Commentary

The Great Ponzi-Scheme Rescue Act of 1999

In the April issue of Rolling Stone, columnist (and Cato Fellow) P.J. O’Rourke turns his sights on Social Security. The following are among his observations:

“We’re getting an average return of more than 16.5 percent on our employer/employee payroll contributions. If we’re 82 years old. On the other hand, if we’re 67, we’re getting about 1.4 percent-a financial coup we might have managed on our own, without the help of the federal government, by holding on to our Beanie Baby collections a little too long. And, if we’re age 24 to 62, we can expect a return of between -0.34 percent and -1.7 percent, and might be better off leaving the money in our old jeans and going through the closet when we retire.”

“The only way to place money as opposed to IOUs in [the Social Security Trust Fund] is for the government to buy something real-such as $700 billion worth of Microsoft. This would put the federal government in an interesting position with its anti-trust suit against that company. We were just kidding Bill. Having a government that owned economic assets is what made the U.S.S.R the success it is today. Maybe Bolshevism could be avoided, but conflict of interest couldn’t be. Businesses would all want a slice of the federal government investment pizza, and so would labor unions, special interests, pressure groups, and every ad hoc group of scallywags and hand graspers that you can imagine. Not to mention that the government itself might be tempted by all the mushrooms, pepperoni, and extra cheese sitting around uneaten.”

“The only real solution for Social Security is to own it-privatize the whole system of national social insurance. This would still leave us with enormous unfunded liabilities owed to people to old to go private. But we’ll have those anyway. And privatization would work. There is no 20 year period in American history when stocks lost money.”

P.J. O’Rourke is a Mencken Research Fellow at the Cato Institute, a correspondent for The Atlantic Monthly and author of “Parliament of Whores,” “Eat the Rich” and “The CEO of the Sofa.”