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If They Really Want Social Security

AARP types should be flexing their political muscle to cash in and fully fund social security. They should not pussyfoot around trying to keep social security payments high every year. It is a political battle every year as the report on how well the social security trust fund is doing comes out, much like China before permanent normal trade relations (PNTR).

Instead, they should get Congress to fully fund social security and privatize it at the same time by distributing bonds to all seniors. The bonds that they would distribute would magically make appear the trust fund that has not exactly been on the books since the original Social Security Act of 1935. An individual version of the Pension Benefit Guarantee Corporation can monitor each senior’s finances to make sure they are not too free afterwards.

The upside is that the aged rich will be able to invest their money in houses, boats, consumption items and early bequests. There will be tremendous freedom associated with altering the investment strategies. The marginal tax rate can drop from 12.4% on everyone in favor of some level of mandatory savings. If workers invest in a balanced portfolio of st0cks and bonds, they would only have to sock away less than a third of what they do now assuming 40 years of straight line savings earning 7.56% instead of 1-2%.

The down side of the proposal is that the federal deficit and debt will be a lot higher. But the promise to pay the seniors was implicit already. There will also be no pork fest as the taxes come in and are dissipated. The money goes away from one place (federal spending) into another (incentive to work harder). The federal government would have to borrow a heck of a lot more from the private markets or raise taxes to replace the 6%/year of skimmed management fees that put Eliot Spitzer to shame. Or are these downsides?

The proposal is positive sum because even with the trillions in payables fully monetized, the federal government will have excellent credit. It will cost less for the government to borrow than for seniors to borrow against future payments. And not only will there be a huge fiscal stimulus of lower taxes and higher accessible wealth. The seniors will be much better stewards of the money, and spend a bigger portion of it instead of saving it (or at least get a higher return than social security). The current workers would have a huge improvement in their standard of living given the lower taxes. Workers would therefore work harder to help provide more luxuries to seniors who would typically have a ton of cash.

The time for the aged to strike is now despite the fact that our society is getting older by the year. Success and popularity, ironically, is one of the worst things that can happen to an interest group. The old should act now before their coalition fragments into the not-so old, the really old, the rich old, the poor old, the technocratic old, the blue old and the red old.

The old should also do it now because if they wait a few decades for a transition, we may hit a technological singularity like the one Vernor Vinge talks about and all be uploads or something. If you claim to see at all what will happen 75 years in the future, perhaps you can tell me:

• How many world wars to expect
  
• What we will be using for transatlantic transportation
  
• What will power our local transportation
  
• The computing power that can be bought for $1,000
  
• How many trillionaires there will be
  
• The next nuclear attack
  
• The price of oil
  

The idea that the Old-Age and Survivors Insurance and Disability Insurance Trustees can see that far into the future is complete bunk. How do you judge their assumptions?

Once the old have finished funding Social Security, perhaps next year they can fully fund and privatize Medicare.

Posted by Sam Dinkin at April 10, 2005 07:47 AM

Comments

• How many world wars to expect

  Zero world wars.

• What we will be using for transatlantic transportation

A combination of supersonic and suborbital. The former will dominate in terms of cargo and passenger-miles.

• What will power our local transportation

Electricity or maybe hydrogen.

• The computing power that can be bought for $1,000

Somewhere in the neighborhood of 10^24 floating point operations. Plus or minus two orders of magnitude. Currently, you can buy roughly 10^17 flops for $1000 (using this pretty graph) and assuming that you buy 5 years of computing power at that MIPS/$1000. Moore's law will "fail" in the mid 2010's. I'm ignoring the coming elevated levels of inflation of the USD. This may reduce the number of flops by one order of magnitude.

Finally, it'll depend on the degree of parallelism of the problem. A highly parallel problem will get the full benefit, but you'll see a drop of a number of orders of magnitude if the problem requires a lot of communication between computation nodes.

• How many trillionaires there will be

10-50. I'll guess 30.

• The next nuclear attack

By 2025.

• The price of oil

1 oz of gold per barrel.

Ah, I can sit down again.

Posted by Karl Hallowell at April 10, 2005 07:21 PM

Moore's law has been declared dead quite a few times. My guess is that chip stacks, multiple core chips, multiple motherboard computers, nanodrives, active cooling, thermoelectric cooling, liquid cooling, more layers, a new round of reduced instruction sets, simpler cores, new materials (CNT?), SOI, quantum dots, quantum computing, short range inter chip RF communication and many other innovations will appear on the scene in time to keep the law going.

Posted by Sam Dinkin at April 10, 2005 07:51 PM

Zero world wars, supersonic airplanes or the railway, synthetic hydrocarbon fuels, just use Moore's law, that depends on how much the dollar is worth by then so is totally unpredictable, 20 years seems a reasonable estimate, the price of oil will likely be cheaper (adjusted) than it is today.

To Sam Dinking: thermoelectric cooling sucks. liquid or liquid evaporative is better.

Posted by Gojira at April 11, 2005 04:32 PM


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