Following up on yesterday’s post about personal “lockboxes” for social security, I want to pass along this brilliant analysis of John Fund’s idea. Consider:
I assume Fund’s unspoken premise is that substituting “marketable” Treasury bills for the current system of vague promises will make it more difficult for future versions of the government to cheat, because defaulting on Treasuries amounts to ripping off the Chinese, which is much harder to get away with than ripping off Americans. Note that this addresses the dishonesty problem only by increasing the insolvency problem: future fiscal obligations become larger and more mandatory.
And…
Anyway, read a few paragraphs down and tell me who’s huffing the pipe:
Would the deficit increase if Congress used the Social Security surpluses to create personal accounts rather than finance current government spending? Not if Congress found the will to cut federal spending by roughly 3% a year.
Oops; when I saw that the first time, I thought it said, “Not if Congress found a nest of pixies at the bottom of the garden who vomited shiny gold coins”, but then I realized that Fund’s assumption was ridiculous. His overall conclusion, however, is true: if we spent less money, then we would spend less money.
I tried to explain the absurdity of Mr. Fund’s proposal through illustrations. I think they were effective, but I wish I’d written Evan Kirchhoff’s words, instead. How much more fun it would’ve been to write “a nest of pixies at the bottom of the garden who vomited shiny gold coins” than to drag clip art into neat order in Microsoft Visio…
At least I’m not the only one who understands the basic principles of government and debt. And for what it’s worth, I’d like to participate in Evan’s “Let me out of Social Security” plan, as well.
(Link via The Penultimate Genius)