My Response: It is About Ownership

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Joe Klein says this about healthcare, “there are enormous economic inefficiencies in the current system. It hurts the international competitiveness of American companies. It causes people to stay in jobs they don’t like; it makes it less attractive for them to strike out on their own as entrepreneurs.” I agree 100 percent. But let’s not get crazy.

Klein also comments on Mayor Giuliani’s remarks last night vis-a-vis the individual mandate proposal of Governor Romney. I guess he wants me to give voice to all the heartburn on the right. Here goes: Socialized medicine can take the form of government taking your money and then spending it on insurance. Socialized medicine can take the form of a requirement from government for you to spend money on health insurance. Either way, it is the government making the decision about your money, no matter whether you call it Medicare, Medicaid, or an individual mandate. The Romney plan fits in this format.

On retirement security, Klein asks if I could live with regulation of private investments. Certainly. The main difference between my starting point and those on the Left is that I believe private ownership of retirement savings is superior to a bunch of politicians in Washington “saving” for America. Their record on saving scares me, quite frankly, and soon we’ll pay the piper.

Social Security is not a retirement system. It is an intergenerational transfer program. Our 21st century economy is marked by a global economy and multiple zigs and zags in the typical career path. Today’s 401(k) funds, diverse mutual fund market, and the low cost of access to financial information is fundamentally different than even a generation ago. In 1937, Social Security collected a combined two percent of an employee’s income; today it collects more than 12 percent.

Until we move toward ownership of large personal accounts, “reform” of the current program requires one of two responses. Congress will raise taxes or reduce benefits. Neither is politically palatable. Over time, personal ownership would transform the program’s $12 trillion unfunded liability into individually owned assets. This would be the single largest debt reduction in history.

I ask, if Social Security is such a great deal, then why is it mandatory? We should move toward personal accounts. Members of Congress and other federal employees already have something like this called the Thrift Savings Plan. There are five highly diversified, low-cost mutual funds. Sure, there are limits. The TSP doesn’t allow investments into individual stocks. But the “regulation” offered by a TSP-style plan is a great deal if it moves America toward ownership. And, considering the overwhelming moral and financial costs associated with failure, I’m not sure what we are waiting for.