Monday, February 21, 2005

Gary Becker on Social Security Reform

Those of you who receive The Wall Street Journal on dead tree throughout the week should note that the paper often posts editorials online on Saturday and Sundays too. Dr. Gary Becker, a Nobel winner had excellent comments on social security reform. [The bold is mine.]

OpinionJournal: "Republicans and Democrats are arguing passionately about the future of Social Security, and the argument, at its core, is about privatization. It is true, as some critics observe, that there is no magical gain in privatizing Social Security, since all systems have to provide incomes for retired persons. By that token, however, there's no gain in privatizing a government steel plant either, since steel still has to be produced, too. Yet there are very good reasons--with roots in political economy--to privatize steel. And as with steel (and the like), there are excellent reasons for a privatized individual-account Social Security system..."

"...There is no guarantee that government interference would not increase further in such a privatized system since the retired would continue to press for additional benefits. But experience shows that governments interfere less when an industry is privatized, especially in access to capital and financing of budget deficits.

So the really strong arguments for privatization are that they reduce the role of government in determining retirement ages and incomes, and improve government accounting of revenues and spending obligations. All the other issues are really diversions, because neither advocates nor opponents of privatizing Social Security generally answer the most meaningful question: Is there as strong a political economy case for eliminating government management of the retirement industry as there is for eliminating its management of most other industries?

My answer is "yes."

[Mr. Becker, a Nobel laureate in economics, is a professor at the University of Chicago and a senior fellow at Stanford's Hoover Institution.]

The entire article is well worth a read both for those opposed to private accounts and those in favor such as me (strongly.)

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