Social Security is America's largest and most popular government program. But it is also a deeply troubled one. In just 15 years, Social Security will begin to run a deficit, spending more on benefits than it takes in through taxes. Overall, the program faces nearly $26 trillion in unfunded liabilities. Without massive tax increases or benefit cuts, it quite simply cannot pay the benefits that it has promised. At the same time, payroll taxes are already so high that younger workers face a declining and below-market return on the taxes they pay.
This crisis has prompted the most far-reaching discussion of the purpose and structure of Social Security since the program was enacted in 1935. Not so very long ago, Social Security was rightly regarded as the “third rail” of American politics—touch it and your career dies. But no longer. Polls today show that the vast majority of Americans support proposals that would allow younger workers to privately invest at least part of their Social Security taxes through individual accounts.
The Cato Institute has been actively involved in the debate over Social Security reform since 1979 when Carolyn Weaver's article “Social Security: Has the Crisis Passed?” appeared in the very first issue of Policy Report. Peter Ferrara's classic book, Social Security: The Inherent Contradiction, was published in 1980. Throughout the 1980s and 1990s, while various commissions were “saving” Social Security, the Cato Institute continued to warn that Social Security's pay-asyou-go (PAYGO) structure was fundamentally unsound. In 1986 the Institute launched the Cato Project on Social Security Privatization, since renamed the Project on Social Security Choice, which has become perhaps the leading intellectual voice in favor of marketbased Social Security reform.
Since the beginning of the project, we have published more than 30 studies and reports on the U.S. Social Security system, its many