A couple years ago, back when Bush was still marginally popular, there was a lot of debate about his proposal to "reform" Social Security by converting it from a defined-benefit pension program to a defined-contribution program more like a 401(k).
One of the arguments he made in favor of this approach was that with a 401(k) type account, you would be able to live more comfortably in retirement AND you would be able to pass along to your heirs any excess equity left over when you died.
No one ever really took this argument on in the mainstream, but this post by Clive Crook sort of reminds me of the principle that makes the truth startlingly clear - This Idea Is Bunk.
The principle is pretty simple: Not Everybody Can Get Rich.
At first glance that probably seems like sort of a sourpuss thing to say. After all, why not?!?!
Well, imagine if you will a society that is, say, two generations into a program like the one Bush was proposing. Let's say that the society is at more or less zero population growth, so people on average are leaving their estates to two children.
After two generations of a program where people are accumulating sufficient assets to live off equity to the age of 100, but where people die on average at the age of 85, basically every person in the society is going to have inherited enough money that they don't have to work full time.
The problem with that, of course, is that wealth in a capitalist system is sort of an abstraction - it's not like wealthy people actually have a big pile of food and clothing and LearJets just sitting in their backyard. Wealth is, in a sense, the right to live off the work of others. If no one's working, there isn't anything for the wealthy to consume.
The particular program Crook is pointing out isn't nearly so crazy - it isn't intended to produce an entire generation of idle people. It's a system of investment accounts designed to create more opportunity for lower-income people when they turn 18. It's a neat system, but it can't work as a retirement plan. It just can't. And anyone who says it can either hasn't thought it through or they are lying (or both.)