Click here for an interesting article on the Social Security privatization debate.

The article questions the privatization proponents' claim that, based on historical data, the stock market will return a post-inflation rate of 6.5% over the long term. The article's thesis is that if the rate of return was so certain, the financial services industry would have created financial instruments that invest in the stock market and guarantee a rate of return for investors. However, no such financial instrument exists. Regardless of what the financial services industry assumes the stock market rate of return is, they are unwilling to guarantee that return.

At this point, it seems clear to me that Social Security isn't broke, so it's interesting that the privatization proponents still argue that it is. I think there are plenty of other arguments that they can make:

1. Private accounts will, for most people, provide a higher rate of return than the "main fund" Social Security program.
2. Private accounts will boost the financial services industry by increasing the total value of privately-managed investment dollars.
3. Social Security is effectively a payroll tax, and creating private accounts is one way to reduce the effective federal tax rate.
4. The government should reward entrepreneurial behavior by reducing the federal retirement safety net.

I'm not sure that the arguments convince me, but I think they are what we ought to be debating.

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Jukebox From Hell: "Up Where We Belong," by Joe Cocker and Jennifer Warnes