From back in the day, I recall a comedian, whose name I can not recall, do a bit in which he proposed a Stupid Tax. Anytime that you caught somebody doing something stupid, then you could collect $5 from them as a tax…and if they paid you the Stupid Tax, then they had done something stupid again and so they should give you another $5.
Slate’s Matthew Yglesias now proposes something similar as if it were a serious policy proposal.
As he summarizes his solution to Americans’ failure to adequately save for retirement, “What’s needed is a much more forceful, much more statist approach to forced savings, whether that’s quasi-savings in the form of higher taxes and more Social Security benefits or something like a Singapore-style system where ‘private’ savings are pooled into a state-run investment fund.” (emphasis added)
Let us take a moment to explore his underlying premises, beyond his appeal to the gun to impose his judgment on everybody else:
- Individual choice is bad because “a very large share” of people will choose wrong.
- As the correct choice in retirement savings is obvious, those people who choose independently and differently are stupid or duped.
- Only investments in diversified funds with low fees are valid for retirement savings and that judgment should be enforced by law.
- Need (not individual rights) should be the standard in government policy.
- Money should be transferred from wealthy people that do save for retirement and given to poor and middle class people who cannot save enough.
Do you agree with Yglesias? Are you too stupid to manage your own money, so it is better for the smart people in the government to have it? Alternatively, you know that you are smart, but you know stupid people exist who should be forced to do the right thing according to the majority’s judgment?
There are many new proposals out there for providing retirement security, but they have a few things in common: (1) individuals should not be able to choose, (2) the government can eliminate risk by centralizing everything federally, and (3) savings should be taken from the rich to subsidize the retirement of those who are not rich.
These three points ignore history, even the recent history of the financial crisis. When government violates its hedgehog concept (the protection of individual rights) by attempting to regulate all risk out of life, the result is a single point of failure that will break under the cumulative strain to impose a greater cost of failure upon everyone.
Meanwhile, the federal government has failed to even cover the promised pensions of federal employees; that alone is more than $760 BILLION in broken promises and growing.
Doubt this last historical point, how confident are you that the federal government will repay the full value of your substantial payments into Social Security, which is approaching failure? The reason behind new proposals for federal retirement taxes and confiscations is that money is to be used by the federal government to paper over the actuarial deficits in Social Security.