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Posts Tagged ‘Social Security’

When I write about Social Security, I normally focus on two serious deficiencies.

  1. The program was never properly designed to deal with demographic change, which means there’s a gargantuan long-run budgetary shortfall of $44 trillion.
  2. The program is a very bad deal for workers (especially minorities), offering a paltry retirement benefit compared to what could be obtained with private savings.

I’ve neglected to explain, though, that there’s also an economic cost. All government spending is a burden since resources get diverted from the productive sector of the economy. Moreover, the associated payroll taxes have an adverse impact on incentives for employment.

Those taxes also have a negative effect on entrepreneurship, according to new research from three economists. Here are some excerpts from their study, which has been published by the National Bureau of Economic Research. We’ll start with a look at the methodology.

Entrepreneurship plays a central role in modern economies. In the US, for example, new businesses account for 20% of total gross job creation. While entrepreneurs can be very successful…, entrepreneurship remains one of the most economically risky lines of activity and can result in large wealth losses. …the marginal value of resources for entrepreneurs can be substantial, given how cash-constrained they often are. Therefore, mandating social insurance, while reducing risks,could significantly affect entrepreneurial activity. …In this paper, we…exploit quasi-experimental variation in the amount of social insurance contributions and…administrative data on the full population of Finnish entrepreneurs to address this question. …We use a standard differences-in-differences strategy and exploit a reform in 2011 that changed the ownership share rule from 50% to 30% to assess how relaxing the social insurance mandate affects entrepreneurial activity. …Overall, we find that social insurance contributions are reduced by an aver-age of 19% for the treatment group, which has more discretion over insurance contributions after the reform. This reduction represents a large cash windfall, equivalent to, on average, a 5 percentage-point reduction in corporate taxes.

Here are the key results, which show that payroll taxes have a decidedly negative effect on new firms.

…we observe a larger than average decrease in social insurance contributions by the owners of younger firms. The cash saved from the lower contributions is channeled into their firms, as we observe an increase in both employee compensations and other input costs, and an increase in turnover after the reform. …entrepreneurs in younger firms are more liquidity-constrained and have access to better growth opportunities than more mature firms. …Figure 2 shows the effect of the 2011 reform on business activity for young firms that are equal to or younger than five years old. …we estimate a 9.9% increase in turnover and a 6% increase in employee wage costs. Overall, these results imply that firms use the saved cash to pay for additional intermediate inputs and labor in order to increase turnover, and suggests that these firms might be facing liquidity constraints.

Here’s the aforementioned Figure 2, showing the both sales and wages are higher when social insurance taxes are lower.

The bottom line is clear.

…our findings imply that the social insurance mandate…crowds out business activity for young firms… the social insurance mandate for entrepreneurs has heterogeneous efficiency costs. Efficiency gains could be achieved by…lower social insurance contributions.

What is meant by efficiency gains?

That’s simply economic jargon for faster growth and higher living standards. And those results occur because entrepreneurs play a key role in driving innovation.

P.S. This issue is timely and important since politicians such as Bernie Sanders and Alexandria Ocasio-Cortez are pushing “Medicare for All” and other schemes that would require huge increases in payroll taxes.

P.P.S. Other Democrats, such as Barack Obama and Hillary Clinton, have urged higher payroll taxes that would deliberately target entrepreneurs, investors and business owners.

P.P.P.S. You can enjoy some Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

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When I write about Social Security, I normally focus on the program’s huge fiscal imbalance ($44 trillion and climbing).

But it’s not just a fiscal crisis. Social Security is also an increasingly bad deal for workers. Especially minorities with lower average lifespans. When compared to what they would get from a private retirement system, people are paying in too much and getting out too little.

There’s also another major problem with the program.

Academic experts have quantified how older workers are lured out of the labor force when they get money from the government. And since economic output is a function of the quality and quantity of labor and capital, this means we’re sacrificing wealth and reducing prosperity.

Here are some excerpts from a study by Professors Daniel Fetter and Lee Lockwood.

Many of the most important government programs, including Social Security and Medicare, transfer resources to older people… Standard economic theory predicts that such programs reduce late-life labor supply and that the implicit taxation reduces the ex-post value of the programs to recipients. Understanding the size and nature of such effects on labor supply and welfare is an increasingly important issue, as demographic trends have increased both the potential labor supply of the elderly and its aggregate importance, while simultaneously increasing the need for reforms to government old-age support programs. …We address these questions by investigating Old Age Assistance (OAA), a means-tested program introduced in the 1930s alongside Social Security that later became the Supplemental Security Income (SSI) program.

Here are charts illustrating how people are retiring earlier in part because of government payments.

And here are some calculations from the study.

Our estimates indicate that OAA significantly reduced labor force participation among older individuals. The basic patterns that we explore in the data are evident in Figure 2, which plots male labor force participation by age, separately for states with above- and belowmedian OAA payments per person 65 and older. Up to age 65, the age pattern of labor force participation was extremely similar in states with larger and smaller OAA programs. At age 65, however, there was a sharp divergence in labor force participation between states with larger OAA programs relative to those with smaller programs, and this divergence continued at older ages. Our regression results, which isolate variation in OAA program size due to state policy differences, imply that OAA can explain more than half of the large 1930–40 drop in labor force participation of men aged 65–74. …Our results suggest that Social Security had the potential to drive at least half—and likely more—of the mid-century decline in late-life labor supply for men. …Taken as a whole, our results suggest that government old-age support programs can have large effects on labor supply, through both their transfer and taxation components.

This chart captures how old-age payments in various states were associated with varying degrees of labor force participation.

By the way, I’m not sharing this information because it’s bad for people to retire at some point.

I’m merely establishing that there’s academic support for the common-sense observation that people are more likely to leave the labor force when there’s an alternative source of income (though it’s worth noting that there should be a sensible and sustainable system for providing that retirement income).

Moreover, people are likely to stop working when government systems give them money before age 65.

Three academics, Andres Erosa, Luisa Fuster, and Gueorgui Kambourov, have a study quantifying this problem in European nations.

There are substantial differences in labor supply and in the design of tax and transfer programs across countries. The cross-country differences in labor supply increase dramatically late in the life cycle…while differences in employment rates among eight European countries are in the order of 15 percentage points for the 50-54 age group, they increase to 35 percentage points for the 55-59 age group and to more than 50 percentage points for the 60-64 age group. In this paper we quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle (age 50+) across European countries and the United States. … The social security, disability insurance, and taxation systems in the United States and European countries in the study are modelled in great detail.

Here’s a sampling of their results.

The main findings are that the model accounts fairly well for how labor supply decreases late in the life cycle for most countries. The model matches remarkably well the large decline in the aggregate labor supply after age 50 in Spain, Italy, and the Netherlands. The results support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle for these European countries relative to the United States, with social security rules accounting for the bulk of these effects… relative to the United States, the hours worked by men aged 60-64 is…49% in the Netherlands, 66% in Spain, 44% in Italy, and 29% in France. …government policies can go a long way towards accounting for labor supply differences across countries. Social security rules account for the bulk of cross country differences in labor supply late in the life cycle (with its contribution varying from 50% to 100%), but other policies also matter. In accounting for the low labor supply relative to the US at ages 60 to 64, taxes matter importantly in the Netherlands (6%), Italy (6%), and France (5%); disability insurance policies are important for the Netherlands (7%) and Spain (10%).

And here’s one of their charts comparing hours worked at various ages in Switzerland, Spain, France, and the United States.

The good news is that we don’t push people out of the labor force as much as the French and the Spanish.

The bad news is that we’re not as good as Switzerland (probably in part because the Swiss have a retirement system based on private saving, so they have the ideal combination of good work incentives and comfortable retirement).

But it shouldn’t matter whether other countries have good systems or bad systems. What does matter is that America’s demographic profile is changing. We’re living longer and having fewer children and our system of entitlements is a mess.

We should be reforming these programs, both for fiscal reasons and economic reasons.

P.S. It’s not just Social Security. Other programs also lure people out of the job market and into government dependency, with Obamacare being an especially harmful example.

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When I think about social welfare spending, I mostly worry about recipients getting trapped in dependency.

But I also feel sorry for taxpayers, who are bearing ever-higher costs to finance redistribution programs.

Today’s column won’t focus on those issues. Instead, we’re going to utilize new OECD data to compare the size of the welfare states in developed nations.

We’ll start with the big picture. Here it total redistribution spending, measured as a share of economic output, for selected countries that are members of the Organization for Economic Cooperation and Development.

Nobody will be surprised, I assume, to see that France, Finland, Belgium, Denmark, and Italy have the biggest welfare states.

The United States is in the middle of the pack. American taxpayers might be surprised to learn, though, that they finance a bigger welfare state than the ones that exist in Canada, Iceland, and the Netherlands.

The overall numbers are important, but it’s also educational to consider the various components.

And the largest chunk of social spending in most nations is for their old-age programs. The biggest burdens are found in Greece, Italy, France, Portugal, and Austria. The United States, once again, is in the middle of the pack.

By the way, keep in mind that there are many factors that determine why some nations spend more than others.

  • How generous are benefits? – This is often measured as the “replacement rate,” which compares retirement benefits to income during working years.
  • When can people retire? – Some countries allow people, or some classes of people, to get benefits while relatively young. Others are more stringent.
  • Does a country have an aging population? – Demographic changes already are beginning to have a large effect on the finances of some systems.
  • Is there a private savings system? – Nations such as Switzerland, Australia, Chile, and the Netherlands have significant private retirement savings.

Now let’s look at government spending on health.

Here’s the area where the United States is more extravagant than almost every other nation. Only France spends more money.

Actually, since per-capita GDP is significantly larger in the United States than in France, American taxpayers spend more on a per-person basis.

Some people will observe, with great justification, that the data for the United States may be a measure of the inefficiency of the American system rather than taxpayer generosity. This is a topic for another day.

Last but not least, let’s look at traditional welfare. In other words, cash assistance to the working-age population.

The fiscal burden of this spending is highest in Belgium, Finland, the Netherlands, Norway, and Luxembourg. The United States, meanwhile, is comparatively frugal.

P.S. Here are a couple of caveats for number crunchers and policy wonks.

First, there are methodological challenges when comparing OECD nations. Eastern European nations tend to be significantly less prosperous than Western European nations, thanks to decades of communist enslavement. So looking at this data does not really allow for apples-to-apples comparisons. Moreover, there are a handful of developing nations that belong to the OECD, such as Mexico and Turkey, so comparison are effectively meaningless. And Chile is on the cusp of becoming a fully developed nation so it’s in its own category.

Second, as I briefly mentioned above, nations have different levels of per-capita GDP. If we look at the last chart, Austria and Spain spend a similar share of GDP on welfare, but since Austria is a richer nation, its taxpayers actually finance a lot more per-capita welfare spending. The same is true if you compare Canada and Estonia, Sweden and Slovenia, and Germany and Greece.

P.P.S. There was virtually no welfare state in OECD nations prior to the 1930s and very small welfare states until the 1960s. For what it’s worth, the huge reduction in poverty in those nations occurred before the welfare state.

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The world is in the middle of a dramatic demographic transition caused by increasing lifespans and falling birthrates.

One consequence of this change is that traditional tax-and-transfer, pay-as-you-go retirement schemes (such as Social Security in the United States) are basically bankrupt.

The problem is so acute that even the normally statist bureaucrats at the Organization for Economic Cooperation and Development are expressing considerable sympathy for reforms that would allow much greater reliance on private savings (shifting to what is known as “funded” systems).

Countries should introduce funded arrangements gradually… Policymakers should carefully assess the transition as it may put an additional, short-term, strain on public finances… Tax rules should be straightforward, stable and consistent across all retirement savings plans. …Countries with an “EET” tax regime should maintain the deferred taxation structure… Funded, private pensions may be expected to support broader economic growth and accelerate the development of local capital markets by creating a pool of pension savings that must be invested. The role of funded, private pensions in economic development is likely to become more important still as countries place a higher priority on the objective of labour force participation. Funded pensions increase the incentive to work and save and by encouraging older workers to stay in the labour market they can help to address concerns about the sustainability and adequacy of public PAYG pensions in the face of demographic changes.

Here’s a chart from the OECD report. It shows that many developed nations already have fully or partly privatized systems.

By the way, I corrected a glaring mistake. The OECD chart shows Australia as blue. I changed it to white since they have a fully private Social Security system Down Under.

The report highlights some of the secondary economic benefits of private systems.

Funded pensions offer a number of advantages compared to PAYG pensions. They provide stronger incentives to participate in the labor market and to save for retirement. They create a pool of savings that can be put to productive use in the broader economy. Increasing national savings or reallocating savings to longer-term investment supports the development of financial markets. …More domestic savings reduces dependency on foreign savings to finance necessary investment. Higher investment may lead to higher productive capacity, increasing GDP, wages and employment, higher tax revenues and lower deficits.

Here’s the chart showing that countries with private retirement systems are among the world leaders in pension assets.

The report highlights some of the specific nations and how they benefited.

Over the long term, transition costs may be at least partially offset by additional positive economic effects associated with introducing private pensions rather than relying solely on public provision. …poverty rates have declined in Australia, the Netherlands and Switzerland since mandatory funded pensions were introduced. The initial transformation of Poland’s public PAYG system into a multi-pillar DC approach helped to encourage Warsaw’s development as a financial centre. …the introduction of funded DC pensions in Chile encouraged the growth of financial markets and provided a source of domestic financing.

For those seeking additional information on national reforms, I’ve written about the following jurisdictions.

At some point, I also need to write about the Singaporean system, which is one of the reasons that nation is so successful.

P.S. Needless to say, it would be nice if the United States was added to this list at some point. Though I won’t be holding my breath for any progress while Trump is in the White House.

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President Trump thinks he can boost Republicans next Tuesday by promising a new round of tax relief for the middle class.

I’m skeptical of his sincerity, as noted in this segment from a recent interview, but I also warn that his proposed tax cut is impractical because Republicans have done a lousy job on spending. And I also point out that it is ironic that Trump is urging lower taxes for the middle class when his protectionist tariffs (trade taxes) are hurting the same people.

At first, I wasn’t going to bother writing about this topic for the simple reason that Trump isn’t serious (if he was, he wouldn’t have meekly allowed the big spenders to bust the spending caps).

But then I saw that Tom Giovanetti of the Institute for Policy Innovation wrote a column for the Wall Street Journal explaining how reforming Social Security would be great news for lower- and middle-income taxpayers.

…44% of Americans no longer pay any federal income tax at all, and many more pay very little. …On the other hand, low- and middle-income workers do send the government a large share of their earnings in the form of payroll taxes. That same family of four pays $12,240 at the 15.3% combined rate for Social Security and Medicare. If you want to cut taxes for middle-class and low-income workers, that’s where you have to do it. …instead of…a payroll-tax cut of 4% of income, why not redirect that same 4% into personal retirement accounts for every worker? …With no decline in disposable income, American workers would suddenly be investing for retirement at market rates in accounts they own and control, instead of relying on Congress to keep Social Security solvent.

Not only would personal retirement accounts be good for workers, they also would help deal with the looming entitlement crisis.

America’s entitlements are on a path to collapse, and few politicians—including Mr. Trump—have an appetite to do anything about it. When the crisis comes, no tax increase will be big enough to solve the problem. Knowing the U.S. government is eventually going to fudge its commitment to retirees, policy makers should at least give workers a fair chance to amass the savings they will need to support themselves. The back-door solution to the entitlement crisis is to make workers wealthy. Will you worry about Social Security’s solvency or a Medicare collapse if you have more than enough money in a real retirement account to buy a generous annuity and cover your health insurance?

At the risk of stating the obvious, this is the right approach. Both for workers and the country.

To be sure, I don’t think it’s likely since Trump opposes sensible entitlement reform. But Tom’s column at least provides a teaching moment.

I’m not sure when we’ll have a chance to address this simmering crisis. But if you’re wondering whether changes are necessary, check out this chart I put together earlier this year showing Social Security’s annual shortfall (adjusted for inflation, so we’re comparing apples-to-apples).

P.S. This video has more details on the benefits of personal retirement accounts.

P.P.S. And this video shows why the left’s plan to “fix” Social Security would be so destructive.

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The United States has a bankrupt Social Security system.

According to the most recent Trustees Report, the cash-flow deficit is approaching $44 trillion. And that’s after adjusting for inflation.

Even by DC standards of profligacy, that’s a big number.

Yet all that spending (and future red ink) doesn’t even provide a lavish retirement. Workers would enjoy a much more comfortable future if they had the freedom to shift payroll taxes to personal retirement accounts.

This is why I periodically point out that other nations are surpassing America by creating retirement systems based on private savings. Here are some examples of countries with “funded” systems (as compared to the “pay-as-you-go” regime in the United States).

Now it’s time to add Denmark to this list.

Here’s how the OECD describes the Danish system.

There is…a mandatory occupation pension scheme based on lump-sum contributions (ATP). In addition, compulsory occupational pension schemes negotiated as part of collective agreements or similar cover about 90% of the employed work force. …Pension rights with ATP and with occupational pension schemes are accrued on a what-you-pay-iswhat-you-get basis. The longer the working career, the higher the employment rate, the longer contribution record and the higher the contribution level, the greater the pension benefits. …ATP covers all wage earners and almost all recipients of social security benefits. ATP membership is voluntary for the self-employed. ATP covers almost the entire population and comes close to absolute universality. …The occupational pension schemes are fully funded defined-contribution schemes… Some 90% of the employed work force is covered… The coverage ratio has increased from some 35% in the mid-1980s to the current level… Contribution rates range between 12% and 18%.

A Danish academic described the system in a recent report.

As labour market pensions mature, they will challenge the people’s pension as the backbone The fully funded pensions provide the state with large income tax revenues from future pension payments which will also relieve the state quite a bit from future increases in pension expenditures. Alongside positive demographic prospects this makes the Danish system economically sustainable. … a main driver was the state’s interest in higher savings… Initially, savings was also the government motive for announcing in 1984 that it would welcome an extension of occupational pensions to the entire labour market. … Initially, contributions were low, but the social partners set a target of 9 per cent, later 12 per cent, which was reached by 2009. …it is formally a private system. Pensions are fully funded, and savings are secured in pensions funds. …It is also worth noting that the capital accumulated is huge. Adding together pensions in private insurance companies, banks, and labour market pension funds (some of which are organized as private pension insurance companies), the total amount by the end of 2015 was 4.083 bill.DKK, that is, 201 per cent of GDP.

Denmark’s government also is cutting back on the taxpayer-financed system.

… the state has also sought to reduce costs of ageing by raising the pension age. In the 2006 “Welfare Reform”, it was decided to index retirement age with life expectancy… Moreover, the voluntary early retirement scheme was reduced from 5 to 3 years and made so economically unattractive that it is de facto phased out. Pension age is gradually raised from 65 to 67 years in 2019-22, to 68 years in 2030, to 69 in 2035 and to 70 in 2040… These reforms are extremely radical: The earliest possible time of retirement increases from 60 years for those born in 1953 to 70 years for those born in 1970. But the challenge of ageing is basically solved.

Those “socialist” Danes obviously are more to the right than many American politicians.

The Social Security Administration has noticed that Denmark is responding to demographic change.

The Danish government recently implemented two policy changes that will delay the transition from work to retirement for many of its residents. On December 29, 2015, the statutory retirement age increased from age 67 to 68 for younger Danish residents. Three days later, on January 1, 2016, a reform went into effect that prohibits the long-standing practice of including mandatory retirement ages in employment contracts.

And here’s some additional analysis from the OECD.

…pension reforms are expected to compensate the impact of ageing on the labour force… To maintain its sustainability…, major reforms have been legislated, including the indexation of retirement age to life expectancy gains from 2030 onwards. …a person entering the labour market at 20 in 2014 will reach the legal retirement age at 73.5. This would make the Danish pension age the highest among OECD countries. …As private pension schemes introduced in the 1990s mature, public spending on pension is projected to decline from around 10% of GDP in 2013 to 7% towards 2060.

Wow. Government spending on pensions will decline even though the population is getting older. Too bad that’s not what’s happening in America.

Last but not least, here are some excerpts from some Danish research.

Denmark has also developed a funded, private pension system, which is based on mandatory, occupational pension (OP) schemes… The projected development of the occupational schemes will have a substantial effect on the Danish economy’s ability to cope with the demographic changes. …the risks of generational conflicts seem smaller in Denmark than in many other countries. …Overall, the Danish OP schemes are thus widely regarded as highly successful: they have contributed substantially to restoring fiscal sustainability, helped averting chronic imbalances on the current account and reduced poverty among the elderly.

This table is remarkable, showing the very high levels of pension assets in Denmark.

To be sure, the Danish system is not a libertarian fantasy. Government still provides a substantial chunk of retirement income, and that will still be true when the private portion of the system is fully mature. And even if the private system provided 99 percent of retirement income, it’s based on compulsion, so “libertarian” is probably not the right description.

But it is safe to say that Denmark’s system is far more market-oriented (and sustainable) than America’s tax-and-transfer Social Security system.

So the next time I hear Bernie Sanders say that the United States should be more like Denmark. I’ll be (selectively) cheering.

P.S. The good news isn’t limited to pension reform. Having reached (and probably surpassed) the revenue-maximizing point on the Laffer Curve, Denmark is taking some modest steps to restrain the burden of government spending. Combined with very laissez-faire policies on other policies such as trade and regulation, this helps to explain why Denmark is actually one of the 20-most capitalist nations in the world.

August 8 addendum: Here’s a chart from a report by the European Commission showing that private pension income is growing while government-provided retirement benefits are falling (both measured as a share of GDP).

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Writing a column every day can sometimes be a challenge, in part because of logistics (I have to travel a lot, which can make things complicated), but also because I want to make sure I’m sharing interesting and relevant information.

My task, however, is very easy on certain days. When Economic Freedom of the World is published in the autumn, I know that will be my topic (as it was in 2017, 2016, 2015, etc). My only challenge is to figure out how to keep the column to a manageable size since there’s always so much fascinating data.

Likewise, I know that I have a very easy column about this time of year (2017, 2016, 2015, etc) since that’s when the Social Security Administration releases the annual Trustees Report.

It’s an easy column to write, but it’s also depressing since my main goal is to explain that the program already consumes an enormous pile of money and that it will become an every bigger burden in the future.

Here are the 1970-2095 budgetary outlays from the latest report, adjusted for inflation. As you can see, the forecast shows a huge increase in spending.

The good news, as least relatively speaking, is that we’ll also have inflation-adjusted growth between now and 2095, so the numbers aren’t quite as horrifying as they appear. That being said, Social Security inexorably will consume a larger share of the private economy over time.

Now let’s examine a second issue. Most news reports incorrectly focus on the year the Social Security Trust Fund runs out of money.

But since that “Trust Fund” is filled with nothing but IOUs, I think that’s an utterly pointless piece of data. So every year I show the cumulative $43.7 trillion cash-flow deficit in the system. Using inflation-adjusted dollars, of course.

Assuming we don’t reform the program, think of these numbers as a reflection of a built-in future tax hike.

You won’t be surprised to learn, by the way, that politicians such as Barack Obama and Hillary Clinton already have identified their preferred tax hikes to fill this gap.

Let’s wrap up.

Veronique de Rugy of Mercatus accurately summarizes both the problem and the solution.

The single largest government program in the United States will soon have an annual budget of $1 trillion a year. …The program is Social Security, and our national pastime seems to be turning a blind eye to its dysfunctions. …Since 2010, it has been running a cash-flow deficit—meaning that the Social Security payroll taxes the government collects aren’t enough to cover the benefits it’s obliged to pay out. …

Veronique punctures the myth that there’s a “Trust Fund” that can be used to magically pay benefits.

Prior to 2010, the program collected more in payroll taxes than was needed to pay the benefits due at the time. The leftovers were “invested” into Treasury bonds through the so-called Old Age Trust Fund, which is now being drawn down. …In fact, the Treasury bonds are nothing but IOUs. …Treasury…doesn’t have the money: It has already spent it on wars, roads, education, domestic spying, and much more. So when Social Security shows up with its IOUs, Treasury has to borrow to pay the bonds back. …Did you catch that? Past generations of workers paid extra payroll taxes to bulk up the Social Security system. But the government spent that additional revenue on non-retirement activities, so now your children and grandchildren will also have to pay more in taxes to reimburse the program.

So what’s the solution?

Veronique explains we need to reform the system by allowing personal retirement accounts. She was even kind enough to quote me cheerleading for the Australian system.

Congress should shift away from Social Security into a “funded” system based on real savings, much as Australia and others have done. The libertarian economist Daniel J. Mitchell notes that, starting in the ’80s and ’90s, that country has required workers to put 9.5 percent of their income into a personal retirement account. As a safety net—but not as a default—Australians with limited savings are guaranteed a basic pension. That program has generated big increases in wealth. Meanwhile, Social Security has generated big deficits and discouraged private saving. Who would you have emulate the other?

Though I’m ecumenical. I also have written favorably about the Chilean system, the Hong Kong system, the Swiss system, the Dutch system, the Swedish system. Heck, I even like the system in the Faroe Islands.

The bottom line is that there’s been a worldwide revolution in favor of private savings and the United States is falling behind.

P.S. If you have some statist friends and family who get confused by numbers, here’s a set of cartoons that shows the need for Social Security reform.

P.P.S. As I explain in this video, reform does not mean reducing benefits for current retirees, or even older workers.

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