I'm a great admirer of wonky liberal bloggers Matt Yglesias--and it is becoming clearer and clearer that John McCain is just gobsmackkingly ignorant of even the rudiments of public policy. Still, I don't know why Yglesias is getting his knickers all in a twist over the idea of a financially solvent pension system [Update: Ditto for this, with other links].
Run some numbers: Social Security benefits top out these days at somewhere around $20,000 pa. The average recipient collects for something like 18 years, starting at age 65. Assume (plucked out of the sky) an interest rate of 4 percent. To fund that pension, you would need a t=65 pot equal to about $253,000. To raise that money over a working lifetime--say, 35 years--you would need to deposit about $3,400 a year.
Fund a pension scheme according to these parameters and it is solvent, and perpetual. And rather innocuous. So, why don't we let it happen that way? I can think of two reasons. One, we don't trust people to do it on their own; we want to compel, or at least strongly nudge, them to do something of the sort, even if they are too weak-willed to do it on their own. And two, we want to raise money from the haves to take care of the have-nots.
Now, there may be good justifications for either of these two reasons--I happen to think there are, but we can cover that topic another day. The point is, that neither of these undercuts the basic principles of pension solvency.
Wonk note re numbers: You can get the basics in any first-year B school finance book. Or you can get them from Underbelly.
Run some numbers: Social Security benefits top out these days at somewhere around $20,000 pa. The average recipient collects for something like 18 years, starting at age 65. Assume (plucked out of the sky) an interest rate of 4 percent. To fund that pension, you would need a t=65 pot equal to about $253,000. To raise that money over a working lifetime--say, 35 years--you would need to deposit about $3,400 a year.
Fund a pension scheme according to these parameters and it is solvent, and perpetual. And rather innocuous. So, why don't we let it happen that way? I can think of two reasons. One, we don't trust people to do it on their own; we want to compel, or at least strongly nudge, them to do something of the sort, even if they are too weak-willed to do it on their own. And two, we want to raise money from the haves to take care of the have-nots.
Now, there may be good justifications for either of these two reasons--I happen to think there are, but we can cover that topic another day. The point is, that neither of these undercuts the basic principles of pension solvency.
Wonk note re numbers: You can get the basics in any first-year B school finance book. Or you can get them from Underbelly.
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