President Obama and other Democratic leaders stand steadfast against a Republican effort to privatize Social Security. Trouble is, there appears to be no such Republican effort. Obama got nailed on this by, the politically neutral "truth squad." They said Obama's charges about Republican designs are flat-out "false."

FactCheck noted that even George W. Bush's plan was for only partial privatization, which strikes me as a pissant point. They are on firmer ground in asking for evidence of this alleged current Republican perfidy. There basically is none. You will not find more than one or two of the 535 Republicans in Congress who have anything nice at all to say about privatizing social security. To do so would be to violate the motto of Republicans in the 111th Congress: "Oppose everything. Propose nothing."

Stop for a moment and consider how remarkable this is. A major policy initiative by a Republican president, and a few years later you can search high and low and not find a Republican politician who will publicly support it. When Bush first proposed the idea, it was Topic A for quite a while and I seem to recall no dearth of GOP voices saying what a great idea it was. In fact, here is a passage from the 2004 Republican platform, the one on which George W. Bush ran for re-election:

Personal retirement accounts must be the cornerstone of strengthening and enhancing Social Security. Each of today’s workers should be free to direct a portion of their payroll taxes to personal investments for their retirement. It is crucial that individuals be offered a variety of investment alternatives and that detailed information be provided to each participant to help them judge the risks and benefits of each plan.
Time goes on, people change, I get that. But the rapid slide of Social Security privatization from a top Republican priority to something no Republican would be caught dead supporting is still pretty funny.


Now I must beg your indulgence and readers who are familiar with the rest of this post are welcome to skip it. But I can't resist seizing the opportunity to offer my proof that Social Security privatization, were it ever tried, would not merely be a bad idea or overly risky but doomed with mathematical certainty to fail.

Privatization means allowing some or all Social Security participants to invest for themselves all or part of what they have paid into the system. Right now, all Social Security tax revenues go into a notional "trust fund" which is invested in government bonds, thereby reducing the amount the government needs to borrow from citizens or outsiders. The government pays the fund interest, too, of course. But the theory behind privatization (partial or total: the logic is the same) is that retirees could do better by investing for themselves than what they are getting from the government. (You see why privatization looked better in 2005 than it looks now.)

So here's the puzzle: where does that higher return for retirees come from? Is there anything about this arrangement that will improve the performance of individual companies or the economy generally? Well, more private investment can make companies and the nation richer, but privatization does not increase the total amount of capital available to the private economy. The government will have to borrow one more dollar from private markets to replace every dollar that goes into these private Social Security accounts.

If not more investment, what about smarter investment? Depending on the details, Social Security privatization may give individual citizens--many with no investment experience-- more control over where and how their money is invested. Maybe this will improve our economic performance, but I wouldn't want to bet Social Security's future on that.

If Social Security privatization does nothing to improve the performance of individual companies or the economy in general, then the bonus needed to declare it a success--the higher return to retirees--must come somehow from other people. (Either the pie is bigger or somebody's piece gets smaller: those are the only possibilities.) And the assumption underlying all Social Security privatization schemes is indeed that the money will come from other people--specifically, the people who sell the shares of stock that participants buy and buy the government bonds that are needed to replace the Social Security payments lost to privatization.

These would be remarkable people. They would be selling shares of stock and buying government bonds at the very moment the government is out there declaring that its own bonds are a terrible investment and anybody in his or her right mind should sell them and buy stocks. There are no such people. Or there are not enough of them.

In the real world, billions of dollars made available for investment by privatization of Social Security would raise the price of (and thus lower the return on) stocks, while the government's need to attract billions of replacement dollars would raise the interest rate on government bonds.So even if such people existed at the beginning, they would soon disappear. And with them, any hope of a bigger Social Security check for retirees.

Am I wrong?