Column misleading on Social Security
Re: “Risks in privatizing Social Security worth it ,” April 5

Adam Fowler’s arguments for privatizing Social Security are quite problematic. He overestimates the extent to which nominally private investment in British retirement programs is actually private. According to Nicholas Barr’s Economics of the Welfare State, a British textbook on welfare economics, virtually all private schemes are “subsidized on a substantial scale through tax expenditures,” (4th ed., P.188) among other forms of government involvement.

Chile’s system may also not be a beacon of privatization. More than a quarter of government expenditure goes toward benefits, largely because of the perception that the system does not deliver. The government is thus looking to reform the system (“Chile’s Retirees Find Shortfall In Private Plan,” New York Times, Jan. 27 2005). I don’t know much about the system in Australia, but if his other examples are any indication, it is more equivocal than Fowler implies.

But his examples don’t even make a case against critics of the Bush administration’s plan if they are taken at face value. No one argues that it is not possible for private accounts to provide acceptable returns, just that it is not guaranteed. A few examples of such schemes working can only contradict claims of the former type.

It strikes me as absurd to claim that the “United States will crumble” in the event of a stock market crash. The government did not crumble in past crashes, why should we believe that this will happen as a result of future crashes?

There is also a very significant political reason for why I don’t think Social Security should be left to the stock market. There is a large amount of economic literature on why the Anglo-Saxon system of finance through capital markets is vastly inferior to the bank-oriented finance that has been dominant in South Korea, Japan and most of continental Europe. I would dread to see stock market reform become the “third rail” of American politics.

Walt Byars is an undeclared freshman.