Demagogue

The Cato Institute has been leading the charge for privatizing Social Security since long before George W. Bush entered the White House. An advertisement placed by the Cato Institute in today's New York Times compares apples and oranges in a way that obscures an important issue -- the uncertain rate of return that private accounts would produce.

Consider this excerpt from the text of Cato's newspaper ad:

What you receive from Social Security is entirely up to the 535 members of Congress. But personal retirement accounts would give you ownership and control over your retirement funds.

To the extent that Congress could vote to raise the retirement age or change the formula for calculating benefits, that first sentence ("What you receive ... is entirely up to ... Congress") is literally true.

However, the next sentence is a tap dance with language that implies that private accounts would be a more dependable or predictable asset because, argues Cato, they'd "give you ownership and control."

Yet just as the benefits produced by SS are in the hands of "535 members of Congress," it is also true that the benefits produced through private accounts would be determined not by the individual, but by the actions of dozens of central banks, hundreds of currency traders, dozens of mutual fund managers and many other people whose decisions drive stock market trends.

I'm not suggesting that this is such a terrible thing. My 401-k plan is affected significantly by these same factors. But it's wrong for Cato to play rhetorical games in a simplistic attempt to sidestep reality. Yes, individuals with private accounts will have "ownership" of those funds -- but the key question that Cato tries to avoid is this: ownership of what?

In the end, the what will be determined mostly by the financial markets and economic climate. The so-called "owners" of these accounts will have only limited "control" over how much their private accounts appreciate.