Protecting Social Security's risk-sharing through government administration

¶ … Social Security Privatization is a Bad Idea

It is possible to use a Toulmin-based argument structure to help explain why privatizing Social Security would negatively impact both the results as well as the effectiveness of the program itself. Using this structure, the argument is broken down into six separate sub-headings as it is discussed further.

Claim:

Social Security should be left in the hands of the U.S. Government and not be privatized.

Grounds

There is much proof that privatizing Social Security would lead to a less effective and efficient system. This social safety net program was originally based on the idea that people would claim their benefits at the age of 62 after working and contributing to the resource pool their entire lives. In the 1930's, when Social Security was first implemented, not as many people lived long enough to claim their benefits or didn't live long enough to claim them for very long (Shipman, 1). This meant that the risk the government was taking in essentially insuring each citizen was much less than the risk they now bear given the fact that more people are living well into and through their 60's. It has been argued that by privatizing Social Security, government will no longer have to absorb the higher levels of risk of payout of benefits, and, instead a company or organization can help to do so based upon tactics and policies similar to those driving the medical insurance industry. They are essentially arguing that resources are lost at a rate higher than they are gained. In other words, privatization of social security in an economy populated by overlapping generations of individuals that have time-consistent or time-inconsistent preferences, face mortality and individual income risk as well as borrowing constraints (Fehr, Habermann, and Kindermann, 884).

What the proponents of privatization do not understand is that accumulating assets, if held by individuals, are equal to those if held by the government; resources are not lost. Rather, they are reallocated and the government's benefit obligations fall as individuals' assets rise (Shipman, 2). This means that there is no net resource loss as long as the government is still able to efficiently dole out benefits. Privatizing Social Security would shift the risk from the government to private corporations, which, if they were to go bankrupt of lose money due to privatization, would ultimately shift the fiscal responsibility or burden onto the taxpayers. The current system does not give this potential burden to the taxpayers and, instead, leaves it squarely on the back of the government as a low risk form of individual fiscal insurance.

Warrant

US citizens, as taxpayers, would be fiscally disadvantaged if left liable for inefficiencies and net loss of resources due to the privatization of Social Security. There is much evidence for this within the idea that risk is shared currently on a relative equilibrium within the government and would be shifted to burden the taxpayers and not the corporations if privatization should occur.

Qualifier

Privatization of Social Security would hurt taxpayers in the event of corporate insolvency. Also, the for-profit corporations would likely answer first to their shareholders and look to make a profit from a social safety net.

Rebuttal

No for-profit corporation as ever sought to not make a profit from privatized or private business ventures. These corporations would milk taxpayers and create inefficiency and waste in order to turn a profit. The current Social Security system is the most efficient system possible, and has served millions of Americans well for over 70 years. Privatization of Social Security benefits has not been successful in many European countries (Fehr, Habermann, and Kindermann, 884) and is based upon corporate profits instead of the needs of a nation's working class.

Conclusion

It can be demonstrated that the privatization of Social Security in the U.S. represents a clear shifting of risk from the government sector to the taxpayers themselves through for-profit corporate entities. This would allow corporations to make money on such risk as well as those paying into the already extremely efficient and effective system. Part of this efficiency would be eliminated in favor of profits and gains for shareholders if privatization were to occur. The history of such a shift of social safety net responsibility from government to private sector shows this to be true.