Social Security: Sham “Risk” Arguments

I hate it when people who I agree with use stupid arguments to support their (our) positions. It sets us up as straw-men that our rhetorical opponents can swat at will.

The AARP’s ads about Social Security privatization fall right into that trap.

Their position? Privatized funds invested in the market are like gambling. "If we feel like gambling," says the tagline beneath a pair of forty-somethings, "we’ll play the slots."

And on the AARP web site: "There are places in retirement planning for risk, but Social Security isn’t one of them."

Plenty of bloggers are taking this line as well:

"Let’s call it what it is: Gambling"

The speciousness of this position is epitomized in an otherwise cogent NYT Op-Ed piece by Bary Schwartz, a professor of psychology at Swarthmore College and the author of The Paradox of Choice: Why More Is Less. Here’s the key sentence:

For example, a person who retired in 2000 after a lifetime of investing half in stocks and half in bonds would have had 50 percent more in his account than a person making the same investments who retired in 2003.

The problem: Schwartz doesn’t compare either of these lifelong investors to a person who invested in treasury bonds for a lifetime. Both equity/bond investors would be far, far ahead of that person. That is presumably why Schwartz immediately (though grudgingly) goes on to "grant the advantages of putting trust fund money into equities."

What I’m saying here doesn’t support or vilify privatization. It just shows that the "risky business" argument is specious. It’s a setup for successful counterattacks. Let’s stop giving ammunition to the enemy.

Update, Jan. 10: Here’s another ridiculous example, an "Essay" by John Schwartz in the NYT. Two representatively idiotic paragraphs:

But let’s get back to Social Security. Why stop with the stock market? Mutual funds aren’t nearly risky enough for those of us who are ready to take the future in our teeth and shake it until it’s dead. The true adventurers among us want the financial equivalent of bungee jumping – provisions in retirement plan law to allow us to automatically use a substantial portion of what the government would otherwise be putting into those T-bills (BOR-ing!) and instead buy, say, lottery tickets. Or weekends in Atlantic City. Welcome to your new 401(k): the "k" stands for keno.

It gets better. How about a federal program that would let citizens try to sink a basket from midcourt for double or nothing on their Social Security payments? We need to appoint a blue-ribbon presidential commission to research old "Honeymooners" episodes to find can’t-lose, get-rich-quick schemes. The problem for Ralph Kramden was probably in the execution, not the underlying ideas.

With ridiculous arguments like this, we’re just asking those we disagree with to kick us.