Montag, Januar 31, 2005

Social Security...

Hi -

Short post on this topic...

Here is a link to a great take on social security.

He wants out of it entirely. Unfortunately, that ain't easy.

But I still think that social security boils down to a simple point, that income transfer is, long-term, dependent on demographic factors that any social security system using income transfer cannot control. And demographics are invariably ignored until it is too late (as the Europeans largely are finding out).

The alternative to income transfer is to save. Either you have to all-of-a-sudden come up with whatever gazillions of dollars you need to create what are basically trust funds with annuities for all retirees when you set up the system, or you make the transition take two generations to be complete: the first generation continued to be funded by income transfer; the second generation starts saving in addition to income transfer, and the third generation is purely savings.

Anything wrong with this? The major arguments I am seeing are rather obvious partisan resistance to fixing the system before it is broken. The problem here is that if you even get close to waiting for the system to break, you have to transition over several more generations before the system is fixed.


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