Now You Tell Us

From Andrew Biggs, writing in the National Review, a conservative magazine:

Personal accounts [to add onto or substitute for Social Security] are a valid choice, and one I’ve supported in the past and continue to support. But accounts aren’t exclusive to tax increases or benefit cuts; they don’t, as I’ll explain, reduce the need for these other choices. One problem for the Bush administration’s reform drive in 2005 was that many congressional Republicans had bought into the idea that accounts reduce or eliminate the need for tax increases or benefit cuts. Finding out they don’t may have taken some wind out of their sails. ...

[O]nce transition costs are accounted for, the total rate of return on a personal-accounts-based program would be about the same as the current system. ...

Also unchanged would be the program’s financing shortfall, even assuming that account holders gave up a share of their traditional benefits. A pay-as-you-go program like Social Security is always in the hole, such that each generation honors the benefits of the preceding one while hoping their own claims will be honored by the following generation. No generation can break away from this cycle without either ponying up extra cash (tax increases) or defaulting on its promises (benefit cuts). Neither solution is costless. ...

The only way personal accounts could fix Social Security on their own is if accountholders gave up traditional benefits far in excess of the taxes they put into accounts. For instance, individuals might put half their taxes into an account but give up all their traditional benefits. This would fix Social Security, but it’s not clear that most (or even many) workers would take the deal. You might come out ahead if you got solid investment returns, but you could also fall far short. This is just asking accounts to do more than they reasonably can.

As you may recall, Biggs was sent by the Bush Administration to work at Social Security to promote privatization of Social Security. Unlike the Commissioner of Social Security at the time, and all other Social Security employees, Biggs actively campaigned with President Bush for partial privatization of Social Security. He now works at the Cato Institute, a right wing "think tank." The Koch brothers were instrumental in creating Cato and still give it heavy support. With reasonable talk like this, you have to wonder how long Biggs will be able to stay at Cato.