Don Boudreaux thinks Social Security is making us Soft

Don Boudreaux looks at this NYT article reporting that Americans are financially ignorant and atrocious investors and posits that we are so because Social Security cossets us from the consequences of not being fiscally responsible. Now, y'all know that I'm a fan of Social Security. But given the dismal savings rates of Americans, we have to at least contemplate the possibility that Americans are unwisely turning their safety nets into hammocks.

The first strike against this argument is that surviving on SS isn't really much of a hammock. The incentive is still there for people to improve their lots by saving and investing wisely, but we're not. Take away SS entirely and the incentive to save and invest will certainly increase by a large degree, but the trade off is a sizable proportion of the population will fail to do this and fall into penury.

Now this tradeoff might just be worth it if it turns the average American into a regular Warren Buffett. But is this a realistic expectation? If I recall correctly, they have generous social safety nets in Europe, yet this safety net has not hurt their savings rate. Also, Americans fail to make rational financial decisions when it comes to other aspects of our financial life, like credit card debts. Those facts suggest that there are probably ingrained cultural and sociological reasons for our lack of fiscal responsibility that will not respond simply to the withdrawal of Social Security.

Boudreaux raises another charge, one that I hear often from libertarians -- If we think Americans are too irresponsible to take care of themselves, how can we trust them to elect governments that will be wise enough to take care of them? I don't think this argument gets anywhere beyond rhetorical point-scoring. After all, it's not as if Boudreaux have a good, valid alternative to democracy. We empower the government to make decision in many facets of our lives based on the outcomes politicians promise. It's doesn't always work so well in practise, but it's not somehow logically inconsistant. I know how to hire a plumber to fix my dripping faucet, even though I have no idea how to do it myself.