Farrell Favors Experiments in Statism

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Farrell Favors Experiments in Statism

by Ari Armstrong, December 13, 2004

Would you prefer that your left foot or right arm be removed? Perhaps we can reach a compromise -- say, to remove only your left toes and right thumb. So pick an option somewhere in that range. Of course, any sensible person would reply, "I don't want any part of my body removed, unless it is so badly damaged or diseased that removal is necessary to maintain the integrity of the rest of the body." The standard is health. The principle is, remove a limb or appendage if and only if doing so is necessary to maintain the health of the rest of the body. This seems obvious, but when it comes to politics many people forget all about principles and argue within an arbitrary range of preordained "solutions."

In a 1969 course on writing, Ayn Rand skewered an article she was reviewing (see The Art of Nonfiction, pages 34-7). She praised the author's general method of editorializing but criticized the substance of his ideas. Rand argued the author "believes there are no absolutes," which suggests a philosophy of pragmatism. "According to pragmatism, principles cannot be discovered in advance... [A]nything is permissible, because we cannot know in advance what is right," Rand explained. Fast forward to the present day, and Rand's comments about the author she discussed could as well have been written about a columnist for the Denver Post who recently addressed Social Security.

The December 12 edition of the Post published John Aloysius Farrell's article titled, "What price Social Security reform?" The title appropriately asks a question, because Farrell doesn't offer any answers.

"So let's experiment." That is the crux of Farrell's advice. In many contexts this is good advice. Experimentation is at the core of the scientific method. Even the history of politics can be said to contain useful experiments -- for example, the U.S. Constitution tried some new ways to protect individual rights and limit state power. But experimentation is useful only within the correct framework. For example, the 20th Century contained a number of political "experiments" that should never have been tried. In science any number of experiments would be totally inappropriate (say, for example, testing whether painting various objects different colors impacted their gravitational pull).

Farrell argues in circles and ultimately takes us nowhere. He claims -- without offering any support for the view -- that Social Security is "one of the most efficient and successful federal initiatives of the 20th century." The program's "benefits are guaranteed, and won't evaporate in the next stock market crash or Enron fiasco."

Furthermore, a fundamental overhaul of Social Security is unnecessary. Farrell argues, "The program is in nowhere near as bad a shape as its critics would have you think. Surely, it is facing a demographic pinch, but some tinkering with the inflation formulas used to calculate benefits, and/or an adjustment in the retirement age, could go a long way toward fixing things."

Farrell also offers several arguments against replacing part or all of Social Security with mandatory, regulated accounts, as Bush and many other Republicans want to do. Farrell notes the "risk of private investing," and (as cited) he believes the mandated accounts might be compromised by a stock market crash or serious legal scandal. Furthermore, the mandated accounts could inappropriately reward special interests: "[T]he "president's supporters on Wall Street (the same big stockbrokers that have been gouging investors in mutual funds) could reap billions in administrative fees over time."

In addition to the inherent problems with mandated accounts, Farrell describes some political problems with implementation. He writes, "Bush and the Republican Congress need to summon the political courage to pay for these changes up front, instead of going into further debt." Yet Farrell also laments tax increases: he argues "citizens should keep a tight grip on their wallets" because "a generous dose of skepticism is especially warranted" when it comes to reform of Social Security. In addition, Farrell claims the White House may not adequately care about "candor, transparency and concern for the economic interests of working and middle-class families." (What these interests might be Farrell doesn't explain.)

So Social Security is great, it requires only minor reform, mandated accounts are inherently problematic, and the political implementation of mandated accounts risks enriching special interests and hurting families. So what is Farrell's conclusion, then? Of course it is that Social Security should be fundamentally reformed by imposing mandatory accounts.

After all, Farrell writes, "there is a lot to be said for the core idea in the president's proposal: to divert an as-yet-undetermined chunk of our Social Security payroll taxes from federal coffers and into a private savings account, insured from excessive risk by the government, which we could tap when needed or pass on to our heirs." Farrell makes a number of unwarranted assumptions here. He assumes that accounts must be mandated and regulated by the national government. In fact, any plan to replace part or all of Social Security with mandatory, regulated accounts could work as well without the mandatory accounts. People could instead be left free to do with that money what they please. But this possibility is not even mentioned by Farrell. He assumes that accounts mandated and regulated by the national government are "private," when in fact they are the precise opposite of private control. He assumes that the national government can properly decide what is "excessive risk" and properly control for it. He writes that workers can "tap" into their accounts, yet he doesn't mention what restrictions will be placed on this or why the income should be subject to any restrictions.

Citing Senator Daniel Patrick Moynihan, Farrell argues "that private accounts could help struggling families climb the economic ladder, by giving them assets to pass on to succeeding generations, who might otherwise continue living hand-to-mouth." Yet Farrell again ignores the fact that struggling families are capable of saving without being forced to do so by the national government. If part of the payroll tax is going to be diverted away from the current Social Security program, it could as well be diverted directly to the people who earned the wealth, rather than to a system of mandatory, regulated accounts. The Social Security tax is a horrible burden on the poor.

So Farrell has offered a hopeless contradiction. His arguments support the continuation of the modern Social Security program, though with some minor changes, as well as the fundamental reform of Social Security. His arguments simultaneously undermine and support the replacement of Social Security with mandatory, regulated accounts. How does Farrell hope to get past these obviously incompatible goals?

To a pragmatist such as Farrell, there's nothing that can't be solved through a little wonking. Yet Farrell offers the political equivalent of drawing a "compromise" between cutting off the left foot and right arm. At no point does he even consider the possibility of some change that neither maintains the status quo nor imposes mandatory, regulated accounts. For example, he considers neither transforming Social Security into an anti-poverty program nor phasing out the program completely (two options I describe).

Farrell's experimentation, then, is a sham. Farrell's discussion precludes the "experiment" of establishing economic liberty and protecting the individual's right to use his or her income as desired.

Farrell holds that no "federal institution be so sacred a cow as to defy innovation." What innovations are to be considered, and why? Farrell approvingly cites Franklin D. Roosevelt, who talked of "bold, persistent experimentation" in political policy. The fact that Roosevelt's "experiments" worsened and extended the Great Depression is of no concern to Farrell. Farrell hopes the White House can craft a "sensible" reform (sensible by what standard)? Farrell suggests one mark of a "sensible" reform is that it "wins the support of moderate Republicans and a healthy contingent of Democrats..." What does "moderate" mean, and why should we believe "moderate" implies "sensible?"

"So let's experiment," Farrell urges. Which experiments are to be deemed appropriate, and why? Farrell quotes "the Wicked Witch of the West," who says, "These things must be done delicately... or you hurt the spell." What does "delicately" mean in the context of Social Security reform? Farrell urges caution: "The devil is in the details." He concludes, "So watch this space, in the coming weeks, for an early rundown on the demonic fine print." How are we to know which details are relevant and which ones are demonic?

Farrell is so anxious to explore the "details" of Social Security reform that he has utterly lost sight of the principles involved. Farrell has assured us that all we can expect from him are ad hoc, seat-of-the-pants criticisms of arbitrarily selected devils. How much reform is too much? At what point are special interests too much enriched? How much investment risk is "excessive?" Will the transition costs be funded with new taxes or with more debt? What are the details of the tax increases? Is the plan sufficiently "moderate?" These questions are irrelevant to real reform, and Farrell cannot hope to offer anything but entirely arbitrary answers to them. Farrell's approach is the political equivalent of debating the details of building Frankenstein's monster. The devil is not in the details: the devil is the entire enterprise. Farrell is examining the devil's toenails and wondering if he needs a pedicure.

Here's the big picture. Social Security takes 12.4% of the income of every working poor and middle-class family in America. It is a crushing burden especially on the poor. Social Security is a fundamentally flawed system that inherently violates individual rights and economic liberty on a massive scale. Individuals have a fundamental human right to use their earnings and prepare for retirement as they see fit -- not as national politicians demand. Mandatory, regulated accounts are neither a necessary nor desirable part of reforming Social Security, and they, too, violate individual rights while giving improper powers to the national government. At most, welfare statists should support replacing Social Security with a (much smaller) anti-poverty program. The best free-market reform is to phase out Social Security entirely, such as by raising the pay-out age indefinitely.

Enough of wonking policy, debating irrelevant details, and conducting experiments outside any meaningful context. Social Security should be pulled up by its roots and discarded. In its place should grow liberty. The details of how to accomplish that are open to debate.

For additional analysis, please see Social Security: Collected links.

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