Why We Must Rehabilitate the Ownership Society

More

In a new column for Bloomberg I argue that to solve its pension problem the US needs to revisit the idea of the ownership society--recast as a liberal rather than conservative program, which it should have been all along. Don't replace or reduce Social Security to direct savings into private accounts. Create mandatory private accounts, with public subsidy, as an add-on, and cover the cost to taxpayers by redirecting existing tax preferences for saving.

Why not simply acknowledge that Social Security is not a savings plan but a transfer system, make it more generous, means-test it to limit the cost and then raise other taxes to pay the bill? That approach has the advantage of fiscal simplicity, but the politics doesn't work.

The fact is, the masquerade serves a purpose. Support for Social Security is strong precisely because people see it as a savings plan. They have paid into the system -- or so the letters from the Social Security Administration tell them every year -- and they feel entitled to what the system owes them. Recasting Social Security as just another welfare program would be the first step toward dismantling it altogether.

The opposite approach is partial privatization, as tried by George W. Bush. The idea was to let people divert some of their payroll taxes to a private pension. All being well, they could expect a higher return on that money, so adding their private pension and their diminished entitlement to Social Security together, they would come out ahead. One problem is that savers would have to bear more financial risk -- not something you should ask people of limited means to do. Another is that the shortfall in payroll tax receipts would drive Social Security deeper into deficit, which subtracts from national saving when one of the goals in all this is to increase it.

Even so, it's a pity that Bush's plan was trashed so viciously. Greater private saving should be part of the solution -- as an addition to Social Security, rather than a replacement in whole or in part. Building the "ownership society" Bush talked about is surely a worthy goal. Democrats shouldn't renounce that idea because of its provenance. The idea that retirees "own" their Social Security benefits -- as illusory in fiscal terms as that notion might be -- accounts for the country's devotion to the system, and this devotion is telling. People want and should be granted ownership of the assets they will need to support them in retirement.

Jump to comments
Presented by

Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

Get Today's Top Stories in Your Inbox (preview)

Sad Desk Lunch: Is This How You Want to Die?

How to avoid working through lunch, and diseases related to social isolation.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Where Time Comes From

The clocks that coordinate your cellphone, GPS, and more

Video

Computer Vision Syndrome and You

Save your eyes. Take breaks.

Video

What Happens in 60 Seconds

Quantifying human activity around the world

Writers

Up
Down

More in Business

Just In