Talking Points on Social Security: Ed Crane’s Advice

Ed Crane, president of the free-market Cato Institute in Washington, D.C. has advocated Personal Retirement Accounts (PRAs) since the 1980s. Crane calls President Bush “heroically bold” for selling Social Security reform across the country. “But it seems to me he’s been somewhat timid in the manner in which he has chosen to promote it,” Crane recently wrote.

Rather than focus on “boring, not to say uninspiring” matters such as long-term solvency, Crane stresses three far more exciting benefits of personal retirement accounts: Ownership, choice and inheritability.

* Ownership: “Under the current system, you have no right to the money you pay into Social Security. You don’t own the money; Congress does, as soon as you pay into the system.” “The 1960 Supreme Court case, Flemming v. Nestor, …explicitly says Americans have no ownership rights to the money they pay into Social Security. It is, the Court ruled, a social program of Congress with absolutely no contractual obligations. What you get back at retirement – indeed, when you can retire and receive benefits – is entirely up to the 535 members of Congress. Where is the dignity in such a system?” Owning your own retirement assets means “the pride one has in having provided for his or her own retirement, as opposed to being a supplicant of the state; [and] the security of knowing the government can’t take the money away (which they do whenever they raise the payroll tax or push back the retirement age)…”

* Choice: “We can choose where we live, who we marry, what we drive, the insurance we prefer, but when it comes to Social Security, Congress tells us what the deal is? We have no option but to go into a system in which we have no right to the money we pay in?” “Give us the choice to stay in the current system or to purchase real assets that we own within the system. Choice is consistent with American values. Compulsion and no choice are consistent with foreign cultures, not ours.” “Furthermore, if you are, as [Chilean personal account pioneer] Jose Piñera puts it, genetically socialist, you have the choice to stay in the current system. Good luck.”

* Inheritability: Since the federal government, not you, owns the funds in Social Security, “you can’t leave it to your loved ones.” “Under the current system, when you die, or when your spouse dies, the money simply disappears. What’s up with that? …Why should the money go to the government and not your loved ones?” So far, in this debate, “the focus has been on green eyeshade issues such as solvency, transition costs, unfunded liabilities and rates of return. Accountants and actuaries to the barricades!” Social Security choice “should be an emotional issue about liberty and opportunity, not solvency dates.

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