December 22nd, 2006

Gilder agrees with IPI on Social Security

Posted in  Economic Growth  Entitlement Reform  Tax 
Author: Tom Giovanetti || Location: Lewisville, Texas, USA

Here is what IPI has been saying about Social Security:

• The system needs to be fundamentally transformed into a true system of prefunded savings, not transfer payments.
• Debt is a perfectly legitimate way to finance the transition to a savings-based Social Security system. We should not fear increased debt. It simply recognizes the reality of the system's obligations and is the least-harmful way to recognize this liability and turn it into something that markets can easily deal with.  
• No Social Security deal is worth an increase in the tax burden, which will slow the economy and excerbate Social Security's problems.
• Obsessing over the solvency of the system will lead to a horrible "solution" that is worse than the problem.
• Playing games with cutting Social Security benefits will not substantially solve the problem and will only make it a worse deal for workers.

Now, given that, let's read what George Gilder has recently written on this dispute, and see if he agrees with IPI or with our critics:

Only if we raise tax rates and regulations and cripple the GOP and our defenses with delusionary spending cuts can social security become a crisis. Yet that sums up the likely grand compact, doesn't it? Higher tax rates in some form or other, some jerrybuilt pension scheme full of government regulations on our financial markets, and gimcrack spending cuts that end up focusing on defense.

We should take the offensive. Lower tax rates will yield the additional revenues and borrowing power we need to sustain social programs for the aged in coming decades.

As a key first step, we need to reduce the payroll tax by at least one third.

Indeed, as part of a flat tax program, we should eliminate the payroll tax.

Make the Democrats talk about that, not about spending cuts, which always turn out to focus on defense. In a dangerous world, we will need defense.

Eurofare economic policies like Germany's would obviously destroy our ability to supply goods and services to coming generations. Under those conditions we would have to inflate away the liabilities one way or another. It may be horrible, but no conceivable compact with the Democrats today can save us from the nemesis of socialism. Indeed, a compact with the Democrats will tend to cripple the necessary Republican resistance.

If we keep our tax rates low, however, we will discover that this economy in future decades can easily sustain the necessary 40 trillion dollars of additional debt. Read Ken Fisher's The Only Three Questions That Count.

He believes that the U.S. incurs too little debt compared to the productivity of incremental investment. His regressions show that the larger the budget and trade deficits the higher the stock market. We already command a steadily growing resource of some $110 trillion of assets. We are already running an all-governmental surplus. Our corporations are laden with cash. Our current debt asset ratio is sub-optimally conservative.

The only thing that matters, as you know, is economic growth. Focus on that. Let Democrat accountant economists grouse about debt.

Now, I ask you, does Gilder agree with us, or with those who have been making the opposite arguments? I think it's obvious.