Privatizing Social Security

Studies | Social Security

No. 217
Wednesday, July 01, 1998
by Laurence J. Kotlikoff


Conclusion

The Social Security system does many important things. It forces us to save and to insure and protects us from running out of money in old age. But the system was financed from the start as a pyramid scheme and the pyramid is crumbling. We now have two options. We can try to con our children and grandchildren into adding more stones. Or we can act like adults and reform the system that imperils our offsprings' financial well-being. In considering these two options, we should bear in mind that Social Security's long-term financial imbalance is part of a bigger fiscal disaster that we have organized for our children.

"Social Security's long-term financial imbalance is part of a bigger fiscal disaster that we have organized for our children - but we can correct our errors responsibly."

By fully privatizing Social Security's retirement program along the lines outlined above, we can correct our errors responsibly. The PSS proposal achieves all the legitimate goals of Social Security, forcing us to save, protecting dependent spouses, assisting the poor and providing retirees with inflation-protected pensions. It also gives American workers access to the world capital market in a manner that precludes their trying to time or otherwise play the market. Finally, it asks all who can pay, including the middle-class and rich elderly, to retire the liabilities of the current system and ensure real social security for our children.

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.


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