Should the United States Privatize Social Security?

By Henry J. Aaron; John B. Shoven et al. | Go to book overview

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.


Note
1.
The data are from the World Bank. "Averting the Old Age Crisis" ( New York: Oxford University Press, 1994), table A.5.

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.

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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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