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Social Security and the Crisis



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It’s a common line, one adopted by Barack Obama. Thomas Frank took it up in yesterday morning’s Wall Street Journal: The financial crisis supposedly discredits the idea of personal savings accounts for Social Security. As Frank puts it, “Maybe all those people would be better off if we had invested Social Security’s trust fund in WaMu and Wachovia.”

The Clinton administration did indeed propose investing the trust fund in stocks. The Bush administration, however, merely proposed letting individuals invest a portion of their payroll taxes if they so chose. And, as Andrew Biggs pointed out here the other day, over time investing in stocks and bonds pays off. I don’t expect the argument for a free-market reform of Social Security to get much traction now or in the Democratic Congress of the next few years. But that doesn’t mean that it shouldn’t.



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