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February 07, 2005

Lazear vs. Hassett: Ants and Grasshoppers

Eddie Lazear approves of Social Security considered as a forced saving plan:

To begin, the legitimate goal of Social Security is to ensure that everyonehas sufficient income to support some basic standard of living throughoutretirement. Thus, forced saving is at the heart of the system.Were individuals not forced to save, some would engage in moral hazard,over-consuming when young and allowing themselves to be destitute when old,knowing that they could then count on relatives, churches or communities to carefor them. Others would be less strategic, but might end up in the same situationsimply for lack of foresight...

Kevin Hassett does not. He writes that the inability to tap your Social Security account when young is a problem:

WSJ.com - Ants and Grasshoppers: Since you cannot touch the money until you retire, you no longer have a rainy-day fund, or a down payment for a house...

Since Kevin Hassett is considerably closer to the Bush administration than Eddie Lazear is, this is scary. It's a sign that the Bush plan--whatever it is--won't do a good job at what Lazear thinks is the principle legitimate goal of Social Security.

Posted by DeLong at February 7, 2005 08:23 PM