The Virtues of Personal Accounts for Social Security
Edward P. Lazear

An article currently listed in the 'Economist's Voice' extolling the advantages of Private Accounts. He makes the traditional Conservative economic reference to Social Security being a market distortion; unacceptant of the proposal that a unified Pension system with inclusion remain more viable than discrete, underfunded particulate systems of Pension benefits. The unified system assures a minimum benefit going to the greatest Number of Retirees, to maintain a basic level of Consumption among all Retirees; a greater stability to the market system than it be a market distortion. Private Accounts, on the other hand, assures the minimum benefit is to be drastically reduced, and variably dependent on market investment decisions of particulate investment elements. What is the greater market distortion?

Lazear described the Social Security Trust Fund as a Government possession--which it is not; Congress and President should be reminded they do not hold unilateral right to spend Fund revenues. The Author previously articulated that the Trust Fund should purchase the Federal Reserve system. This could be resisted by American Workers themselves on ideological reasons, but at the least; American Taxpayers could insist FICA tax revenues be deposited with the Federal Reserve, leaving the Federal Reserve personally liable for lending funds to the U.S. Treasury if they found such Treasuries to be a good risk. Social Security funds in the Trust Fund would be protected by Federal Banking law. Lazear's argument as to the insecurity of Congressional and Presidental guarantees of the Fund revenues could be eliminated.

The redistributive effects of Social Security on which Lazear complains could only be worsened by Private Accounts. How? Low and Middle Incomes would suffer a far greater loss from poor investments than would wealthier Incomes, because such losses would be a much greater percentage of total held Assets, and wealthier Incomes have greater viability to hold intermediate-term investments until better Sales pricing can be obtained. Lower Incomes would be pressured to sell because of Household obligations at lower Sales pricing, thereby further enriching wealthier Incomes with better Investment buys. The adverse redistribution would only be accelerated. lgl

Postscript: Some have complained the daily Posts are becoming too long--references made to long-winded bores. Therefore, Tomorrow's Post will deal with the real Dollar aspects of Private Accounts. lgl