What George Mason Experts Are Saying about…Social Security

Posted: August 16, 2005 at 1:00 am, Last Updated: November 30, -0001 at 12:00 am

By Rey Cheatham Banks

Signed into law by President Franklin D. Roosevelt on August 14, 1935, the Social Security Act was created to ensure America’s economic security. Today, 70 years later, legislators and the American public are examining whether Social Security has met its objectives as stated by Roosevelt to “take care of human needs and at the same time to provide the United States an economic structure of vastly greater soundness.” Should Social Security be privatized by allowing workers to invest some of their payroll taxes in individual retirement accounts? George Mason experts weigh in.

Russell Roberts, Professor of Economics

“We can afford to fix Social Security. But do we want to? Do we really want to force every American to contribute to everyone else’s retirement? That doesn’t make sense when a lot of us have healthy retirement accounts, healthy futures and can take care of ourselves. Let’s make Social Security what it was meant to be—a safety net—a minimum standard to keep the elderly out of poverty.

Worried that some people will live irresponsible lives and take advantage of that safety net down the road? That’s an unpleasant, unavoidable cost of any safety net. But look at the benefits. People are encouraged to stand on their own two feet. The ideal is to plan for your own future and take care of yourself rather than living off of others.

Young people who want to use their money now rather than later have more freedom to spend their money as they see fit. Our political discussion can be spent on something else besides a fight between the generations.

And we can finally have a sensible discussion about tax reform. Right now, the illusion that the payroll tax is earmarked for retirement and health confuses every discussion of the true tax burden in America on rich and poor.

There is no crisis in Social Security. But if we do have to change the system, now is the time–20 years in advance of the changes that will have to come because of the size of the baby boomer generation—so people will have a chance to adjust their behavior.”

Roberts is J. Fish and Lillian F. Smith Distinguished Scholar at the Mercatus Center and professor of economics. He is also a research fellow of the Hoover Institution at Stanford University. Roberts is a frequent commentator on National Public Radio’s Morning Edition. In addition to numerous academic publications, he has written for the New York Times and the Wall Street Journal.

Tyler Cowen, Associate Professor of Economics

“Overall the accounts are a bad idea. I believe the cracks in public support for the president’s approach are only the surface manifestations of wider misgivings on the right.”

Cowen represents a new group arguing that the proposal represents an unwise expansion of Social Security’s promises.

“I think there was a kind of notional support among right-wing or free-market intellectuals, but now they’re getting nervous. Even if they’re not speaking out, they just figure it will die on the vine.”

Cowen is the general director of the Mercatus Center and the Holbert L. Harris Chair of Economics at George Mason. Cowen has published dozens of books, reviews, and articles. His most recent book, the 2005 Markets and Cultural Voices, explains the effect that globalization has had on the lives of Mexican Amate artists.

Walter Williams, Professor of Economics

“President Bush’s call to allow Americans to take a portion of the money they pay as Social Security taxes to set up private retirement accounts has to be a good idea because the more of what a person earns that’s in his pocket and under his control, the better off he will be. And because Social Security has failed to keep a number of promises, including capping the amount an individual would pay in social security taxes and guaranteeing payment. The U.S. Supreme Court has ruled on two occasions that Americans have no legal right to Social Security payments. If a private retirement company reneged on its promises, we could take it to court. If Congress reneges on its promises, there’s no judicial course of action whatsoever.

In 1999, President Clinton devised a plan to “save” Social Security by requiring five million previously exempted employees into Social Security, thereby creating billions in additional revenue. Twelve senators descended on the White House to demand that President Clinton not support their constituents into Social Security, warning of the adverse impact on employees in terms of lower rates of return and lost flexibility.

These are the same politicians who are now resisting President Bush’s call to allow Americans to take a part of their Social Security taxes to put into private retirement accounts. If they’d go to bat for those five million workers to remain out of Social Security, to avoid the adverse impact of lower rates of return and lost flexibility, why would they fight to deny tens of millions of workers a right to use a portion of their taxes to do the same?”

Walter Williams is the John M. Olin Distinguished Professor of Economics. He is the author of more than 160 articles, which have appeared in scholarly journals such as Economic Inquiry, American Economic Review, and Social Science Quarterly and popular publications such as Reader’s Digest, Regulation, Policy Review, and Newsweek. He has made numerous radio and television appearances. His book, The State Against Blacks, was made into a television documentary titled Good Intentions.

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