30% to 75% Monthly Returns

[Pointedstick]

Stone, that's not what I meant. People who earn wages beyond the cap and pay the current maximum tax still receive proportionally less in benefits than earners at the lower end. If the cap was removed, the plan would not be to give the high earners that would now pay even more into the system a raise. It would merely attempt to keep the system afloat. Thus, for those above the cap, more money would be paid in but without a concurrent and proportional increase in benefits, the percentage received out would be even less.

I think it's quite clear that any attempt to "fix" the imbalance between taxes and payments in Social Security is going to be unfair to someone. Possibly multiple groups of someones. Maybe even all of them at the same time if you select stupid enough plans and incompetent enough people to implement them.

[AgAuMoney]

Pugchief, I thought that one thing that is clear about social security is that it is cheap to administer. The money that goes in does mostly get to recipients without getting creamed off by administrators.

That is only an accounting fiction and are not comparable to costs incurred by any other pension system I know of.

One example:  The costs of compliance with the tax are not counted as an expense, whether paid by the tax payer or by the tax collector (IRS and courts).

The only expenses they claim are counted are those directly paid by the SSA, and I'm still trying to figure out what those are.

[stone]

What would you guys consider the ideal alternative to social security?

Should the government just butt out and leave it down to each person to sort themselves out? My problem with that is that so many people are totally lost when it comes to that kind of thing. In reality I guess most pensioner's expenses would become the job of their own children (if they have them).

There was a recent BBC radio program about China saying that the Chinese government is thinking of starting a social security system to try and foster a consumer culture because they consider that the Chinese economy is paralyzed by everyone trying to personally cover for themselves with savings. I guess I personally act like the Chinese public though -and so do my bit towards inducing economic paralysis .

[MachineGhost]

What would you guys consider the ideal alternative to social security?

Mandatory enrollment in private pensions/annuites with a MMR government covering a minimum fallback provision in cases of fraud, implosion or any other shenigans.  However, the moral hazard of the latter would require a lot of regulation and that is likely to reduce the returns available.  Wall Street would love it either way as it would  become a captive market with political lobbying.

Like the head of the federal cybersecurity initiative that doesn't even use e-mail, government bureaucrats just cannot possibly be on the ball against fraud, waste and abuse compared to private sector corporation.  Medicare, I believe has a 7% overhead, which looks great compared to "greedy" insurance companies 2x-3x that until you account for the massive waste and fraud in the Medicare system that turns the "low" administrative costs into a mirage.

[stone]

MachineGhost, wouldn't mandatory enrollment in private pensions just be a trillion dollar give-away to Wall Street, bidding up the price of stocks sold by current stock holders and leaking vast amounts as transaction charges
to quote that Warren Mosler link again: http://mosler2012.com/wp-content/upload ... deadly.pdf

And one of the major discussions in Washington is whether or not to privatize social security. That entire discussion, too, makes no sense whatsoever, so let me begin with that and then move on.
The idea of privatization is that
1. Social security taxes and benefits are reduced, and instead.
2. The amount of the tax reduction is used to buy specified shares of stock.
3. Because the government is going to collect that much less in taxes the budget deficit will be that much higher, and so the government will have to sell that many more Treasury securities to ‘pay for it all’ (as they say).
Got it?
1. They take less each week from your pay check for social security.
2. You also get to use of the funds they no longer take from you to buy stocks.
3. You later will collect a bit less in social security payments when you retire, but you will own stocks that will hopefully
become worth more than the social security payments you gave up.
From the point of view of the individual it looks like an interesting trade off. The stocks you buy only have to go up modestly over time for you to be quite a bit ahead.
Those who favor this plan say yes, it’s a relatively large one time addition to the deficit, but the savings in social security payments down the road for the government pretty much makes up for that, and the payments going into the stock market will help the economy grow and prosper.
Those against the proposal say the stock market is too risky for this type of thing, and point to the large drop in 2008 as an example. And if people lose in the stock market the government will be compelled to increase social security retirement payments to keep them out of poverty. Therefore, unless we want to risk a high percentage of our seniors falling below the poverty line, government is taking all the risk.
They are both terribly wrong.The major flaw in this main stream dialogue is what is called a ‘fallacy of composition.’ The typical textbook example of a fallacy of composition is the football game where you can see better if you stand up, and then conclude that everyone would see better if all of them stood up.
They are both terribly wrong.
To understand what’s fundamentally wrong at the macro (big picture, top down) level, you first have to understand that participating in social security is functionally the same as buying a government bond.
With the current social security program you give the government your dollars now and it gives you back dollars later. That is exactly what happens when you buy a government bond. You give the government your dollars now and you get dollars back later.
Yes, one might turn out to be a better investment and give you a higher return, but apart from the rate of return, each is the same.
Now that you know this, you are way ahead of Congress, by the way.
And now you are ready to read about the conversation of several years back I had with Steve Moore, then head of CATO, now a CNBC regular, and one of the first to advocate privatizing Social Security.
Steve came down to speak about social security at one of my conferences in Florida. He gave his talk that went much like I just stated - by letting people put their money in the stock market rather than making social security payments they will better off over time when they retire, and the one time increase in the government budget deficit will be both well worth it and probably paid down over time in the expansion to follow, as all that money going into stocks will help the economy grow and prosper.
At that point I led off the question and answer session.
Warren: “Steve, giving the government money now in the form of social security taxes, and getting it back later is functionally the same as buying a government bond, where you give the government money now and it gives it back to you later. The only difference is the return.”?
Steve: “OK, but with government bonds you get a higher return than with Social Security which only pays your money back at 2% interest. Social Security is a bad investment for individuals.”?
Warren: “OK, I’ll get to the investment aspect later, but let me continue. Under your privatization proposal, the government would reduce Social Security payments and the employees would put that money into the stock market.”?
Steve: “Yes, about $100 per month, and only into approved, high quality stocks.”?
Warren: “OK, and the US Treasury would have to issue and sell additional securities to cover the reduced revenues.”?
Steve: “Yes, and it would also be reducing social security payments down the road.”?
Warren: “Right. So to continue with my point, the employees buying the stock buy them from someone else, so all the stocks do is change hands. No new money goes into the economy.”?
Steve: “Right”?
Warren: “And the people who sold the stock then have the money from the sale which is the money that buys the government bonds.”?
Steve: “Yes, you can think of it that way.”?
Warren: “So what’s happened is the employees stopped buying into social security, which we agree was functionally the same as buying a government bond, and instead bought stocks. And other people sold their stocks and bought the newly issued government bonds. So looking at it from the macro level, all that happened is some stocks changed hands, and some bonds changed hands. Total stocks outstanding and total bonds outstanding, if you count social security as a bond, remained about the same. And so this should have no influence on the economy, or total savings, or anything else apart from generating transactions costs?”?
Steve: “Yes, I suppose you can look at it that way, but I look at it as privatizing, and I believe people can invest their money better than government can.”?
Warren: “Ok, but you agree the amount of stocks held by the public hasn’t changed, so with this proposal nothing changes for the economy as a whole.”?
Steve: “But it does change things for Social Security participants.”?
Warren: “Yes, with exactly the opposite change for others. And none of this has even been discussed by Congress or any mainstream economist? It seems you have an ideological bias towards privatization rhetoric, rather than the substance of the proposal.”?
Steve: “I like it because I believe in privatization - I believe that you can invest your money better than government can.”?
I’ll let Steve have the last word here.
The proposal in no way changes the number of shares of stock, or which stocks the American public would hold for investment.
So at the macro level it is not the case of allowing the nation to ‘invest better than the government can.’ And Steve knows that, but it doesn’t matter, and he continues to peddle the same illogical story that he knows is illogical. And he gets no criticism from the media apart from the discussion as to whether stocks are a better investment than social security, and whether the bonds the government has to sell will take away savings that could be used for investment, and whether the government risks its solvency by going even deeper into debt, and other such innocent fraud nonsense.
Unfortunately, the deadly innocent frauds continuously compound and obscure any chance for legitimate analysis.
And it gets worse yet. The ‘intergenerational’ story continues with something like this:
“The problem is that 30 years from the there will be a lot more retired people and proportionately fewer workers *that part’s right], and the Social Security trust fund will run out of money [silly, but they believe it], so to solve the problem we need to figure out a way to be able to provide seniors with enough money to pay for the goods and services they need.”?
With that last statement they assume that real problem of fewer workers and more retirees, which is also known as the dependency ratio, can be ‘solved’ by making sure the retirees have sufficient funds to buy what they need.

[Greg]

That was an interesting story you had there Stone. And  I can understand how they believe Social Security to be a government bond of you pay in now and get dollars later to you at a specified time. What I don't like about this with Social security though is when you buy a normal 30 year bond (Treasury), you can always know what you would be getting based on the interest rates at the time that affect the price. The only other variable is inflation and whether the interest payments are higher than what inflation is.

For Social Security however, you have monkeying with your returns and as an act of congress can change what you will be paid out. They could decide to do a haircut on your benefits which I see as the same thing as if you had regular bonds and a few defaulted, resulting in a haircut to your total bond portfolio. We have no choice but to go along with this system versus if you just told everyone your social security money will purchase U.S. treasury bonds as stated in the first paragraph. Then, hopefully you would at least have a good idea of how much you would be paid out when you retire.

Or at least that's what my simple mind thinks of this.

[stone]

Greg, the Jesse Cafe Americain website keeps also saying that "defaulting" on social security by cutting payouts is technically the same as defaulting on US treasury bonds- there is also no more reason to do it and there is no more justification for doing it.

I agree with you though that bizarrely politicians seem to think it is somehow OK to default on social security. That in itself is a curious state of affairs.

[Pointedstick]

My #1 desired change to Social Security would be to let people opt out of it. If they had ever paid any SS taxes, they would NEVER be able to opt back in, and all the money they had paid in taxes so far would be forfeit. Anyone who had never paid anything (say, a worker who initially opted out but five years later realized he's rubbish at managing investments) could opt back in at a penalty to future payments.

Then I and other people like me (say, all of us here) who are good at managing money could opt out, but the system would still be around for everyone else, and the fact that you lose all your contributions so far would prevent many from making the jump, thereby avoiding a flood of people leaving. And if a flood of people did leave, then great! More money available in the system for the diminished pool of future pensioners.

I don't begrudge Social Security's existence, I just feel like it's a bad deal for me personally. Many others feel differently, so why should they be forced into my preferred hands-on approach? Lots of folks just don't get investing, and let's face it, aren't ever going to.

[MachineGhost]

MachineGhost, wouldn't mandatory enrollment in private pensions just be a trillion dollar give-away to Wall Street, bidding up the price of stocks sold by current stock holders and leaking vast amounts as transaction charges

I don't believe in "privatizing" Social Security, which means diverting a portion of the payroll taxes to IRA-style custodians so you can invest that portion in other assets than virtual government bonds.  I wasn't aware that the payroll taxes were also to be reduced, which is just stupid.  You cannot have a half public and half private pension scheme without unintended consequences of mega-proportions as is evident in Chile.  It has to be either all public or all private to work correctly, otherwise there is too much gaming and warped incentives.

So, the whole point in switching to a mandatory private pension scheme would be for the beneficiary to earn a higher net return after all fees as well as to solve funding shortfalls that the government has.  Talking about it being a "giveaway" to Wall Street is distracting leftwingnut ideaological B.S...  The whole point is for the beneficiary to earn a higher net return by being a shareholder in businesses profiting from economic growth.  If that isn't possible on a net basis, then why even do it?

If you look at Australia, they've done it the way it should be done.  It's mandatory.  It's a private "giveaway".  You have free choice of many investment options.  And its 100% funded, something no other country in the world can claim (to the best of my knowledge).

[stone]

Pointed Stick, I think the problem is that current payments come from current contributions. If people en-mass opt out then that creates a problem just like the demographic problem but potentially more severe and less predictable. People also often think (or get persuaded) that they are better at managing finances than they actually are. I just think it would create a sort of shark feeding frenzy with the investment industry.

MachineGhost, so the idea of an Australian style system is that corporate earnings go to pensioners rather than to whoever would otherwise hold the stock. Do Australians really pay less to get more? Whether they do or not would all depend on whether the cash flow through companies really ends up getting to the pensioners or gets diverted and whether corporation tax etc just shifts the economy's cash flow such that pensioners don't actually do any better.
During the transition to an Australian style set up, you must admit, current stock holders would get an utter bonanaza. It would very much become a sellers market. After the consequent bidding up of stock prices, subsequent returns would be bound to be dire.

[Pointedstick]

Pointed Stick, I think the problem is that current payments come from current contributions. If people en-mass opt out then that creates a problem just like the demographic problem but potentially more severe and less predictable. People also often think (or get persuaded) that they are better at managing finances than they actually are. I just think it would create a sort of shark feeding frenzy with the investment industry.

In general, I am wary of arguments that people should not be granted freedom because they may make bad decisions. That's no way to foster responsibility! I think people are better than we often suppose at avoiding things that are dangerous to them. Most people who know nothing about investing for example just avoid it entirely and keep their money in cash, thereby bypassing the dangerous markets entirely. At least part of them understands that they would lose everything. And it's been my experience that people who are unstable and have repressed violent tendencies tend to avoid firearms (and often advocate for outlawing them), usually using the convenient explanation that it's actually everyone else who is unstable and violent. They unconsciously know they'd do regrettable things if guns were around.

If we let people opt out of SS, I think only a very, very small number of people would opt out and then invest the money that formerly went to the payroll tax in penny stocks, actively-managed emerging market bond funds and triple leveraged inverse gold ETFs. I think most people would stay in because they realize that part of the value of SS is that someone else takes care of everything for you.

[stone]

Pointed Stick, I think the problem is that current payments come from current contributions. If people en-mass opt out then that creates a problem just like the demographic problem but potentially more severe and less predictable. People also often think (or get persuaded) that they are better at managing finances than they actually are. I just think it would create a sort of shark feeding frenzy with the investment industry.

In general, I am wary of arguments that people should not be granted freedom because they may make bad decisions. That's no way to foster responsibility! I think people are better than we often suppose at avoiding things that are dangerous to them. Most people who know nothing about investing for example just avoid it entirely and keep their money in cash, thereby bypassing the dangerous markets entirely. At least part of them understands that they would lose everything. And it's been my experience that people who are unstable and have repressed violent tendencies tend to avoid firearms (and often advocate for outlawing them), usually using the convenient explanation that it's actually everyone else who is unstable and violent. They unconsciously know they'd do regrettable things if guns were around.

If we let people opt out of SS, I think only a very, very small number of people would opt out and then invest the money that formerly went to the payroll tax in penny stocks, actively-managed emerging market bond funds and triple leveraged inverse gold ETFs. I think most people would stay in because they realize that part of the value of SS is that someone else takes care of everything for you.

Pointed stick, are you saying that people would be free to just spend the money as they like or that the equivalent of the payroll tax would legally have to be saved? I guess a lot of people would just spend the money if they had the chance and I guess under your freedom ethos (which I can see the merit of) they would be allowed to. The issue then is that payroll tax is not really connected to social security but is just part of general taxation and is there to prevent inflation. You would also have a lot of destitute elderly people regretting their feckless past.

If you had been in the military, would you have the same negative feelings about the military pension that you have about social security?

[Pointedstick]

Pointed stick, are you saying that people would be free to just spend the money as they like or that the equivalent of the payroll tax would legally have to be saved? I guess a lot of people would just spend the money if they had the chance and I guess under your freedom ethos (which I can see the merit of) they would be allowed to. The issue then is that payroll tax is not really connected to social security but is just part of general taxation and is there to prevent inflation. You would also have a lot of destitute elderly people regretting their feckless past.

Again, I doubt that very many of these chronically irresponsible people you're worried about bankrupting themselves would actually opt out. I don't have any data to back this up; it's just a belief that most people are at least sensible enough to avoid things they (even unconsciously) understand are dangerous to themselves. I believe that under my opt-out plan, the vast, overwhelming majority of people you describe would decide to remain in the SS system. Or rather, not decide to leave it, since remaining in is the default choice. It's not like they would send around flyers asking people what they wanted! Unless you took the iniative to figure out how to opt out, you'd remain in.

If you had been in the military, would you have the same negative feelings about the military pension that you have about social security?

I think military pensions are entirely different. I see them as a well-earned reward for doing something incredibly dangerous for the sake of the rest of us--even more so if there's mandatory conscription involved. IMHO, there's a very big moral difference between giving military veterans retirement pensions and other benefits, and effectuating a general transfer of wealth from current workers to current retirees--who have done nothing to merit the money save for living long enough to collecr. One is a reward for heroism, the other is a generalized entitlement.

[AgAuMoney]

What would you guys consider the ideal alternative to social security?

Depends on if you get my libertarian side or my cynical side. 

Today I'm feeling cynical.

It seems apparent that people will not save for retirement on their own.  So we need some forced saving similar to SocSec.

However instead of a central pool it must be individual accounts that would be annuitized at retirement.  By default no choice or control of investment but the individual must have at least annual reports on his balance and his retirement income if annuitized at the current balance.

Then to aid those who would otherwise not make it on their own, no matter their age, the community must provide a strictly needs based welfare system which covers minimum needs: e.g. shelter, food and clothing in a barracks-like system.  Sort of like a shelter or bed and breakfast or hostel system or like the community houses of some aboriginal people where young adults and elderly move to start and finish their lives, helping to care for and mentor each other.  This would not be a "stay in your own home forever and shop at the local grocery with a 'debit card'" program, but that kind of program would be a nice aid for some limited time (90 days? 180 days?) until it was proven the recipient was not going to recover, at which point their assets would be sold (like my neighbor's this weekend in a sheriff's auction) and they would move to the community home where their maintenance costs are much lower.

Education/job training would be provided and opportunities to earn and accumulate assets would be encouraged so that those who are able to succeed and move out as productive members of the community could do so.  Instead of cutting benefits if the person makes over a threshold, allowing them to continue in the community home while keeping some of what they earn (paying a significant tax much higher than the general populace until the cost of what the community is providing has been covered as well as some subsidy in either time or dollars for the others in the center).  Then as they accumulate enough assets and proven earning ability to pay for their own apartment they could move out on their own and off the community support.  Ideally (as if that were ever possible) this welfare system would be desirable enough that it would be a natural choice for college students or similar setting out on their own for the first time, for people moving to a new city to get on their feet, etc.

[AgAuMoney]

Pointed Stick, I think the problem is that current payments come from current contributions. If people en-mass opt out then that creates a problem just like the demographic problem but potentially more severe and less predictable.

I thought we already covered the "current payments" garbage.

And it doesn't matter, the gov't is perfectly able to do whatever needs to be done to keep its promises whether that is borrow, utilize general revenue, print, or explicitly default.

[AgAuMoney]

Again, I doubt that very many of these chronically irresponsible people you're worried about bankrupting themselves would actually opt out. I don't have any data to back this up; it's just a belief that most people are at least sensible enough to avoid things they (even unconsciously) understand are dangerous to themselves.

As we see when companies have made 401(k) plans opt-out rather than opt-in, most stay in.

I'm not convinced (cynical today, remember) that that would be good enough for a social program.  I'd probably want some sort of established history that the person actually could manage money, as well as some sort of fallback for if/when some fail.

[stone]

Again, I doubt that very many of these chronically irresponsible people you're worried about bankrupting themselves would actually opt out. I don't have any data to back this up; it's just a belief that most people are at least sensible enough to avoid things they (even unconsciously) understand are dangerous to themselves.

As we see when companies have made 401(k) plans opt-out rather than opt-in, most stay in.

I'm not convinced (cynical today, remember) that that would be good enough for a social program.  I'd probably want some sort of established history that the person actually could manage money, as well as some sort of fallback for if/when some fail.

It would take an army of assessors to identify the incapable. You would probably personally be faced with some officious youth who would pronounce that your liking for precious metals and skepticism about the EMH rendered you incapable .

Pointed stick, your objection to SS versus military pensions is then just about whether people deserve a pension rather than the mechanism of pension provision

[Pointedstick]

Pointed stick, your objection to SS versus military pensions is then just about whether people deserve a pension rather than the mechanism of pension provision

Pretty much. Any pension issued by a government that has a fiat currency will be able to provision it *somehow*. But I feel that a generalized entitlement--accompanied by a general tax to remove a roughly equal amount of money from the economy to tamp down inflation--is just a poor social institution. It discourages saving, it discourages the development of personal finance management skills, and it's unfair to people who could make better use of the money that the government destroys.

I agree with others that there are always going to be people who are just bad at saving and who have short time horizons. That's why even if I were in charge, I wouldn't just dynamite the system. I'd simply let people leave. As I've said before, I think that most would stay in, but perhaps, as AgAuMoney suggested, an exit test could be administered. The Libertarian in me would obviously prefer to move to an island full of guns and gold but back in the real world, I think my ideas would be a reasonable alternative to the current system.

[MachineGhost]

During the transition to an Australian style set up, you must admit, current stock holders would get an utter bonanaza. It would very much become a sellers market. After the consequent bidding up of stock prices, subsequent returns would be bound to be dire.

A transition would have to be managed judiciously along with regulatory oversight to prevent rent seeking.  I wouldn't hold my breath.

Easier to just pass an edict that you must fund your own retirement pension and require the employer to withhold a fixed percentage out of your own paycheck that you have to do something with.  That's how I  believe Australia operates.  The less government interference, the better.

[AgAuMoney]

I'd probably want some sort of established history that the person actually could manage money

It would take an army of assessors to identify the incapable. You would probably personally be faced with some officious youth who would pronounce that your liking for precious metals and skepticism about the EMH rendered you incapable .

Yeah, most likely.

To avoid that I wouldn't structure it so any judgment or subjective criteria is involved.  Simple objective criteria such as a minimum time providing for oneself and any dependents and having accumulated some amount of liquid assets relative to income and time being self-sufficient.  Or instead of liquid assets, having accumulated income producing assets (rental properties, etc) with positive cash flow exceeding some defined percentage of their average income.

So one example criteria to show how I'd put numbers on it...

* the most recent 5 years (or longer) providing for yourself and any dependents

with either:
* having accumulated at least 15% of your average income for those years -or-
* having accumulated assets producing at least 10% of your highest income for those years

And an example person providing for themselves who doesn't quite make the cut...

5 years with an average income of $50,000 per year and $25,000 in liquid assets -- fail, must have at least 15% ($37,500) and they only have 10% ($25,000) liquid assets.

And one who does....

5 years with an average income of $50,000 and a highest year of $55,000 and a rental house and treasury bonds producing annual net income (after paying the mortgage on the rental) of $6,000 -- pass, only needed 10% ($5,500) income from assets and they have $6,000.


You might feel these criteria are too strict, or not strict enough.  That's OK, I haven't spent much time trying to see if this would work or if I would qualify.  if this were to be made law I'm sure there would be lots of debate and time to figure out those numbers.

[stone]

Pointed Stick

  Any pension issued by a government that has a fiat currency will be able to provision it *somehow*. But I feel that a generalized entitlement--accompanied by a general tax to remove a roughly equal amount of money from the economy to tamp down inflation--is just a poor social institution. It discourages saving, it discourages the development of personal finance management skills, and it's unfair to people who could make better use of the money that the government destroys.

I don't follow why saving and personal finance management skills are such worthy attributes to create a need for in order to foster. I know I've wasted a lot of time trying to get my head around how money works etc and it holds a weird fascination for me but I'm sure I would have been a better citizen if I'd been doing something useful instead.

[Pointedstick]

Pointed Stick

  Any pension issued by a government that has a fiat currency will be able to provision it *somehow*. But I feel that a generalized entitlement--accompanied by a general tax to remove a roughly equal amount of money from the economy to tamp down inflation--is just a poor social institution. It discourages saving, it discourages the development of personal finance management skills, and it's unfair to people who could make better use of the money that the government destroys.

I don't follow why saving and personal finance management skills are such worthy attributes to create a need for in order to foster. I know I've wasted a lot of time trying to get my head around how money works etc and it holds a weird fascination for me but I'm sure I would have been a better citizen if I'd been doing something useful instead.

Really? You don't see how money management skills are important for participation in a society with a market economy? Tell me, how many economic transactions did you engage in this past week? Now imagine if you didn't understand the importance of a positive cashflow and a cash cushion, or the terrors of credit card debt, or even know how much money you had in your checking account. Can you see how much that would have hampered you, and how you might have made some very bad decisions instead of the presumably mostly or entirely good ones you actually made over the past week?

[stone]

Pointed Stick, just because people need to know that it is important to not get their checking accounts overdrawn willy-nilly doesn't mean that somehow the fabric of society will be improved if lots more people are preoccupied with portfolio management issues. It seems to me an exercise in wanton time wasting.

[Pointedstick]

Pointed Stick, just because people need to know that it is important to not get their checking accounts overdrawn willy-nilly doesn't mean that somehow the fabric of society will be improved if lots more people are preoccupied with portfolio management issues. It seems to me an exercise in wanton time wasting.

I fear we may have reached an impasse. This appears to be a fundamental difference of opinion on what makes society happier, and I see you're on the side saying that people are happiest when they don't have to care about the details of the systems they rely on. You seem to want for people not to have to care about things like retirement savings, medical care, and other typical functions of social welfare programs. I however fall into another camp, one that says that people are happiest when they understand and have some measure of control over the systems they rely on. I want people to have some "skin in the game" so to speak.

Now, I understand that different people are wired differently and we don't all have the same goals. That's why I wouldn't blow up the social welfare systems if I were in charge. I would just let people leave them. If you're the kind of person who doesn't want to have to think about retirement savings, than that's cool, the government will take care of it for you. Maybe well, maybe poorly, but at least you don't have to think about it! But if you're a person who cares to learn about the systems that affect your life and gain some measure of control over them, then I don't think you should be forced to participate in (and pay for) a collectivist program whose goal is to make you not have to care--a goal you don't share.

It's like if everybody were forced to buy Apple products. Some people really want to tweak the settings! And there's nothing wrong with that. I think people are generally responsible and intelligent enough to figure out which of these approaches works best for them.

[Xan]

It also happened in Katrina.  My grandparents on the Mississippi coast had dutifully paid for flood insurance for decades, and it paid off when they needed it.  But it turned out they didn't need it, because the government covered all the shlubs who didn't have it.

The other angle on that, apart from the obvious one of rewarding irresponsibility and punishing responsibility, is this: if the disaster had been smaller, say, one or two shlubs had their houses destroyed by a rising creek, then they wouldn't have gotten special treatment from the feds because it wouldn't have been national news.  So if you're in a disaster, you want to make sure it's a really popular one.