TCS Daily

Moron-Proofing Social Security

By Douglas Kern - January 24, 2005 12:00 AM

It's the day after Congress has permitted individual citizens to invest in privately-controlled Social Security accounts, and you've just received a large colorful envelope in the mail, explaining that You May Already be a Winner!

A prospectus of government-approved investment funds? A pamphlet of government investment advice? Wrong. The package is thin, creepily thin. The first sheet looks like a record club promo. "Invest in THREE mutual funds FOR JUST ONE PENNY! Scratch off the gold box to find your SECRET MYSTERY FUND!" Elsewhere, a scantily clad Paris Hilton assures you that real men invest in no-load index funds. Still another handout encourages you to "Cheer on Fidelity Municipal Bond Fund against Fidelity Income Fund in Fund Bowl I -- during the Super Bowl!" Anthropomorphic representations of safe, 8%-a-year investments, battling it out on the gridiron in a contrived set of computer-generated ads!

The fine print allows you to send for a more comprehensive list of government-approved investments -- but the not-so-fine print cajoles readers to invest in low-risk funds using every idiot-friendly tool in the book: small words, pretty girls, goofy gimmicks, babies, and puppy dogs. Everyone loves babies and puppy dogs.

Is it the end of sanity?

No. It's privatized Social Security -- moron-proofed.

Recently conservative pundits John Derbyshire and Steve Sailer expressed their disdain towards any reform that would give individual Americans control over privatized Social Security retirement accounts. Why? Americans are too stupid to be trusted with something as important as their retirement funds. If the horse-brained masses seize control over their precious Social Security money, the ostrich farms of the world will enjoy fat years of prosperity, while stock futures in the moribund perpetual motion market will take a decided uptick. No, in a world where unscrupulous brokers sell the Brooklyn Bridge to unsuspecting red-state yokels on a daily -- nay, hourly basis, it's better to keep Social Security money in the hands of those thrifty fellows at the Federal Government. America's Social Security: if it ain't really, really, really broke, don't fix it.

My first reaction to this line of argumentation was "Damn right! You had me at 'Americans are too stupid.'" The stupidity of the average American is a force not to be underestimated. It shapes our politics, molds our preferences, and controls our destiny. Our stupidity pours forth from our art and pop culture, poisoning the minds of foreigners not inured to its presence. It oozes from our newspapers, distorting everything in its path. Any argument that begins with the premise "Americans are stupid" is already halfway right.

But my pessimistic conservative friends overlook the extraordinary American capacity to compensate for massive stupidity. Dummies at the fast food joints? No problem -- we'll put up pictures of the meals for the illiterate, and install clever cash registers to make change for the mathematically-addled. Knuckleheads controlling the public schools? We'll devise standardized tests to identify and promote the genuinely gifted. Nincompoops at the voting booth? Behold the butterfly ballot -- an instant IQ test to weed out the votes of the extraordinarily dull-witted. Is it any wonder that a best-selling line of books in America is titled "________ for Dummies?" In America, stupidity is no bar to the pursuit and achievement of excellence.

We have moron-proofed our society. We have sanded off the rough edges of most sharp corners in American existence. From welfare to mandatory helmets to childproof caps, we've trapped stupidity in a tight little cage. Why can't we do the same for Social Security?

It's entirely possible to contrive a private investment fund guaranteed to turn a reasonable profit for as long as Western Civilization does us the favor of not collapsing. High-rated bonds, money markets, T-bills -- when these tools stop making money, it's time to barter the family jewels for ammunition and survival rations. Even hapless Federal bureaucrats could create investment funds that would meet the needs of the illimitably imbecilic, while turning a profit superior to the scanty margins of the current Social Security system. But while we can create a foolproof private retirement fund, how do we compel idiots to invest in it?

That's where the genius of American advertising comes in. We have devised campaigns to make people drink crappy beer, eat awful food, sign up to die in foreign lands, and vote for Jimmy Carter. By God, if we can make dumb America enjoy professional wrestling, we can find a way to make dumb America like responsible investing. The sky's the limit: catchy slogans ('The Freshmaker -- Mentos Brand Debentures!"), celebrity endorsements ("Can you smell the interest that The Rock's CDs are earning?"), infomercials ("Gosh, Cher, my rate of return really is increasing!"), giveaways ("Select the Freedom Index 500 fund today, and receive this thirteen-piece knife set absolutely free!) -- you name it.

Yes, yes, some fools will slip through the cracks. Somewhere in America, some nimrod will insist upon investing in old treasure maps and snake oil factories and real estate developments on Anthrax Island and who knows what else. But notice the distinction: these people are fools, not idiots. An idiot wants to invest sensibly, but can't decipher the hard words and long numbers in the investment brochure. A fool wants to get rich quick, and fully intends to suspend his common sense while doing so. A compassionate society protects its idiots. But a prudent society poses no obstacle between fools and the cruel Darwinian realities that pursue them. Consider, too, that even if you prevent the fool from investing stupidly now, the fool will simply squander his money down the road. Foolishness is an aggressively retroactive tax.

In a free society, risk = the potential for wealth. If you seriously believe that some people are too stupid to be trusted with any risk, then you've effectively excluded those people from any significant form of wealth accrual. And while some people might indeed be that foolish, why should the remaining 99% of us be held hostage to their incompetence? If the idiots of America can't be trusted to memorize and recite the words "I want an index fund," how can we trust them with somewhat more complex chores, like buying a car? Or getting a mortgage? Or, for that matter, taking a spouse? A free citizenry that can't be trusted with even modestly difficult tasks is a citizenry that won't stay free for long.

No investment could be worse than the investment we are all compelled to make into Social Security as it is. Just think: even as your money earns a negligible rate of return, it underwrites the wildly irresponsible spending of the federal government! And what's more, you may never see that money at all! Any private investment choice is better than this mess. It's better to moron-proof Social Security than to keep pumping our money into an archaic system of "savings" that no country in the world would recreate if given the means to do so. Indeed, in a system of free choice, the only person who would invest in today's Social Security system would be -- a moron. Who needs more proof?

The author is a lawyer and frequent TCS contributor.



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