Some people advocate tiny tweaks to the system, like raising the retirement age, cutting benefits or hiking payroll taxes. Others — like me — prefer privatizing Social Security: permitting workers to privately invest their payroll taxes in stocks, bonds and the like. (Characteristically, the president is doing his best to straddle the debate; he announced that he’d accept a little privatization, but only in the context of preserving the system.)
The moral and intellectual appeal of letting working‐class people accumulate retirement savings the same way middle‐ and upper‐income people always have — through investments that appreciate at market rates — is forcing defenders of the current system to attack privatization. Since everyone knows that stocks and bonds will give a better return to investors than the special‐issue U.S. Treasury bonds that the Social Security Administration is required by law to buy, some who favor the current system are doing their best to obscure the workings of both Social Security and a privatized retirement system.
Take a Herblock cartoon in the Washington Post captioned “Have We Got a Deal for You!” A grinning privatization advocate attempts to persuade a baby boomer, while in the background a gigantic bull representing the stock market leaps into the air. Herblock, whose New Deal loyalties have remained unchanged in over a half century of cartooning, is suggesting in his characteristically unsubtle way that the bull market must soon come back to earth. A moment’s thought reveals the cartoonist’s power to have it both ways: imagine what Herblock could do with this material if the market were in free fall!
In any case, snapshots of stock market fluctuation miss the point: no one should make retirement investments expecting a quick gain. Investments in stocks will likely net an annual 10 percent return over the long run. Compare this to what young workers will get under the current system: a negative return. They’d be better off if Social Security had never existed.