Yesterday’s Wall Street Journal included an article by Nobel laureate and University of Chicago economics professor Gary Becker about the reasons for reforming Social Security (link requires registration). It is the first comprehensive and cogent piece of literature I have read on the subject from any source.
Discrediting arguments from both sides of the debate, Dr. Becker says that there are two reasons for Social Security reform, and that both are political rather than economic. He says, “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.”
Dr. Becker’s first reason helps me understand why the AARP and the liberal establishment hate the idea of privatization. If the government discontinues having much of a role in determining retirement age and retirement incomes, people will determine these things on their own based on personal ability, interests, and economics, as well as market factors. As the need for a nanny government diminishes the need for an organization like the AARP to lobby politicians on retiree issues might also evaporate.
Becker’s second reason for reform is difficult to deduce from the quote above, but he is basically saying that politicians are incapable of keeping their hands off any available funds (like that’s news to anybody). Removing retirement funds from access by politicians would force some fiscal discipline, which both of our major political parties are sadly lacking today.
In addition to providing real reasons for reform, Becker supplies several meat-and-potatoes suggestions for achieving the transition to the new system while keeping the system fair and economically feasible for everyone. He provides real-world examples to back up his proposals. In his article Dr. Becker effectively steals the thunder from the fear mongering left as well as the over-promising right while clearly explaining why and how we must undertake Social Security reform now.