Friday, March 04, 2005
"Family Values" and Social Security Privatization
by Tom Bozzo
Personal Journal is actually my favorite section of the WSJ, and it's actually likelier (in the absence of a major blogger's mention, etc.) that I'll see an article there than, say, on its editorial page. The lede:
The effects on survivors and ex-spouses are actually very important in evaluating the prospective benefits of privatization, as I showed a few weeks ago in this post on the Heritage Foundation's privatization calculator. Privatization advocates almost always compare Social Security benefits to earnings from single life annuities, whose payment streams end with the beneficiary's life. This maximizes the advertized benefit under privatization.
An element of deception enters because Social Security retirement benefits are not structured like a single life annuity for married (or once-married) participants. Survivor benefits make Social Security more equivalent to a joint life annuity, which requires considerably more capital to produce the single life annuity's income stream. This is particularly important for "traditional" single-earner families, as well as two-earner families with high income asymmetry, in which one partner will not have a large (or any) amount of money from payroll taxes to divert into a private account. For middle earners — most people, really — this worsens the privatization deal.
A good question is, how do conservative privatization advocates reconcile desires to promote "traditional" family structures with what the opposition research might call, with some justification, privatization's anti-family incentives?
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Separately, Ann Althouse has a good post on Bush's confession of fault, or lack thereof, in the privatization sales job, highlighting the conservative virtue of not fixing that which ain't broke.
Yesterday's Wall Street Journal ran an important article, "Spousal Benefit Is Social Security Wild Card" (no link due to WSJ subscription system) — on page D2 in "Personal Journal."
Personal Journal is actually my favorite section of the WSJ, and it's actually likelier (in the absence of a major blogger's mention, etc.) that I'll see an article there than, say, on its editorial page. The lede:
One of the big unanswered questions in President Bush's push to revamp Social Security is how widows, widowers, and ex-spouses would fare.OK, now, why isn't this question worthy of A1? Or even D1, much as I enjoyed "The Luxury Car Market Gets More Crowded" on Audi's revamped product line.
The effects on survivors and ex-spouses are actually very important in evaluating the prospective benefits of privatization, as I showed a few weeks ago in this post on the Heritage Foundation's privatization calculator. Privatization advocates almost always compare Social Security benefits to earnings from single life annuities, whose payment streams end with the beneficiary's life. This maximizes the advertized benefit under privatization.
An element of deception enters because Social Security retirement benefits are not structured like a single life annuity for married (or once-married) participants. Survivor benefits make Social Security more equivalent to a joint life annuity, which requires considerably more capital to produce the single life annuity's income stream. This is particularly important for "traditional" single-earner families, as well as two-earner families with high income asymmetry, in which one partner will not have a large (or any) amount of money from payroll taxes to divert into a private account. For middle earners — most people, really — this worsens the privatization deal.
A good question is, how do conservative privatization advocates reconcile desires to promote "traditional" family structures with what the opposition research might call, with some justification, privatization's anti-family incentives?
--------------
Separately, Ann Althouse has a good post on Bush's confession of fault, or lack thereof, in the privatization sales job, highlighting the conservative virtue of not fixing that which ain't broke.
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Will the ex-wives/husbands--and their children--who are under 55 but were married for 10 years be deprived of spousal/student survivor benefits?
More generally: Why does this Administration hate entrepreneurial activity?
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More generally: Why does this Administration hate entrepreneurial activity?
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