Should the United States Privatize Social Security?

By Henry J. Aaron; John B. Shoven et al. | Go to book overview
2.
Several proposals call for distributing the current budget surplus to Social Security accounts. This proposal only adds positively to the economy if the government would otherwise have spent the money and thus it would not have been saved.

References

Kotlikoff, Laurence J., Kent A. Smetters, and Jan Walliser. 1998. "Social Security: Privatization and Progressivity." NBER working paper no. 6428.

Samuelson, Paul. 1958. "An Exact Consumption -- Loan Model of Interest with or without the Social Contrivance of Money." Journal of Political Economy 66: 467-482.


ALICIA H. MUNNELL

Although Shoven and Aaron both profess the same goals for Social Security, Aaron's proposal gets us there and Shoven's does not. The question is where -- with such laudable objectives -- does Shoven go wrong. In my view, he and others who propose cutting back on Social Security to make room for privatized accounts make five errors. First, they fail to consider the most serious alternative to privatized accounts -- namely, a partially funded defined-benefit plan. Second, they dismiss in far too cavalier a fashion the possibility of equity investment through the Trust Funds. Third, they have a completely unrealistic notion about the predictability of benefits under a defined-contribution plan. Fourth, they make a priority of increasing efficiency but do not properly evaluate the outcome of their proposals. Fifth, they believe that changing a benefit structure from a defined- benefit plan to a defined-contribution plan can make a tax not a tax.

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Should the United States Privatize Social Security?
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Introduction vii
  • Note xii
  • 1: Social Security Reform: Two Tiers Are Better Than One 1
  • Notes 51
  • References 52
  • 2: Social Security: Tune It Up, Don'T Trade It In 55
  • Conclusion 108
  • Notes 109
  • References 111
  • 3: Comments 113
  • Note 123
  • Summary 132
  • Summary 132
  • References 133
  • Alicia H. Munnell 133
  • Conclusion 144
  • References 145
  • 4: Responses 155
  • Note 159
  • Note 168
  • 5: Rejoinder 169
  • Contributors 171
  • Index 173
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