NCPA - National Center for Policy Analysis

SOCIAL SECURITY REFORM CAN BE MULTI-FACETED

February 15, 2005

Personal accounts, strengthened benefits for seniors, and price-indexing are all important options for Social Security reform, according to economist Glenn Hubbard.

  • In addition to bolstering retirement wealth at modest risk and cost, personal accounts offer an opportunity to build wealth and an asset that can be bequeathed.
  • Personal accounts reduce the political risk of diverting Social Security money to fund other government spending.
  • Seniors can be kept out of poverty by providing a minimum benefit; alternatively, contributions of low-income individuals to personal accounts could be matched in some proportion with public funds.
  • Indexing benefits to inflation would allow the increases in productivity to eliminate some of the financial shortfall facing the current system.

The components can be mixed and matched as desired, says Hubbard: "We can create personal accounts, strengthen benefits for low-income workers, and stabilize Social Security's financial footing without requiring strict adherence to the details of any one proposal."

He adds that, while raising payroll or income taxes remains an option, such hikes would deter work and entrepreneurship, hurting economic growth and America's ability to fund its public programs.

Source: Glenn Hubbard, "Social Security: Pick The Best Part Of Every Plan," BusinessWeek, February 14, 2005.

 

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