Eating the Cake You Have

Is the OAS part of OASDI a transfer program or a savings program?

If that strikes you as a trick question, it's because it is. Any economist will gaze upon you with the patience one ordinarily reserves for a wayward toddler and tell you calmly and clearly that it's a transfer program. When you waggle your finger at the trust fund lockbox, expect your economist to breathe deeply, pinch the bridge of her nose, and remind you that the contents of the OASDI trust fund are held as Treasury instruments, implying that payments are still backed by the current ability of Internal Revenue to collect taxes.

Contrariwise, the typical worker, absent a basic undergraduate exposure to finance, accounting (even this one's questionable), or economics coursework will scoff at the bowtied, bespectacled goon (that's how you can tell Mungo is a political scientist, by the way: laser-corrected vision and nary a bowtie to be found) who has the hubris to suggest that it doesn't matter that he payed into the system: every single moral fiber tugging on his skeleton tells him he's due what he's owed. To the blazing circles of burning hell with the fallacy of the sunk cost. It'd be brazen theft to pull a bait-and-switch like winding down Social Security the way some of those nutbar right-wingers propose from time to idiotic time.

Social Security is endlessly popular from a combination of the above attitude and a fairly large dollop of sociotropic attitude (if you're particularly interested in the empirics on this, see Bryan Caplan's Myth of the Rational Voter or you can conduct your own investigation with the General Social Survey). But it's also terribly insolvent. If you think today's budget showdowns are something, wait until the unfunded liabilities of OASDI start to balloon. Buttercup, you ain't seen nothing yet.

But the fiscal troubles of the trust fund aren't what I want you to consider. I want you to think about the moral intuition here. As economics educators, we often drip blood and froth on the lectern getting students to release the death grip they have on the sunk cost fallacy, and it's often for naught (admit it you guys, you know what I'm talking about). And these are bright minds, open to the possibilities offered when people start thinking past first-round causal effects. Many people don't even know a starting line's there, let alone even think about getting off it. Consider that it's this uninformed moral intuition that rules policy. What, oh what does this imply not merely for pensioneering, but for an expanding transfer state in the midst of Average is Over? What does it imply for federalism, for constitutional constraints on majoritarian democracy? Who wins? Who loses? What advice would you give your kids when they set off down the path of career development?

They say you can't have your cake and eat it too. It's a pity they don't also say you can't have your economic analysis cheeseburger without a side of fried public choice and a large Coke of analytical morality. Actually, that's not a pity; that's a terribly awkward aphorism, do yourself a favor and never repeat it.