Social Security and Populism

PGL at Angry Bear again points out silliness of much commentary on the Social Security system. It is asked: ‘Add or Subtract What?’. I’d say start with the proposition that life expectancy will not increase more than three additional years by 2040. Add in the Proposition that this Country finally gets a handle on Health Care Costs (something from which We will drown in a decade, if left unchecked). Include the Proposition that Employment will increase by Nine million by 2020. I am good with Propositions, ain’t I? Glance through the Actuarial tables for a little time, and utilize the deficient mathematical skills of someone like myself, and ponder how little is actually known at this present time. Scratching on the back of a used napkin, I will go out on a limb, and say the Case can be made for the Social Security deficit to reverse and shrink sometime after 2027, though it will not be unmanageable at any time (We are not talking about great deficits here, when compared to the Bush Tax Cuts). Isn’t Everyone lucky that no one trusts me?

Mark Thoma tries to reconcile the Conservatives and Populists in the Democratic Party. I once wrote someplace that extreme Government intervention will never be beneficial, or would detailed Planning resolve basic economic constrictions (think malfunctions). Take the 401(k) programs. Very popular among All, but how effective? Not really–check out the real enrollment rates. Why? Management of a 401(k) is too complicated, requiring advanced knowledge by the Enrollee, or trust in Management staff who insists on huge Salaries and cannot explain the convoluted movement of investments of the Enrollee’s money. Great Government program–I think not! How could it be changed?

Here is where Economists will give a thousand answers, all basically Incremental in nature, and all basically tested (with flaws realized). I would recognize the deep hazards of Corporate internal financing of Investment; pass a law stating Corporate management could not risk Stockholders’ capital and Profits by such practice; they must obtain exterior financing which has been checked by exterior investment management for adequate Prospectus, Marketing strategy, and existent Consumption market for the proposed Product or Service. Most Corporations could achieve a relatively high Credit rating. Then I would pass legislation which states financial institutions could not obtain fund deposits (Private or Public) for less than Two percent above the Inflation rate. I would follow this legislation with passage of a law granting a limited Tax Credit (of some amount–preferably up to $10,000 per year) from Income taxes for equal amount investment to All Taxpayers who save in financial institutions. This law should eliminate all other Tax Credits for investment.

Everyone should realize there must be Cut-outs for Inflation rising above 8% per Year, and all legislation must be flexible to insure no adverse economic constrictions. This legislation, though, would eliminate vast Giveaways to the Wealthy from open-ended Tax credits for investment, while propelling a vast increase of actual Savings and Investment. Read the Mark Thoma Post, though, because there are major elements in all three positions listed which should be studied for Value. lgl