By Jason Richwine, from October 1, includes “During the Social Security debates of the late 1990s and early 2000s, some conservatives argued that investing the trust fund (or letting individuals invest their payroll taxes) in stocks would generate a “free lunch” — much greater retirement savings at seemingly no budgetary cost. That’s nonsense, said the Center on Budget and Policy Priorities (CBPP) and other liberal groups at the time, because equity investment increases risk, and risk has a cost. Today CBPP, along with most of the Democratic party, argues that the federal government can buy up private-sector student loans, disregard the risk that student loans will not be repaid as expected, and thereby book a profit on the transactions even while making the loans more generous to students. Free lunches all around! That’s nonsense, conservatives say, because risk has a cost. For both parties, market risk is costly except when it’s not. … Andrew Biggs illustrates the absurdity of free-lunch budgeting as applied to Social Security. Imagine that the government sets up private Social Security accounts, guarantees everyone at least the same benefit as the current system, and then takes a portion of any returns above that level. Under CBPP’s revised view, this proposal — in which everyone will receive benefits at least as high as current law provides — would cost less than the present system. That’s something for nothing, the kind of seductive scam that politicians will always find hard to resist without fair-value to rein them in.” …”
Read the full article on: National Review