By using similar illogic, Rep. Charles B. Rangel (D-N.Y.) recently used the Congressional Research Service to misrepresent proposals for Social Security reform. Instead of evaluating how the reform proposals would change retirees’ income, Rep. Rangel asked the CRS to focus exclusively on benefits provided through the traditional Social Security pay‐as‐you‐go structure. His methodology forced the CRS to issue a report that ignores the revenue that would be generated by redirecting payroll taxes to personal retirement accounts.
It’s hardly surprising that proposals that incorporate personal retirement accounts do not fare well under the slanted analysis Rangel requested. One of the main benefits of permitting private investment is that, in the future, individuals will receive their retirement income from a funded, privately owned account instead of from taxpayers’ pockets. Rangel’s method required the CRS to label any reduction in federal spending as a “benefit cut” and ignore the wealth that would accrue as a result of a lifetime of investment.
Rangel might argue that this odd methodology is based on the tremendously pessimistic assumption that the market would tank and all money invested in personal retirement accounts would vanish. However, the Ball plan — the one treated most favorably in this report — requires that the federal government invest the Social Security trust fund in equities as a way of increasing program revenue. The ability of the government to invest successfully is unquestioned by the CRS: therefore, it accepts that the Ball plan can provide higher benefits to future retirees.
Rangel’s inconsistency could be taken as evidence of simple government paternalism. Some politicians really don’t believe we are capable of investing on our own — but they’re willing to take the same gamble on our behalf, with our money.