PERSONAL RETIREMENT ACCOUNTS: A FIT FOR LIBERAL STANDARDS
August 18, 2005
Opponents of President Bush's Social Security reform proposal claim that it violates the inherent values of the program, such as equality and social cohesion; but a frank look at the Social Security status quo reveals that the program is very poorly designed to realize liberal ideals, says the Cato Institute.
- Social Security has a barely progressive overall structure, if it is progressive at all.
- The huge volume of transfers inherent in the system accomplishes very little income redistribution between generational cohorts.
- It works to the disadvantage of current workers, who will receive a smaller "return" on their payroll taxes than do current retirees.
Instead, a system of personal retirement accounts coupled with a means-tested safety net would serve the social insurance function better than the Social Security status quo according to liberal standards, says Cato.
- This would materially enhance equality and social cohesion by more fully integrating workers into the market and providing everyone with a stake in its growth.
- The gap between the investing and noninvesting classes would be closed.
- Participants would share a mutuality of interests in this market society.
Source: Will Wilkinson, "Noble Lies, Liberal Purposes, and Personal Retirement Accounts," Cato Project on Social Security Choice, no. 34, June 28, 2005.
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