Social Security Privatization as an Alternative to Income Tax Increases

I have often complained that President Bush effectively wants to embezzle the Social Security retirement benefits in order to continue his General Fund fiscal irresponsibility instituted by his 2001 and 2003 tax cuts. I have even praised conservative Congressman Mike Pence for objecting to this proposed embezzlement. But it seems the National Review’s Peter Ferrara wants Social Security privatization instead of tax increases:

When I began working on the issue of Social Security, at Harvard Law School in 1978, Pete Peterson, a prominent conservative who had been secretary of Commerce under President Nixon, was arguing that the problem with the program was that the benefits were too high … My position was that if you evaluated Social
Security taxes and benefits in the light of market investment returns, the program was becoming a bad deal for working people. The benefits, particularly in the future, were too low, not too high. Around the same time, José Piñera started making the same argument in Chile, which enacted historic personal-account reforms in 1981. For a year he explained to Chilean television audiences how workers would get a much better deal with personal accounts.

You see – Ferrara and Pence share the illusion that there is some magical free lunch where one can earn really high expected returns without incurring additional risk. This Chilean experiment that Ferrara mentions shows his fantasies are not reality. But Ferrara tries to argue that his fantasy beliefs have been someone vindicated by the voters who preferred Republicans. Which is a hoot as it wasn’t the push for Social Security privatization that won the 2000 election for George W. Bush as it was the promise of more Federal spending and a large tax cut too. But let’s return to the free lunch fantasies of Mr. Ferrara:

It’s time for a reality check. As set out above, personal accounts will come neither through tax increases, nor cuts in future benefits. Quite to the contrary, the drift toward these politically poisonous alternatives is what has cratered the campaign for personal accounts. If blame is to be handed out, blame those who misled the president down this pain-caucus trail – they are the ones who should be held responsible for any future tax increases due to the failure of reform at the present time. The only way to achieve the goal of personal accounts is to go back to the positive and populist reform model on which George W. Bush was first elected to the Oval Office. Reformers in Washington must propose a specific personal-accounts plan that includes no tax increases or benefit cuts and presents obvious and overwhelming benefits to working people.

Even though some conservatives argue that the Social Security Trust Fund has a long-term solvency problem, Ferrara is saying we don’t need more revenues and we don’t need to cut benefits as there is some magic fairy dust that will turn an insolvent fund into a solvent one? How much Kool Aid has he been drinking?