U.S. Social Security
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Criticism of current program
- Looming financial crisis.
- Low rate of return
- Groups with lower life expectancies (males, blacks, low income) have a much lower return over the term of their retirement.
Financial crisis
Social Security is currently running a surplus, and this surplus is actually still growing. In 2008, this surplus will peak, meaning that the amount of Social Security surplus money being "stolen" to fund other programs will start to go down. At this point Congress will have to find other sources of income to replace the social security income (or spend less, or just add more National Debt). In 2018, Social Security will stop providing income to the rest of government, and start requiring it. This means it'll have to start cashing in it's treasury bonds (the IOU notes in the trust fund), and those bonds will have to be paid by either more taxes (from somewhere), or more debt (issuing new treasury bonds).
Regardless, as the Social Security collection surplus shrinks, belts will need to be tightened. When Social Security stops collecting more money than it distributes, belts will need to be tightened more.
http://www.ssa.gov/OACT/TR/TR04/images/II_project_IID2.gif
President Bush proposes to change how Social Security works. A centerpiece is the creation of individual retirement accounts.
Benefits of Bush's proposal
- depoliticize payout
- Removes some funds from government revenue and move them into private accounts
- Larger payout (especially if payouts will be reduced to keep the system fiscally balanced)
Drawback of Bush's proposals
- Investment options are regulated
- Possible politicization of investment
- Transition funds are necessary. This will create a greater incentive for revenue increases
- Private accounts are fairly small (~1/3 of Social Security taxes). 2/3 of your contributions are still subject to congressional whim
- Forced savings are still immoral (though arguably less immoral than transfers)
Problems with both reform and status quo
- Prohibit self-investment (education, housing, tools, etc)
- Prohibit non-investment (maybe you need the money for food now)
- Inflate the cost of labor
External links
- http://www.socialsecurity.org, a Cato institute reform website
- http://www.cato.org/events/ssconf05/program.html, Social Security: The Opportunity for Real Reform, a Cato Institute two day conference on social security
- http://www.mises.org/fullstory.aspx?Id=1751, Mises Institute proposal of a much more radical (and libertarian) market reform
- http://www.mises.org/fullstory.aspx?Id=1732, Mises Institute focusing on the forced savings issue
- http://www.house.gov/paul/tst/tst2005/tst012405.htm, Ron Paul (Congress Libertarian/Republican) on current proposals
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