News Release

June 28, 2005

Media Contact: (202) 789-5200

Social Security System Betrays Liberal Ideals
Cato study concludes that personal retirement accounts would perform better

WASHINGTON -- Social Security reform should appeal to liberals, because the ideals of transparent government, open democratic deliberation, and equality among citizens are violated by the current Social Security system, argues a new study by the Cato Institute.

In "Noble Lies, Liberal Purposes, and Personal Retirement Accounts," Cato policy analyst Will Wilkinson demonstrates that liberals have little reason to defend the Social Security status quo and compelling reasons to promote a well-designed system of personal retirement accounts according to their own standards.

"Social Security has a barely progressive overall structure, if it is progressive at all," Wilkinson writes. "The huge volume of transfers inherent in the system accomplishes very little income redistribution within generational cohorts. Furthermore, it works to the disadvantage of current workers, who will receive a smaller 'return' on their payroll taxes than the current retirees."

Wilkinson explains that the Social Security system was designed to generate political support by misleading voters into believing that their payroll taxes entitle them to later benefits, thereby making the program extremely difficult to change.

But the persistent intentional misrepresentation -- the "noble lie" of Social Security as insurance -- undermines liberal ideals of transparency in government and equality among citizens. "The architects of the Social Security created a structure and accompanying rhetoric that was specifically intended to encourage the false belief that the system provides a kind of insurance, similar to private insurance based in contract and property, and therefore involves a binding entitlement to benefits," Wilkinson continues.

The author urges the U.S. government to enact a program of personal retirement accounts, together with a means-tested safety net, which would serve the commonsense objectives of "old age insurance" -- protecting the elderly poor from financial calamity -- better than the status quo, and without resorting to systemic deception.

Currently stock ownership remains out of reach of many poorer Americans. Enacting a program of personal retirement accounts would involve all working members of society in capital markets, thereby breaking down the distinction between the investing and non-investing classes and lowering the barriers to wealth for those who most need it.

Contrary to the worries of liberal critics, Wilkinson argues that a system of personal retirement accounts would enhance equality and social cohesion. "Far from unraveling the social fabric," Wilkinson writes, "personal retirement accounts would strengthen American social solidarity by unifying us behind the true sources of our interdependence, wealth, and economic security."

Social Security Choice Paper no. 34: http://www.cato.org/pub_display.php?pub_id=3940

Click here to receive Cato's Daily Dispatch, news releases, and event notices.

Contact:

Will Wilkinson, policy analyst, wwilkinson@cato.org
Holiday Dmitri, senior media relations manager, 202-218-4613, hdmitri@cato.org
Evans Pierre, director of broadcasting, 202-789-5204, epierre@cato.org