Washington policymakers are now routinely deluged with proposals for Social Security reform. That’s why the report of the 24‐member bipartisan commission on Social Security reform, the National Coalition on Retirement Policy, was so eagerly awaited.
And that’s why it was such a tremendous disappointment. The commission’s recommendations would continue the path of previous reforms: half‐measures that did nothing to fix Social Security’s fundamental problems.
Every few years, financial experts have tinkered around Social Security’s edges: they’ve teased a little more money out of the system by adding tax hikes, new reimbursement rates, stiffer retirement rules and so forth. And every few years, the date that Social Security would start deficit‐spending moved closer to the present: it’s now the year 2013. The microscopic nature of past reforms was eloquent testimony that our retirement system was economically catastrophic but politically untouchable.
What we did with Social Security was not unlike what Percy Bysse Shelley did with his own finances. Shelley, a brilliant poet but a terrible person, was notorious for living beyond his means and mortgaging his own future. As time went on, he tried to borrow money from nearly everyone he knew, accepting higher and higher levels of debt and rates of interest in the process.
Shelley died with huge unpaid debts. But there’s no need to mortgage our future: we can reform Social Security by letting people keep their own money in private retirement accounts. Instead of paying 12.4 percent of your paycheck to the Social Security administration, you could choose where to invest your money, withdraw what you need for retirement and leave the balance to your heirs — not the government.
After more than a half‐century of government (mis)management of the money people pay into Social Security, it takes vision to consider letting people take responsibility for their own retirement through privatized Social Security accounts. Privatization is the fundamental alternative to the current program. And the economic question is settled: over the long run, private investment delivers a much better return than Social Security.