Ain’t Nothin’ Like the Real Thing, Baby

by Will Wilkinson on May 6, 2005

I have a new piece up at Fox News on the the relative political security of personal retirement accounts and the Social Security status quo. Reform obstructionists like to say that the status quo is at least as secure because Social Security is so popular, and, in any case, Congress could just tax the hell out PRAs if they wanted. This argument doesn’t work because the reason SS is so untouchable is that it was designed to create the illusion of property, contract, and insurance. If fake rights are the electricity in the third rail, then real rights should pump out even more wattage.

My conclusion:

The political vitality of Social Security-as-we-know-it was designed to be parasitic on the American commitment to property and contract. But parasites cannot be more secure than the host. If Congress fears to trespass on illusory property, it will not be bolder when encountering a real legal fence. Personal accounts — real ownership, real rights — offers in reality what the status quo offers only in appearance. The shadow, as Plato would remind us, is not more solid than the form.

Americans deserve real ownership, real property, and real retirement security. Unlike the slowly eroding status quo, PRAs offer Americans the real thing.

Whole thing.

Viewing 40 Comments

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    Will:

    I wonder about your ontology.

    What is the distinction between "illusory" property in which everyone believes and which they respect in their actions and "real" property? I am genuinely having trouble with the distinction.
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    The difference between my promising to pay you $10 dollars tomorrow and you believing it, and our having a binding contract that says that I have to pay you $10.
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    Will:

    If the real concern is that future Congresses will cut Social Security benefits, there are lots of ways the security of those benefits could be dramatically increased. George Bush could barnstorm around the country saying that any future President or Congress that tries to cut Social Security benefits from the amount retirees are entitled to under current law (or default on the "Trust Fund") is un-American and deserves to be voted out of office. He could write a "Contract with America" to that effect and demand that all Republican lawmakers sign it. He could use his influence to put that principle at the front of the Republican Party platform.

    He could even write a new "Social Security Civil Rights Act" giving Americans a property right in their benefits (at the amount they are entitled to under current law) and the right to sue to receive them if cut or taxed above a certain level. As for the trust fund, he could insist that future surplus tax revenues from the so-called "Social Security tax" be invested in securities under the auspices of an independent agency designed along the lines of the Federal Reserve (with directors with long enough tenure to insulate them from political pressure).

    Cutting benefits under that scenario would be pretty darn hard. Marginally easier than confiscating retirees' "personal" retirement accounts? Maybe. Easier than jacking up the tax rate on capital gains realized through "personal" retirement accounts" (which has the same practical effect as partial confiscation)? Definitely not.

    If you're still worried that Congress would abolish Americans' property rights in Social Security and cut their benefits even under those conditions, the President could even be pushing for a Constitutional amendment to protect them (with a special provision for repeal under conditions of national emergency with the consent of some kind of Congressional supermajority).

    The problem here is that you libertarians (and the Republicans) aren't interested in strengthening Social Security - you want to destroy it. That's fine, but don't try to change the subject - make the honest argument that "personal" accounts are the feasible second-best to abolition.

    For the record, my dream would be to abolish the payroll tax, increase the income tax, and turn Social Security payments into a means-tested welfare program. But the stigma attached to "welfare" would make it too easy for y'all to cut benefits, so defending what we have now is the feasible second-best to that. And I'll say it loud and proud.
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    I'm with Gareth in questioning this real/illusory property distinction, and I'm not sure your answer helps. All a contract does is increase the likelyhood that the government will step in if I don't pay. So it sounds like real property is dependent on the goodwill of the government. But dependency on the goodwill of the government is precisely what you criticize about illusory property. Forgive me if I just see two different kinds of shadows; like all of Plato's real things, the form of property appears elusive.
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    Protagoras: the difference is in the right to sue for relief. In this case the difference between a property right and a promise is particularly acute, since Fifth Amendment says the government can't just confiscate your stuff without compensation. (It can tax, but that's not the same thing.) Hence my suggestion above that if Republicans and Will were really interested in protecting future Social Security benefits, they'd be pushing to define a property right in those benefits as they are defined today.
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    I wonder what the people at Enron believe? I have a feeling Social Security will be more real for them than their bankrupted 401Ks or any other program Will can conjure up for Wall Street to abscond with.

    Will assumes everyone is honest and bad things do not happen. He describes a utopian vision of the world.

    There are better ways, than the present system, to help people enjoy retirement, but they are not any of the ways Will describes.

    His ideas are a simple parroting of Wall Street. Leave Wall Street out of it.
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    Anton,

    I used this example before, but a British citizen cannot sue for relief if Parliament takes away her house without compensation. But British citizens have "real" property rights in their homes because it is (at least for now and in the foreseeable future) politically unthinkable for any Parliamentary majority to do that.

    (Note: I'm not arguing against justiciable property rights in constitutions. I'm just saying that even if they don't exist, property rights still may. And, conversely, a justiciable right in the constitution, as the People's Republic of China now has, will not do any good if the judicial system will not reliably enforce it.)

    Since property rights exist only when it is politically unthinkable to interfere with them, Will and Cato's statements that they aren't property rights can't be evaluated as a neutral description of reality, but as an attempt to change that reality.
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    Gareth: sorry for not being clear; I didn't mean that the only real property rights were rights you could sue the government to enforce. Even in the UK, you can presumably still sue for relief if someone tries to steal your house (i.e. sue the person who stole the house, not the government). But even in the UK there would be a difference between a property right in a government obligation and a mere government promise; if the government just refuses to honor a contract (e.g. if you're an employee and they don't pay you due to a screwup in their accounting division, then refuse to pay) you can presumably sue for relief. Americans have no property right in their Social Security benefits; if the Social Security Administration doesn't pay you due to a mistake, you can ask them to correct the situation, but you can't sue. So whether or not we have a property right in Social Security (no) has real legal teeth even today.

    And as I've argued before, the Fifth Amendment means that if Americans had a genuine property right in Social Security, their payments would be more secure than they are today. There's a major difference between "Congress could cut or eliminate your benefits by changing one number in a statute" and "Congress could cut or eliminate your benefits by passing a law abolishing a property right, fighting things out with the Supreme Court, and then, if they win, changing a number in a statute."

    Of course, if the government is sufficiently confiscation-happy or judicial or executive authorities refuse to enforce property rights against violators, property rights don't really exist, but that's not the situation under consideration.
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    Gareth: to clarify, you're right that property rights only exist when it is politically unthinkable to interfere with them, but not everything it is politically unthinkable to interfere with is a property right. It would be politically unthinkable to repeal the First Amendment, but I don't have a property right in my freedom of religion.
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    Well, the Social Security Administration can't just refuse to give you a social security cheque if you qualify under the current rules. You could indeed get judicial recourse if that happened.

    What is true is that you can't sue Congress for changing the level of benefits. So the analogy with the UK Parliament's theoretical power to expropriate your house without compensation is a good one.

    If it is unthinkable for Congress to repudiate the obligations of the general account to the trust fund, then that is all the property rights anyone can ever have. And if the social security debate goes the way it looks like it's going, then it will indeed be unthinkable to the same degree as it is unthinkable for Congress not to respect the governmetn bonds in the portfolio of the private insurance company.
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    Gareth: fair point about the SSA, but it's still not like the British government's theoretical ability to take your house, because you already have your house. Something is being taken rather than withheld. And afaik you can't do lots of things with your Social Security benefits that you could usually do with property. For example, I understand that you can't assign them to another person or offer them as security on a loan. The only thing future Social Security benefits have in common with genuine property is that both are politically difficult to abolish. As I've said before, something being politically difficult to interfere with doesn't make it a property right.

    In any case Congress would never have to repudiate the government's obligations to the trust fund by defaulting; it would only have to cut benefits payable. If it did that, the "trust fund" could keep getting bigger and bigger even as benefits got smaller and smaller (and because they were getting smaller and smaller).
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    Hehe, Fox TV news. Did you have to give back your college degrees to post there, or just eat a few poor babies?
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    The shadow, as Plato would remind us, is not more solid than the form.


    I believe this sentence would be more rhetorically forcible if you relocated the interrupting clause to the beginning. Check it out:

    As Plato reminds us, the shadow is not more solid than the form.


    What do you think?
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    I think you're right. Dammit.
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    Gareth and Anton,

    There are two related points you're missing here, it seems to me. One is that Congressional reduction of SS benefits is *not* as unthinkable as, say, mass uncompensated expropriation of people's houses, or even of their 401(k)s. It may be very unlikely, but it is less unlikely.

    The other is: the reason *why* it's less unthinkable is that real property is a natural, moral right that exists prior to the State, not a grant at the State's whim, and at least some of the population, some of the time, still dimly and half-consciously remembers that. Thus a positive government entitlement, however long-established and generally popular, is not going to have quite the same moral force behind it in the popular mind as the negative right not to be expropriated. Almost the same, maybe, but not quite.
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    So lets sum up this weeks' offering from the Rupert Murdoch School of Philosophy:

    1. SS is a "Rube Goldberg" contraption designed to hide its true purpose.

    Nope, its probably the most straight-forward program the government runs.

    2. SS isn't really insurance at all!

    It is, 31% percent of SS payment went to survivors and the disabled. And for one third of retirement benefit recipients, their SS check is their sole source of income.

    3. And now we get: Future congresses can't be trusted!

    So, we should all get private accounts! Can we afford to start private accounts? Nope, the U.S. government already owes over $7 trillion.

    Where will we get the money to fund private accounts? By selling $3 trillion of worthless promises to some unsuspecting rubes!

    At what point did LINOs like Will go from simple lies to fraud? This week...
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    Nicholas:

    I'm not saying that property exists at the whim of the State. On the contrary, I'm saying that secure property rights exist only when it is politically unthinkable for a goverment to take them away.

    But I would say that property rights are necessarily socially constructed. An individual might be mistaken about what property he holds, but only because his subjective view conflicts with the social view. A society can't be mistaken about the property rights that exist within it, anymore than I can be mistaken about whether I have a headache.

    As a matter of degree, I would accept that taking away people's houses without compensation is even more unthinkable in American society than not paying Social Security benefits. But the point is that Cato and Will are simultaneously saying the problem with Social Security benefits is that they aren't secure property rights, while trying to bring about the situation it is complaining of.
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    Well, then, this is the nub of the disagreement. For one thing, any sentence starting "A society can't be mistaken..." is incoherent, because a society can't do or judge or believe anything; but this is perhaps tangential.

    I think you mean "a clear majority of people in society can't be mistaken...", and if you mean that then you're mistaken. :-) If a vast majority of people think, for example, that a certain subclass of persons should have no property rights to their own bodies and thus can legitimately be enslaved, they're just wrong, no matter how much they outnumber the unfortunate slaves.

    And there's nothing wrong with the simultaneous political positions you describe, because part of the point is that SS benefits *shouldn't* be property rights; that even if you believe in the legitimacy of government benefits in general, there's a good reason why no Congress can bind future Congresses; that the electorate of today should not be able to make a promise to retain a certain level of benefits that is binding, morally or legally, on future electorates. Whereas the moral obligation to respect real property rights is binding on all electorates, now and in the future.
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    Gareth, You can be mistaken about whether you have a headache!

    I agree that property rights are social facts. But it is very easy for a society to be mistaken about social facts. Some facts depend on other social facts. If someone who does not have legal authority to marry you and your partner, but does it anyway, and everyone without exception believes it, it is still not true that you are legally married. The social fact of marriage piggybacks on the social fact of legal authority to marry, which piggybacks on the social fact of a body of laws, etc., etc.
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    Nicholas,

    I don't think a clear majority of society can't be mistaken about anything. A clear majority of society can be mistaken about the cause of the extinction of the dinosaurs, or how many moons Pluto has. But there are a class of things about which a society can't be mistaken because if a clear majority believe it to be true, it is true.

    An example is that treason (defined as opposition to the effective state authority) can never prosper becuase if it prosper, it isn't treason (because the previous state authority turned out not to be effective).

    So, Americans could not, coherently, be mistaken that the dollar is legal tender. An individual could be mistaken (or deluded) that the piece of paper he had in his pocket was legal tender, but a clear majority could not.

    It isn't incoherent to bemoan the fact that Americans view Social Security benefits as property rights. It is incoherent to say that the problem with Social Security benefits is that they aren't property rights, even though everyone (or almost everyone) thinks they are. That's like saying that the problem with fiat money is that it doesn't work as a medium of exchange, even when everything thinks it does (and acts on this belief). That's what I took Will to be arguing.
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    Will:

    In your example, we all believe two things:

    (1) No one is lawfully married unless the marriage is presided over by a person with the authority to do it.

    (2) Bob is lawfully married to Alice.

    But it turns out (contrary to our belief):

    (3) The person who presided over Bob and Alice's wedding did not have the authority to do it.

    First off, Bob might not legally be entitled to an anullment from Alice, even if (3) turns out to be the case, particularly if (3) is found out after Alice and Bob have had three kids, a mortgage and so on. So, your counter-example isn't necessarily one, even on the more specific level.

    But, anyway, a belief that Social Security benefits are property is more like (1) than (2). I can, of course, be mistaken about my Social Security entitlement. The Social Security Administration can be mistaken about it. But the whole society can't be mistaken as to whether Social Security is an entitlement at all.

    And I know when I'm having a headache.
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