this episode serves as a warning: if you force people to save in one form they may cut back in another.
In summary, with equal deposits, Trust Fund accumulations would probably grow faster than individual account balances because of the differential in administrative costs. Some outside offsets could occur in both cases. One effect is clear -- accumulating pension reserves can raise national saving, whether reserves are held in Social Security trust funds or personal retirement accounts. But saving might be lower if it were done through individual accounts than if it were done through Social Security.
Whatever its name, the core pension program for the United States should remain a defined-benefit pension program, that provides fully indexed annuities. The social assistance that Social Security provides is vitally important and should continue to be provided to retirees, the disabled, and survivors without the stigmatizing effects of income- or meanstests. Social Security faces a projected long-term deficit that should be closed promptly. Modest steps taken early will suffice to close it. While benefits now are not unduly generous, I believe that some reductions should be included as part of that deficit-elimination program. In addition, Social Security trustees should be freed of restrictions on investment that have deprived beneficiaries of returns that any private pension fund would be expected to achieve.
Proposals to replace Social Security, in whole or in part, with personal accounts are misconceived. They would expose the core incomes of beneficiaries to increased risks that