Social Security Illusions

Since Social Security is a failure and won't be around when I retire, I have been a staunch proponent of the private accounts that have been proposed by W, basically because the less of my money they pour into a bankrupt system the happier I'll be.

After reading this post at Lone Star Reality, though, I'm going to have to re-think my position.

Some telling quotes:

I have long contended that the diversion of funds to government-controlled investments in the market would amount to the government becoming the single largest investor on Wall Street. This would inevitably result in the perversion of the market as a whole.

There is an inherent risk/reward dynamic to investing in that sometimes you lose money, while at other times your return on investment exceeds 15% or greater. Historically, over time, the gains offset the losses. But can anyone seriously argue that Congress could resist the impulse to investigate the "scandal"when the losses occur - which they inevitably would? Can you imagine the uproar when hundreds of thousands, or even millions of so-called "investors" complain to Congress about the temporary depreciation of their assets?

This would amount to a huge drain on the economic engine that runs our economy. Government-first partisans notwithstanding, it is the market, not the government which drives our economy. Only the imagination can conceive what bizarre regulations and restrictions Congress would dream up to"insure" private account "investors from losses. But the nasty fact is that without those losses, the market would become overburdened with non-performing entities artificially sustained by"helpful" regulations instead of undergoing the very necessary discipline that the free market imposes on people and companies who fail to perform.

The bottom line is that millions, who do not understand basic economics, will not understand 1) why their assets are depreciating in value, and 2) why the government is powerless to do anything about it. The proposition that having private accounts in Social Security is a cure for this dilemma is polyanish at best, and desperate at worst.

I really hadn't thought about it that way. In a rush to keep my money with me, I hadn't seen this aspect of the argument. He concludes:

Merging the welfare system and the market is a catastrophe waiting to happen.

Definitely a post worth reading.

(A side note worth mentioning, while searching around for a photo of a Social Security card to use for this post, I was amazed at how many I found that looked like real ones, with names and numbers. That is a little troubling.)