Amateur Megalomania

There’s been a lot of talk recently about President Bush’s proposal for Social Security reform. And while a mind-numbing amount of numbers are being bandied about, both in support of the need for reform and in a silly reversal by the Left regarding the existence of the Crises, I think all of the debate is missing a fundamental point.

Social Security reform is a done deal. Bush might not get his plan through right now, but the system is dead as it stands today, and it will succumb to a simple shift in expectations.

Social Security was designed and pitched to a generation that was used to having very few choices. They had two or three television channels, a handful of radio stations, limited selection of grocery brands, and limited expectations when it came to investments, if any. Social Security was a nice, vanilla scheme tailor made for a generation used to standardization, and quite put off by the idea of roiling, turbulent capitalism. The entire power base of the Democratic Party, birthed by FDR, was built on the idea of stability for all that are willing to forego choice. While that has served the party well, the seeming inability to reconcile themselves with the changing dynamic will doom them in the end.

The generation that embraced Social Security is still a powerful force, and their gullibility at the hands of the Democratic Party will continue to present obstacles for much needed reform. Preaching numbers, retirement age, and rates of return aren’t going to change their mind, but fortunately, reform won’t turn on that kind of data.

Tap a twenty-something on the shoulder and try to explain to them that they shouldn’t have any choice in how their money is invested. Bring it up while they wait in line at Starbucks to order their sixteen syllable personal variation of coffee. Explain it while they grab their personalized Whopper delivered in under ninety seconds at a drive thru window. Run an infomercial on one of five hundred television channels available to them. Run ads on the radio and hope they aren’t listening to one of several thousands songs available at their fingertips through various media players. Explain to them that they aren’t capable of making choices. Explain that they shouldn’t exercise ownership over some portion of their own account.

Good luck.

The younger generations grew up in a vastly different world. The turbulence of capitalism is a comfort for most, providing new opportunities and challenges each and every day. They live in a dynamic world, and nearly fifty percent of them own stock in some form or another. Much has been made of the growing wave of retirees, but I think the real wave is on the other end of the demographic scale. They aren’t going to tolerate a static system with a pathetic rate of return, and more importantly, lack of ownership of their accounts for the sake of their dependents.

And the Democratic Party faces an agonizing choice in the face of this coming shift in political power. They can stand with the aging (and ultimately declining) FDR generation, riding them into the sunset of political power, or they can embrace the coming wave of politically active voter and try to get ahead of the GOP push for privatization and choice. Either way, a very important segment of the Democratic Base will find themselves out in the cold.

The coming reform is as certain as the morning. It remains to be seen if Bush is the man to pull it off right now, but it will happen.

UPDATE – I found a well written entry on Social Security here at Dave Friedman’s Soul of Wit, speaking to some of the concerns raised by Chris in the comment section. Mr. Friedman has a nice take on the issue, namely that there are many other valid reasons for attacking the current system, so take your pick. As I said below, and maybe hadn’t made clear in the main entry, I do favor a menu approach to investing with private accounts. By some means, various risk classifications would have to applied to an approved list of securities or Mutual Funds, much like most 401(k) accounts. While I prefer as much freedom as possible, and would ultimately strive for complete freedom to invest as you will, I bow to the reality of emotion and irresponsibility. But even in the face of human failure, ultimately, private accounts are both prudent, fiscally sound, and morally just. I can really see no compelling reason to pool money as we have in the current program.

Filed under: Social Security