“Privatizing” social security is a lightning-rod idea, guaranteed to stir things up in any political season. It came up again during the Republican debate last Wednesday (9/7/11) and afterwards in the obligatory analyses; both sides predictably dragged out their talking points.
The political right keeps bringing it up for two main reasons: (1) they like the idea of each individual worker owning the future benefits of the retirement safety net he or she has been paying for; and (2) they don’t trust future politicians to keep the promises of past politicians.
But the political left keeps gunning it down, because: (1) they see the stock market as a highly undesirable place to risk the nation’s social safety net; and (2) they dislike the idea of the Wall Street financial vampires sinking their fangs into yet another asset base worth trillions of dollars, collecting the economic rent they charge for their handling services.
Well, I think everybody has a good point or two. And I also think there’s a solution that should make everybody happy. Today, workers earn credits that accumulate on a spreadsheet at the Social Security office; the future dollars those credits eventually yield depend on future politicians keeping the promises of past politicians. Do you trust Barney Frank, or Rand Paul, or Rick Perry (...or their next-generation counterparts) not to devalue those credits in any way after they've been earned, such as by means testing or benefit cutting? Well, I don’t.
So, I propose that we create a new form of U.S. Treasury security: a Social Security retirement bond, a non-transferrable financial asset, issued to individuals based on the credits they have already accumulated for contributing to the system. Those new assets would begin to be convertible only into dollars, commencing only at retirement age. The new system would be one of individual ownership of the earned financial assets, no stock market investing would be permitted, the bonds would be fully backed by the U.S. government, with terms not changeable by future politicians. Experts at Social Security and Treasury could design them such that the total benefits would be no different from the current promises. The only difference, therefore, would be ownership of the bonds by the individuals who earned them; the promised benefits would be locked in at the time they were earned, impervious to any future politicians, immune to Wall Street vampires, and not exposed to the stock market.
Wouldn’t that satisfy both sides, based on their currently-advertised objections to either privatization or the status quo? Each worker takes private ownership of his or her own, government-guaranteed, politician-impervious social security safety net. I bet both FDR and Reagan would have liked the idea, anyway.