Category Archive: Social Security
Comments Off on The answer is a new government program. What’s the question?
The Sunday Washington Post had a long, hagiographic article about Senator Mark Warner’s critique about how capitalism “isn’t working” for the masses and his heroic attempts to fix it that left me thinking I’m in an alternate reality.
The problem he sees is that the growing tendency of people to change jobs throughout their career has left people unprepared for retirement, and that we need to do more to make sure that workers have some sort of safety net to provide them with health care and income in their golden years.
That this was largely addressed decades ago with the introduction of Social Security and Medicare was completely missing from the article. Social Security is an incredibly progressive retirement program that provides everyone with a work history of at least ten years with a decent-sized benefit that doesn’t go up all that much for wealthier people who contributed much more. And Medicare is the largest government program there is, covering hospitalization costs, basic health costs and drug benefits for tens of millions of senior citizens. The government spends about $1.5 trillion each year on these two programs, and they make up the majority of our federal budget. There’s also plenty of evidence that they prevent seniors from indigence: the poverty rate for seniors is well below that of other age groups.
The current Administration also added an expensive entitlement that makes it much easier for people under age 65 who do not receive health insurance to obtain it, along with a healthy subsidy. For a family of four in Washington DC there is still a subsidy for an income of $80,000, which is well above the mean household income, and Medicaid completely covers those who don’t make enough money to buy their own health insurance. What more can we possibly do to make health insurance more affordable for the working poor?
The latest push of the Administration–and one that Senator Warner is leading–is to create some sort of government 401k. The idea is an awful one–the rationale is that since we move around to so many jobs, and since many employees do not provide a retirement plan, the government should do it for them. Earlier this year the Department of Labor made it much easier for the states to set up retirement accounts for their workers that would be administered by the state as an option for workers at firms without a retirement plan.
It is a supremely bad idea. For starters, there is no evidence that a public option is better than a private option, and plenty of data showing the contrary. For instance, the college savings accounts run by the states are no different than what people would get if they went to their local Fidelity or Vanguard office and opened their account, save for the fact that the latter would not come with a tax break, and the money in the government account has a sharply higher management fee than are found in the private funds. The Department of Labor just spent a year trying to drive down management fees in retirement accounts and they’re embarking on a new plan that would invariably create millions of accounts with higher management fees than they could get elsewhere.
Until recently liberals were in full defense of defined benefit pensions despite the fact that they disadvantaged people who had shorter job tenure and were more likely to change jobs, both of which tend to be truer for women than men. That they realize these don’t work in today’s economy is gratifying, but their insistence that the government create a vehicle to replace it is nonsensical.
If we want to nudge people to get a retirement account, we can do that without the state of Massachusetts inserting itself as a middleman. And politicians should stop pretending that there’s a senior citizen poverty crisis, no matter how flattering the Post may treat such efforts.
Comments Off on The Size of the U.S. Debt, Redux
What a difference just five years will make.
The U.S. national debt reached $19 trillion. How can we grasp such an unfathomable number?
Here at Learn Liberty, we’ve been trying to answer that question for years. In fact, our very first video attempted to contextualize the size of the then $14 trillion debt. With help of Duquesne University Professor Antony Davies, we illustrated how that debt was bigger than the entire global economy. That video went viral and has been viewed 646,000 times. Through it, Learn Liberty was born.
As part of our five year anniversary celebration, we have updated and modernized that video with new figures, graphics, and animation. Professor Davies explains that if we stacked up $100 bills, the $19 trillion U.S. debt would exceed the entire output of the U.S. economy. The size of the debt including unfunded obligations – future Social Security and Medicaid payments that the government doesn’t have the money to pay – would exceed the entire economic output of the entire planet.
Check out the re-mastered video and the original below. Any estimates on what the debt will be in five more years?
Comments Off on How to Fix Our Fiscal Crisis
The Congressional Budget Office announced last week that the growth of the federal budget deficit will outpace the growth of the economy in 2016 for the first time since 2009. The drag this places on economic growth is hard to overstate, but what can be done to solve this problem for the future? Harvard University’s Director of Undergraduate Studies Jeff Miron explains in this Learn Liberty video.
Peter Ferrara argues that Social Security benefits yield a lower rate of return than a typical blend of stocks and bonds. On top of this, it is highly unlikely that Social Security will be able pay all the benefits it has promised. Personal accounts, he argues, are the best alternative to the current Social Security system. Personal accounts would be great for workers, offering them a large asset that could be assigned to family, more choice, and the opportunity to own a portion of the capital stock.
Prof. Antony Davies analyzes Social Security in the United States through the lens of a typical 22 year old American. Assuming that Social Security is completely solvent, the expected return on investment (ROI) of Social Security is far lower than the expected ROI of a private account. Further, if an individual could hypothetically opt out of Social Security payments and invest the funds entirely in Treasury Bills, the Treasury bills would even yield a greater ROI.