A change to a private, funded program does not escape the problem of honoring commitments on pension payments to the current elderly. These promises ought to be honored, although there are questions about quantifying the degree of commitment for people who are currently below retirement age. This honoring of past promises inevitably requires taxes of some form on current and future generations. Basically, these levies should be viewed as costs created by the past mistakes of giving old people retirement benefits that greatly overmatched the present value of their payroll taxes. But these costs are basically sunk and ought not to influence decisions about a desirable form of Social Security for the future. In particular, we should start now on a transition to a system that is mainly private and funded.
DAVID M. CUTLER
Depending on one's point of view, Social Security privatization is either an integral part of economic growth or a major step backward in social policy. Aaron and Shoven are more restrained than many of the authors in this literature, but their papers still reflect this difference of opinion. Shoven sees Social Security privatization as a way to shore up the retirement system for the aged. Aaron believes that privatizing Social Security will irretrievably scale back a valuable government role.