Means-testing of the kind we’re talking about (scrapping benefits entirely for people with incomes over something like $200,000) won’t solve the problems. The system would still be a pay-as-you-go entitlement program that would always be extraordinarily sensitive to demographic changes of the kind we’re about to undergo. PAYGO rules may work fine for annual appropriations, but they don’t work for long-term benefit promises–there’s no ompetus on Congress today to fund promises that won’t come due for another 20 years or more.

Secondly, the amount of money “saved” though means-testing would be but a drop in the bucket of what’s needed to cover the unfunded liabilities, unless the limits on income for eligibility were lowered to a politically infeasible level.

Thirdly, say we did means-test: that’s effectively putting everyone who remains eligible for benefits on welfare. It becomes a massive government transfer program–good luck selling that to retirees who have worked their whole lives only to retire and find themselves a burden on society: “Thanks for the 45 years of hard work! Since we taxed you up the wazoo your whole life, you surely can’t afford to retire comfortably now, so us rich folks got together and decided to give you this welfare check!” Surely some people might not mind, but there are a lot of hardworking Americans who DON’T want to the beneficiaries of government largesse in their old age, myself among them. (And given my current career trajectory, I’d almost certainly be elegible for benefits.)

So if the choices as Cowen sets them up are forced saving where everyone saves for themselves (private accounts) or turning Social Security into a government redistribution program (means-testing), I choose everyone saving for themselves. Cowen wants to junk the forced saving and just turn it into welfare for the elderly–but won’t we have to pay the poor elderly less in their retirement if we force them to save and invest now?

What we really need to do is change how beneifts are calculated–currently, scheduled benefit increases are tied to wages, not prices. Since economy-wide wages rise faster than prices, benefit increases tied to wages grow much faster than is necessary. That combined with private accounts (which would lessen the amount necessary to take care of the legitimate “safety net” cases) just makes more sense.

I do find it unsettling how much disinformation remains on this issue. The proud and willful ignorance of the commenters on Yglesias is astounding; they keep repeating that SS is NOT a Ponzi scheme–how else do you describe a system where the current payees pay the benefits of the former payees? Oh, right, it’s a generational contract. That’s some clever f*ing marketing. It’s like they haven’t heard the news that there are more tie-dyed baby-boomers frothing at the mouths for their benefits than there are workers to pay for them.

“…taxation is forever — always there, nipping and tugging at your life plan — while a little drafting comes, hijacks your plans, and then lets you go.”

He’s right that taxation is forever, always nipping and tugging at your life plan. But does this justify another type of slavery? Of course not.

Matthew should try to tell that whole “a little drafting comes, hijacks your plans, and then lets you go” diatribe to all the poor souls whose names reside on a certain wall in Washington DC.

Hm, that’s funny, Matt. That “little draft” that you spoke of, it never really “let go” of all those people, did it? No, because of that “little draft”, they’re DEAD. I’ve never heard someone speak this nonchalantly before about the wholesale sacrifice of the lives of our citizens at the hands of the state. Never. And he should be ashamed.