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SPEAKING THE TRUTH ABOUT

SOCIAL SECURITY REFORM

by Milton Friedman

No. 46

April 12, 1999

Executive Summary

be mandatory. The fraction of a person's income

As support grows for transforming Social

that it is reasonable for him or her to set aside for

Security from a pay-as-you-go defined benefit pro-

retirement depends on that person's circum

-

gram to a system of individually owned, privately

stances and values. It makes no more sense to

invested accounts, critics of privatization have

specify a minimum fraction for all people than to

warned that making the transition to such a new

mandate a minimum fraction of income that

system would impose substantial new costs on

must be spent on housing or transportation. Our

today's young workers. However, given a proper

general presumption is that individuals can best

understanding of Social Security's current un-

judge for themselves how to use their resources.

funded liabilities--variously estimated at from$4

The ongoing discussion about privatizing

trillion to $11 trillion--there are no real transition

Social Security would benefit from paying more

costs to privatizing Social Security, merely the

attention to fundamentals, rather than dwelling

explicit recognition of current implicit debt.

simply on nuts and bolts of privatization.

A privatized Social Security system should not

Milton Friedman, winner of the 1976 Nobel Prize in Economics, is a senior research fellow at the Hoover Institution. Originally published in

the New York Times, January 11, 1999. Reprinted by pemission.