Actually I am just going to go ahead and post her response to my social security post:
This is a fascinating discussion. I have a couple of things to add. Nick’s point that social security is not “insurance” is an important one; many people misunderstand how the system works, in part because the Social Security Administration purposefully sold the program in a particular way. Our payroll taxes are helping to fund current beneficiaries, and the vast majority of beneficiaries use way more money than they ever put in. In terms of the capacity of the private market to ensure economic security for the “retired”/aged, this is debatable (and I don’t know enough of what economists have to say to offer any definitive answer). I would add that old-age poverty was in fact very high before OAI/OASDI (“Social Security”) and frankly remained high until expansions in the program in the 1960s/1970s (I’m not sure the date of the NY study that Nick mentions), and it was a tremendous burden on many working-class families to care for family members who could no longer work (keeping in mind that industrial and agricultural labor were both very hard on the bodies and that access to medical care was difficult and expensive) – one of the motives for the program was to reduce that burden on the children of the aged. Roosevelt opposed an opt-out for the same reason Obama’s health care mandate is a mandate for all, because if everyone does not participate, the program will not work; the goal was to make this program a universal one (which exclusions prevented but which has come closer to being the case over time) with legitimacy and with political support (the reason for insisting on payroll contributions and the language of “insurance” was precisely to create buy-in and remove the program from any stigma of “government welfare”).
As for relying on the private market for retirement (individual savings), this is frankly problematic. The only way to ensure that one’s money does not erode with inflation is to “invest” it (all of our private retirement funds are thus investments via mutual funds, etc.), but the stock market is not guaranteed — as our most recent financial crisis revealed, individuals who worked very hard to save over the years can easily lose everything. It is thus a gamble. One might get a much better deal, or one might get a much worse one.
I recognize the frustration of younger generations who resent payroll taxes that they fear will not “pay off” in their future. At the same time, I don’t see Social Security as a “fraud,” and I fear that some charges against its viability are overblown (from what I understand, most economists believe that a few adjustments can secure the system) and frankly political (a way to discredit the program, urge privatization, and more broadly discredit government social provision). But these are certainly issues that people of different ideologies can legitimately debate.
I am Nick and the study she mentions is the one quoted by Professor Woods in his lecture.