Cato Study: “Opting out of Social Security”

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Cato Studies:

5 Million Workers Opt Out of Social Security

Approximately 5 million state and local government workers are reaping rewards outside the current federal Social Security system. In "State and Local Government Retirement Programs: Lessons in Alternatives to Social Security" (Social Security Paper no. 16), Cato policy analyst Carrie Lips examines local retirement plans in both San Diego and Galveston, Texas, and state plans in Louisiana, Ohio, and Massachusetts. "These plans provide useful information about the benefits and hazards of some aspects of retirement programs—information that should guide the debate about the future of Social Security," Lips writes. Some local retirement plans, including one in San Diego, are defined-contribution plans that allow workers to put their retirement money into personal accounts that offer "greater returns and individual ownership of retirement savings." Lips recommends that instead of allowing the federal government to invest Social Security trust fund money in the stock market, policymakers "should adopt the structure of a defined-contribution plan by giving individuals the option to redirect payroll taxes to accounts that they would own and invest."

Few Free Traders in Congress

In the first comprehensive rating from a free-market perspective of individual members of Congress on how they voted on trade and international subsidy issues, Daniel T. Griswold found that only 37 members (25 of the House, 12 of the Senate) of the 105th Congress were real "free traders." Sen. Wayne Allard (R-Colo.), who voted for free trade and against subsidies on all six major votes surveyed, ranked highest in the study "Free Trade, Free Markets: Rating the 105th Congress" (Trade Policy Analysis no. 6). Two senators, Carl Levin (D-Mich.) and Olympia Snowe (R-Maine), opposed free trade and supported subsidies on every major vote. Griswold, associate director of Cato's Center for Trade Policy Studies, found that members of the 105th Congress can be classified in four categories: free traders, who support trade and oppose subsidies; internationalists, who support both trade and subsidies; isolationists, who oppose both trade and subsidies; and interventionists, who oppose trade and support subsidies. "Members of Congress do not need to choose between the isolationism of Pat Buchanan and the internationalism of President Clinton. They can choose to vote for a coherent agenda to liberalize trade and eliminate subsidies," writes Griswold.

Universal Preschool's False Start

Although preschool programs provide no lasting benefits to disadvantaged children, and middle-class children gain little if anything from preschool, legislators across the country are deciding whether to provide no-fee prekindergarten classes for all three- and four-year-olds. In "Universal Preschool Is No Golden Ticket: Why Government Should Not Enter the Preschool Business" (Policy Analysis no. 333), entitlements policy analyst Darcy Olsen warns that the desire to "do some-thing" should be tempered by the facts. In an extensive review of research done on the subject over the past 35 years, she finds that, despite the assertion of advocates of public preschool that early schooling of low-income children is an investment that pays off, there is no empirical evidence that such programs reduce "the number of children who perform poorly in school, become teenage parents, commit criminal acts, or depend on welfare." In fact, studies show that any initial gains the children make disappear entirely within a few years of exiting the programs.

Endless Search for Enemies

Although both congressional leaders and the president have proposed higher military spending next year, a study from the Cato Institute says that "the time has come to reduce U.S. defense spending to match the benign threat environment in the world today." In "Tilting at Windmills: Post–Cold War Military Threats to U.S. Security" (Policy Analysis no. 332), Ivan Eland points out that strategic realities have been altered dramatically by the end of the Cold War, but "U.S. foreign policy remains on autopilot." In assessing purported threats to U.S. security, Eland, Cato's director of defense policy studies, notes that "most of the Pentagon's military planning covers areas of the world that are not very critical to U.S. vital interests, which, contrary to conventional wisdom, indicates how few threats currently exist." With the demise of the Soviet Union, hawks proposing increased defense spending must scour the globe for enemies. "Given the lack of a credible threat from any specific country, people who desperately search for enemies—that is, advocates of foreign intervention and a large defense budget—must settle on the vague notion of 'instability,'" Eland notes. But he adds that "instability in most parts of the world is rarely a threat to the United States," and the number of conflicts per year has actually declined by more than half since 1992. "Intervening anywhere and every-where to battle instability when it doesn't adversely affect U.S. vital interests could merely motivate rogue states or terrorist groups to attack the American homeland with nuclear, biological, or chemical weapons," he contends.

This article originally appeared in the May/June 1999 edition of Cato Policy Report.