It’s the Funding

Andrew defends McCain on social security:

I hadn’t paid a lot of attention to McCain’s social security gaffe, mostly because McCain didn’t call social security itself a disgrace, as some on the left are whining, but called the way we are funding it a disgrace. Here’s what he said:

Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that’s a disgrace. It’s an absolute disgrace, and it’s got to be fixed.

Good for McCain.

He goes on to cite Ezra, and allow that it’s not good that McCain doesn’t, or didn’t, know how social security works, but that doesn’t really excuse the above. So my question to Andrew, or anyone who thinks it’s a “disgrace” the way we fund social security, is this; how do you want to fund social security, and how are you going to pay the transition cost?

I think the real problem here is that some people have it in their minds that social security is a savings program, as opposed to an insurance program. But social security is an insurance program, and it works like any other; that is people who “don’t need it” at the present pay the costs of other people in the pool who do, with the expectation that they’ll receive the same benefit when they’re the ones who need it. And yeah, sometimes you lose money on the deal. I’ve never had to make an insurance claim on my car, because I’ve never been in an accident. I’ve seen a net outflow of a few thousand dollars as a result, but that doesn’t mean I’m being cheated or the systems a disgrace, it just is what it’s supposed to be, insurance. If someone runs a red light and T-bones me tomorrow, I’m probably going to have to make a claim, and I expect that my provider will cover me with my premiums and others that make up their capital pool. And then, eventually, I’ll go back to being one of the people making payments without making claims.

If anyone has a good idea to increase the amount everyone can earn in social security, I’m perfectly open to hearing it, but there’s a large financial liability that comes with it (the Bush plan would have amounted to a liability nearly a full 25% the size of total US debt at present, nearly half of all publicly held debt), and that has to be payed for.