Candidate Calculator 2008 Election
Privatizing Social Security
Summary
Since the Report of the 1994-1996 Advisory Council on Social Security, Social Security reform has been hotly debated. In 2006, Federal Reserve Chairman Ben Bernanke said "Reform of our unsustainable entitlement programs should be a priority." Most lawmakers agree that Social Security is unsustainable as it currently operates, but there is little consensus about how to reform it, or if privatization or partial privatization plans are the best options.
President Bush has advocated a partial privatization system that combines government funding with personal savings accounts. The personal accounts could be invested in various managed investment funds similar to the Thrift Savings Plan offered to federal employees. In this plan, investors can choose between treasury bills, corporate bonds and a stock market fund.
Other countries, such as the United Kingdom, Sweden and Chile, have privatized plans. These plans frequently establish individual retirement accounts for workers that allow investment flexibility and then pay workers after retirement through annuities funded by the individual accounts.
The popular Individual Retirement Accounts (IRAs) and 401(k) savings plans in the United States have also been proposed as models.
Then again, others advocate keeping Social Security as a federal program but reforming it.
Yes: Support Privatizing Social Security
Federal funding of Social Security cannot keep the system solvent. The best solution is to develop programs that encourage or even require citizens to invest in safe private retirement plans that return higher rates on investments than citizens could get from Social Security payroll deductions they currently are required to pay. Individuals are the best decision makers for their own retirement. It is not government's responsibility to financially safeguard citizens from cradle to grave. However, by establishing a private or partially private retirement system for the United States, the government can better ensure that a greater number of citizens will have a satisfactory retirement income than under the current federally operated Social Security system.
You support this or similar arguments.
No: Against Privatizing Social Security
Social Security has achieved its basic goal: by using forced savings, the federal government has established a baseline income for citizens during retirement. The current system has low risk with low management costs, along with social insurance provisions that ensure an income for all citizens should they not have sufficient savings for retirement. Social Security has been in place for decades and can be successfully reformed so that it continues to function.
The main downfall of privatized and partially privatized plans is risk. Returns on retirement investments cannot be accurately predicted over decades. And any citizens who would retire during an unforeseen downturn would be particularly vulnerable. Furthermore, privatizing Social Security would cost trillions of dollars. Gay Thayer, chief economist for A.G. Edwards, believes that privatizing would worsen the federal budget deficit in the short term, which among other problems, could negate any investment benefits retirees could have gained through privatization.
You support this or similar arguments.
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Additional Information
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| AFL-CIO |
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