Saving Social Security Through Privatization
February 24, 2004
Social Security reform cannot be put off. In less than 15 years, the national retirement program will begin to run a deficit, spending more on benefits than it takes in through taxes. Overall, the system is more than $26 trillion in debt, says Mike Tanner, director of the Project on Social Security Choice at the Cato Institute.
Raising taxes and/or cutting benefits are unthinkable. That leaves private investment as the only viable option, says Tanner. By allowing younger workers to invest their Social Security taxes through private individual accounts, we can:
- Help restore Social Security to long-term solvency without having to resort to massive tax increases.
- Provide workers with higher benefits than Social Security otherwise would be able to provide.
- Create a system that treats women, minorities and young people more fairly.
- Allow low-income workers to accumulate real, inheritable wealth for the first time in their lives.
- Give workers ownership of and control over their retirement funds.
Some object that the current budget deficits make Social Security reform, and, particularly, individual accounts, impossible. They point to the "transition costs" of moving to individual accounts. Since current taxes are used to pay current beneficiaries, allowing younger workers to invest their taxes will require a replacement form of revenue to protect current retirees. But given Social Security's unfunded liabilities, the transition does not really represent a new cost. It is just making explicit an already-implicit debt, explains Tanner.
Of course, it would mean paying that debt now rather than later. It is true, therefore, that reforming Social Security will increase short-term budget deficits. But it will save trillions of dollars in the long term, says Tanner.
Source: Mike Tanner, "Privatize program now," USA Today, February 24, 2004. For text
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