Maggie's Farm

The benefit of Social Security, which is hard to see amidst its disincentives, is that it's a long term (30 years) inflation adjusted annuity guaranteeing that you won't outlive your income, something the private sector cannot provide, owing to the uninsurability of inflation ; and that then gives you a definite age that you have to save for, namely to the allowed retirement age for benefits. The risk otherwise is living too long, with no way to save enough to cover that outlying case, but with no difficulty covering the average case.

It's easy to balance the budget, namely just raise the retirement age for benefits until it balances, following whatever the demographics do. If you want to retire earlier, do it on your own dime to bridge the gap betwen when you want and whenever benefits kick in.

McArdle seems unaware that that government must instantly return any funds collected to the economy, lest the money supply fall, either by spending it or by buying back government debt. Social security taxes are general funds exactly like any other, and must be spent.

Similarly, all citizens cannot save at once either, so privatizing social security isn't going to work any better. The particular mechanism would be too many people buying stocks now, and selling at once later, which drops the return on those investments. To what level? Enough to raise the retirement age so that the workers are willing to support the retirees, exactly the same as if the government had done it. Buyers has to equal sellers.

The problem that is unseen is that money is not wealth. Money is tickets in line to say when the economy does next, namely something for you. The Fed creates and destroys tickets to match what the economy is capable of doing at once. There's no point saving tickets if you're the government, since what can be circulating depends on the economy's capability at the time and not the supply of tickets you may have squirreled away. You can print tickets but not wealth.

A deeper insight is that the private sector has the same problem in saving, if everybody does it at once, against retirement. But I guess you're more inclined to have kids if saving obviously doesn't work.

How will adult kids view life-extending medical breakthroughs that extend the lives of the aged parents they're then supporting?

Life extension had better also allow raising the retirement age, which means either that saving cannot work (in that it cannot avoid this worker imbalance) or that there must be a constant population explosion.