November 17, 2004

Libertarian Clueless II

Tyler Cowen grumbles about the idea of private forced savings accounts. The problem is that he takes the marketing job much too seriously. The reality of forced savings accounts is that they provide savings for those who would not otherwise be able to save due to their payroll taxes sucking up so much of their disposable income. Thus in the real world, you're replacing some government taxation with money that is conditionally yours but has restrictions on it so you don't end up on the dole.

For those who are richer, a different effect than providing a private pension out of what would otherwise be tax dollars kicks in. These are people who are already saving privately both in tax advantaged and taxable accounts. The net effect of the new system (post transition) is that the amount of tax advantaged savings is increased so for the vast majority of us who do not think that government pensions are enough, this is merely a new account we can dump our savings into without paying the tax man.

A world with private retirement accounts would be a world that is better than today's where leftists still get away with an awful lot of mindless tripe about how the average person is incapable of planning their own retirement. With the creation of private accounts the battleground shifts to an examination, in minute detail, over each regulation that prevents irresponsible speculation. Over time, we are likely to see successive, small shifts toward true ownership without restriction until the remaining regulations are mostly symbolic, low impact rules, that are more trouble to remove than they are worth.

Removing the debate over retirement to the question of how financially responsible people are versus whether they should have any responsibility whatsoever, fundamentally moves the political debate in a very libertarian friendly direction. The battle of how responsible people are with their own money is something that can be measured, improved, and is likely to generate a string of libertarian policy wins. Libertarians should be on board for that process as the Bush administration kicks off the first draft for market reform.

HT: The Bit Bucket

Posted by TMLutas at November 17, 2004 05:23 AM