January 24, 2004
Bogus Social Security "Transition Cost"
See this piece, TCS: Tech Central Station - Privatization: The Ultimate "Lockbox" for Social Security, for a discussion about how the "transition cost" that so many of those opposed to privatizing social security fret about is bogus:
Bush-hating economist Brad DeLong has praise for the following argument against Social Security privatization, from Mark A.R. Kleiman:
"privatization proposals actually add hundreds of billions of dollars in extra expenses to the federal budget per year. Which means, of course, hundreds of billions of dollars in additional taxes or national debt. Far from being a free ride, privatization will cost taxpayers dearly."
This is known as the "transition cost" argument, and it is completely bogus. Below is a table that explains why. It shows how Social Security obligations would be paid for, both under the present system and under transition to a system where today's workers are given private accounts instead of paying Social Security taxes.
Read the whole story for a clear explanation on why the transition cost argument is bogus and for why both the left and the right get it wrong when it comes to this issue--and why you should be in favor of privatization anyway.