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Yes, because social insurance has been sold as if it's an insurance programme.
So your principle is that, if someone threatens you after they suffer the consequences of bad decisions, then you'll give them what they want?
This falls foul of the Lucas Critique: you're inferring saving behaviour under Policy Regime A from behaviour under Policy Regime B, when a switch from B to A would change the incentives for saving behaviour. Insofar as people have guaranteed consumption in retirement, it makes sense for them to save less now.
Not in itself, but my point was it's another step in that direction. And such steps can be aggravating: by reducing take-home pay of workers, you decrease their incomes relative to their expectations; maybe they respond by demanding more generous tax credits; perhaps these are funded by an increase in taxes on capital; perhaps these deadweight losses lead to slower growth, which requires higher payroll taxes to keep Social Security going...
Social democracy in Europe evolved by a series of steps, most of them seemingly modest in themselves, but ending in stagnation that is extremely difficult to escape, because escape requires pissing off huge numbers of people. The dogmatic and often boneheaded American prejudice against taxation, while often leading to decisions that seem stupid in context, has been tremendously successful in the long-run. This is an example of time-inconsistency: doing the optimising thing at each stage in a process can lead to suboptimal long-run outcomes, whereas precommittment (or equivalently, an irrational dogmatism) to a dogmatic rule can lead to better outcomes. So, even if a 0.3% rise in payroll taxes seems rational now, it weakens the US's culture that has avoided a slide into the relative stagnation of European social democracy.
(Of course, someone might argue that European social democracy is preferable even given this relative stagnation, but that's a different argument. My thesis is only that funding Social Security via increased taxation is one more step in that direction, and that that direction is not without costs.)
My principle is that if you can 100% count on people to mess up, prudence suggests preparing in advance. To not do so is poor governance.
Well, that was why I tried to look into real world examples of what the system looked like in practice. Per the quote in the Brookings Report: “the system [in Chile, Mexico, Peru, El Salvador, Colombia, Argentina, and Bolivia] has done little to stimulate voluntary savings; few workers have channeled additional resources to their accounts.”
I would be one of those people in favor for social democracy, partially because I’m pretty unconvinced taxation is really the root of their slower growth. Europe has had consistently high taxes than America for a long time but the divergence is only in the last 20 years, if anything a period marked more in Europe by slightly falling taxes. But as you say, that’s another argument.
Sure, no disagreement there, my position is just that cutting SS by almost a quarter also has costs, and they seem larger to me than a small tax raise.
Granted, but your previous argument was not "preparing for people to mess up" but that one should cater to irresponsible people, if they will be "up in arms" about having outcomes that disatisfy them.
My point is that "living from paycheck-to-paycheck" doesn't mean that these people won't save more for their retirement under a different system. Whether they save enough depends on how smart and self-disciplined they are.
Additionally, the evidence cited in the quote doesn't do much to support the quote's conclusion: you'd need to look at the overall savings rate (ceteris paribus) to make such a causal inference, not just one category of savings (the retirement accounts).
The divergence in growth rates is recent. The divergence in levels is much older for most Western European economies:
https://fred.stlouisfed.org/graph/?g=19QJO
Note how Germany actually caught up with the US by 1975, but then fell behind again. Also, events in social science are rarely monocausal, so it's not so much "Western European taxation causes slower growth than the US" but "Western European taxation and regulation are part of a set of factors that tend to leave them indefinitely stuck behind the US." Of course, there are exceptions like Norway, but planning on the basis of a massive natural resource boon isn't a development policy; it's closer to a prayer to God.
It's doesn't have to be either/or. An equal increase in the solvency of the system through tax rises and spending cuts (later payment age, slower uprating with inflation etc.) could be a reasonable compromise.
It feels like a distinction without a difference to me tbh, it's just a different way of wording the same policy need that we'll always have to deal with.
Them living paycheck to paycheck is less a particular reflection on SS and more on their spending habits with the money they do have control over; this seems like as good a starting place to make assumptions about how smart and disciplined the best of us are going to be with more cash in hand.
But really, this is part of why I wrote this post in the first place. We don't know fully what people will do under an alternative system, so it makes sense to look at examples of how that system looks in practice. If we note their savings accounts are worse, that certainly shouldn't upgrade our priors to thinking private retirement accounts will help us either.
For the purpose of this discussion it seems most relevant to me whether or not they made use of the retirement savings, but fair enough. The best I can find for personal savings rates is for Latin America overall:
Here's a little closer to the present and after all of these countries went through their SS reforms that seems to say the same thing about overall national savings (which correlates with private savings):
Note that you can look at the specific countries that reformed their SS (Chile, Colombia, Bolivia, Mexico, Peru, El Salvador, Argentina) on pages 12-15, though unfortunately they're not modeled on a chart for easy comparisons with other countries.
Sure, in the inverse, the multifactoral nature of growth is what makes me so suspicious of the original claim that we should be confident European higher government size is the main, or even primary factor here. I don't often see much attempt to isolate those affects, or to account for the fact that many of the countries that have maintained the highest tax levels, like the Scandanavians, have also maintained the highest growth rates (the graph I linked above was supposed to include all of the OECD growth rates, not just Sweden's - sorry about that). Heck, America's own government as a percent of gdp has been moving steadily up forever and we seem to have mostly just gotten richer.
Everywhere faltered around the mid 70s, but when we talk about Germany catching up to America before then it's worth noting this was under a period of famously active state intervention, tight regulations, high union participation, and an expanding welfare state - this is true not just of the Miracle on the Rhine, but of Les Trente Glorieuses, and the Belgium, Italian, Greek economic miracles, etc.
I am no particular advocate for dirigisme (and indeed many of these countries also had pro market reforms that I think contributed to growth as well) but I do need more of an argument for Europe's mild-by-historical standards government size is definitely responsible for its (relative) stagnation now, but its tightly regulated, highly interventionist and welfare expansionist state in the mid twentieth century definitely isn't responsible for its success then.
Agreed! A fair middle ground position.
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