Questions for the AARP

The AARP recently announced that it is taking its campaign against President Bush's proposed Social Security reform to the nation's youth, hoping to broaden its target audience from the credulous elderly to the credulous young. Thus, the AARP further cements its status as the country's foremost lobby against reform. So inquiring minds should have a few questions for AARP CEO William D. Novelli, the architect of the group's crusade to keep young people from having personal retirement accounts as part of Social Security:

Since Bush has said that any proposal won't affect anyone 55 years of age or older, what possible reason — other than sheer ideological hostility — do you have to oppose reforming the system?

Your group's advocacy suggests that reform puts at risk the benefits of current Social Security recipients, even though cutting those benefits is off the table. Are you routinely so dishonest, or is this a special case?

In 1950, 16 workers supported each retiree. By 2040, there will only be two workers per retiree. Does it occur to you that that is very bad news for workers? Or is your ultimate ambition to have each retiree supported by his own individual worker? Perhaps this worker can be made to fan his designated retiree with a palm frond and deliver him fruity drinks poolside?

The current system is already a bad deal for young people. Any tax increases or benefit reductions will make it worse over time. Do you realize that your members have grandchildren? Or do you believe the financial futures of those grandkids just don't matter much to your members?

Social Security is a monument to FDR, the patron saint of the AARP. But anyone younger than 60 would not have been even BORN when FDR was still President, and to expect anyone in their forties or even fifties to remember the New Deal as anything other than something their parents either blessed or cursed, is to suppose that people have some kind of cellular memory of things that happened long before they were born. There are people who do not remember John F. Kennedy, and yet they are fully functioning adults, making decisions and taking actions without that singular fact guiding their every move.

If you believe in vacuum tubes and zinc plating, or wood cookstoves and outhouses, then perhaps a social security system that was designed by some of the best minds working for Imperial Germany and Otto von Bismarck in the 19th Century is perfectly satisfactory. This system worked once, and still performs satisfactorily if one recognizes its limitations, but who drives a Model A Ford in freeway traffic?

Nobody is going to pull the rug out from under grandma; the entire issue is the children and grandchildren of current retirees.
And the SocSecurity "Trust Fund" is nothing but a boondoggle; it consists of IOUs from the government to the government. You can write an IOU to yourself at any time you please, for any amount you please - but you will be no richer for the exercise. This simply reflects the fact that the government revenue from the payroll tax is was spent as current income, and not invested for the benefit of ~~the taxpayers' subsequent retirement payments~~ the younger taxpayers who must support those prior taxpayers now that they are retired.
I repeat, the entire issue is the children and grandchildren of current retirees. Since the SSTF is an accounting fiction its projected bankruptcy in 2040 is irrelevant; it is bankrupt today in the sense that it will be of no benefit to the baby boomers' children in a decade or so when they are faced with the retirement boom which was always implied in the existence of the post-WWII baby boom. The issue is twofold:

ameliorating the future impact of that the looming retirement boom on a system which is designed for good times in the absence of a retirement boom, and

making the SocSecurity system appear to give some return to the boomers' children and grandchildren.
For the safety of the real economy which must support (via whatever financial arrangements) the cost of the retirement boom, investments should have been made in the past which were not made, or made only in the sham SSTF. That is water under the bridge. The process of investment cannot now be started retroactively, but must begin.
It is no good claiming that the only acceptably safe investment is in government debt; whether it is extracted by taxes or by dividends/interest, funding on the scale of that required by the liabilities of SocSecurity must be spun off for that purpose by the real economy. That is, the needs of retired seniors must be met and those who meet those needs (for nursing homes and for food, for medicine and for recreation) must themselves be provided for by the real economy.
The conceit that "safe" government debt must be the investment vehicle for funding on that scale is fatuous because it is unclear how the government is to divert that much of the economy to retirees without causing serious perturbation of the economy. On face value, it is a recommendation for the government to drive its budget into surplus to drive down the government's privately held debt in anticipation of the need to again borrow the money to tide the treasury over the retirement boom, during which time presumably the government's debt would baloon back up to its present size.
But what is that, but a scheme for causing the money supply to shrink in the near term, and baloon with the retirement boom - deliberately courting a huge bust-and-boom cycle? And what is the sense of planning such a thing, when the political reality would soon hit - and the government would not, could not, follow through on that resolution in the teeth of its predictable consequences?
The only sensible way to invest money on the necessary scale is in equity and debt instruments in the real (yes, "risky") economy. Trying to do it in the government isn't "risky" - it is a sure-fire formula for catastrophe. Furthermore, if the government were to directly invest that money in the real economy it would merely prove on the grand scale Adam Smith's dictum that those who invest other men's capital do it foolishly.
And not only so; in so doing the government would place itself in the position of "deserving" many seats on the boards of directors of the biggest corporations - in the position to thoroughly "socialize" (the word should actually be "governmentize") the general economy. Far worse, even, than it already has.

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