|SSP No. 27||August 22, 2002|
by Andrew G. Biggs
Andrew G. Biggs is a Social Security analyst and assistant director of the Cato Institute's Project on Social Security Choice. Biggs served as a staff member on the President's Commission to Strengthen Social Security from May 2001 to January 2002.
The President's Commission to Strengthen Social Security was appointed in May 2001 to formulate proposals that would protect benefits for today's retirees; enhance Social Security's fiscal sustainability for the long term; and give younger workers the opportunity to invest part of their payroll taxes in personal retirement accounts that they would own, control, and be able to pass on to their children. The commission's three reform proposals, delivered to the president in December, fulfill those obligations.
The commission's interim report, issued in August 2001, cast doubt on the current system's trust fund financing and questioned the program's progressivity. Those findings generated considerable public controversy. The commission's final report, which put forward three distinct plans to strengthen Social Security through personal accounts, generated even more debate.
Although the commission's three plans cover a spectrum of approaches, the proposals have important characteristics in common. All three plans would provide higher benefits than the current system can pay, and lower-income workersó who opponents of private accounts claim to be most concerned aboutówould receive higher those benefits at a cost lower than that of maintaining the current program.
The commission attracted significant criticism from opponents of personal accounts. What the commission's work did not attract was substantive counterproposals on how to keep Social Security solvent and sustainable over the long term in the absence of personal accounts. The next stage of the Social Security debate is for account opponents to put their own proposals on the table. Inaction, the "policy" most often put forward by opponents, is not a viable option.
A review of the arguments and evidence finds that the personal account-based proposals from the President's Commission provide a better way to pre-fund future Social Security benefits than the current program's trust fund mechanism; that protections against poverty in old age would be increased and progressivity enhanced; that workers would have the right to own, control, and pass on their Social Security savings; and that personal account-based proposals have the capacity to pay higher benefits at lower long-run costs than the traditional pay-as-you-go method of financing Social Security.
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