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The problem is that there is no trust fund. The trust fund money was spent by the federal government for current expenditures and replaced by special treasury notes. In order to draw on the trust fund, the Social Security Administration needs to collect on those notes from the government. The government does not have the money to pay these notes and would need to raise the additional revenue by raising the FICA contributions or income taxes. The other options, that are only whispered about inside the beltway, include reducing benefits and privatizing the system.
Fortunately, outside the beltway and mainstream politics, there are a number of think-tanks and individuals who are willing to talk about real solutions to save or replace the current system. The Cato Institute is leading the way with its Project on Social Security Privatization. Since 1979, Cato has been seeking alternatives to the current system and has published a number of books and policy reports on the subject. Cato is leading the battle for privatization, armed with comprehensive research studies and the example of what Chile has done to replace their bankrupt system under Dr. José Piñera. Dr. Piñera is the former Chilean Labor and Welfare Minister and architect of the privatization of the Chilean public pension system and currently serves as co-chairman of the project.
Many other think tanks and individuals have also been working towards the same goal. Recently the Concord Coalition, the deficit fighting group founded by former Senators Paul Tsongas and Warren Rudman, has commented that reform of the system is crucial to reducing the national debt.
Summarized below is a list of articles and policy reports showing how the system can be saved or replaced with a system based on sound free market principles. There is also a section highlighting articles about Chile as well as links to other sites of interest on the subject.
The Cato Institute and their Project for Social Security Privatization have been very outspoken on the need for privatization. They have published books and policy reports and testified before Congress. Below are highlights of their major works on privatization.
Michael Tanner, director of health and welfare studies and director of the project, testified twice before Congress on privatization:
The project has released five major studies since August 1995:
This past fall, at a Cato Institute Capitol Hill Briefing entitled The Progressive Case for Social Security Privatization, speakers offered ideas for how to reform the system. Speakers included Michael Tanner, former Democratic Congressman (and now Cato Fellow) Tim Penny, Sam Beard president of the National Development Council, and Robert Shapiro, vice-president of the Progressive Policy Institute.
Social Security: Rates of Return and Fairness of Benefits explores the gender, racial and class inequality inherent in the current system. This article is from the Spring/Summer 1994 Cato Journal.
Reason is the premier libertarian magazine and one of the best web sites for libertarian commentary. The folks at Reason also have some definite opinions on what needs to be done with the system.
In the March 1996 issue, Rick Henderson has an article entitled Retirement Systems. Henderson discusses the need for privatization and what some countries have implemented as partial privatization. He answered criticism of this article in the July 1996 issue, mainly in response to a letter to the editor.
Carolyn Weaver, resident scholar and director of Social Security and pension studies at the American Enterprise Institute, compares the "radical" proposals to reform Social Security to the even more "radical" proposal in the 1930s to create the system in this May 1996 article entitled Birth of an Entitlement: Learning from the Origins of Social Security.
Many other people and organizations have made their opinions known on what needs to be done to fix Social Security. Here are some highlights of their work.
Cascade had a number of op-eds related to a Cascade-sponsored breakfast speech given by Dr. José Piñera and Michael Tanner. Social Security fit for a King and Worker talks about the benefits of privatization and Opt Out of Social Security asks if Oregonians should petition the government for permission to opt out of the system and invest in private retirement systems. Make the Promise Real: Privatize Social Security discusses the benefits of privatization and how to complete the job.
In this letter to the editor that appeared in the Oregonian, entitled Don't Wait to Change Social Security System, Ted Abram, the executive director of the American Institute for Full Employment, urges that something be done now before the problem gets worse.
After Senate Minority Leader Tom Daschle admitted there is no trust fund, LP presidential candidate Harry Browne called for public discussion of a solution in this post-election press release.
On January 6, 1997, The Libertarian Party issued a press release to warn us to be wary of the privatization proposed by the Advisory Council on Social Security that would have the government directly purchase equity securities and become one of the major shareholders in most American companies. As a major shareholder, the government would be able to extend its social engineering directly into the boardrooms of these corporations.
International Society for Individual Liberty
As part of its Educational Pamphlet Series, ISIL has a pamphlet entitled Social Security: Warning! Time is Running Out on this Bankrupt System. It discusses the history and future of the system and what can be done to save it.
Institute for Policy Innovation
Salvaging Social Security discusses what happened to the trust fund and proposes several solutions to keep the system going. This file is in Adobe Acrobat format; you may download the Adobe Acrobat Reader for free from Adobe Systems.
Pete DuPont shows that privatization can work and has worked -- at least for a small group of workers in Texas who were allowed to opt out of the system in 1981 when it was legal -- in his editorial How to Retire on $2,740 a Month. He also discusses the numbers in an article entitled The Coming Collapse of Social Security -- 16 Years and Counting.
James Glassman of the American Enterprise Institute discusses self-reliance as the ultimate reform in his editorial Self-Reliance: A Solution for Social Security.
National Center for Policy Analysis
NCPA has several articles on the problem and how to solve it with privatization in its Social Security library.
The Concord Coalition is concerned with the budget ramifications of the Social Security system. Currently, a portion of the deficit is masked by the surplus of revenue over payments. They sponsored a conference entitled Avoiding Generational Warfare: Social Security and the Budget at George Mason University.
In a recent Facing Facts Alert, they said that Social Security reform must be part of any discussion of a balanced budget.
Private Enterprise Research Center
In his article How to Put Security Back in the Social Security System Thomas R. Saving, the director of PERC, discusses how the system got in trouble and proposes a solution.
This month AEI will release a new book written by Carolyn Weaver: "The Frayed Social Contract Why Social Security Is in Trouble and How It Can Be Fixed". Weaver outlines the important points relevant to reform. This is also the topic of the cover story in the January/February 1997 The American Enterprise magazine.
Even the moderate Democratic Leadership Council is now willing to discuss the issue. In Rethinking Social Security (New Democrat, September 1995), Robert Shapiro discusses the fall of the system and suggests a private system to replace it.
Beard has founded a group called Equal Capital Opportunity Now. The organization is similar to the Concord Coalition in nature but is dedicated to Social Security only. He had an article published in the Summer 1995 Policy Review entitled Minimum Wage Millionaires: The Capitalist Way To Save Social Security, where he shows how anyone can become a millionaire by being able to invest for themselves. Beard also published a book called "Restoring Hope in America: The Social Security Solution."
Background Information
Fifteen years ago, Chile replaced its bankrupt pay-as-you-go social security system with one comprised of private pension funds. Employee contributions are mandated and the pension fund companies are regulated to a small extent. The early indications are that benefits under the new system are much higher than under the government-run system.
Very Social Security is an article published by the international accounting firm of KPMG Peat Marwick about the Chilean system in the August 1996 issue of their World Business magazine.
In Privatizing Social Security: Lessons from Chile, Mark Klugman, director of The International Center for Pension Reform, discusses Chile's successes. This is from the May/June issue of American Civilization from the Progress and Freedom Foundation.
A summary of Chile's social security system can be found as part of the Social Security Programs Throughout the World at the Social Security Administration site. (This file is in Adobe Acrobat format; you may download the Adobe Acrobat Reader for free from Adobe Systems.
Dr. Piñera has been writing and lecturing since he finished his term as the Chilean Labor and Welfare Minister. He is currently President of the International Center for Pension Reform as well as co-chairman of the Cato Institute's Project on Social Security Privatization. Piñera holds a Ph.D. in economics from Harvard University.
Empowering Workers: The Privatization of Social Security in Chile appeared in the Fall/Winter 1996 issue of the Cato Journal and discusses the impact of reform on Chile.
Why the U.S. Should Privatize Social Security: The Chilean Model is a speech given by Dr. Piñera on this subject at Cato. It is available in RealAudio format.
An Interview with Dr. Piñera is available from IntellectualCapital.Com in text and RealAudio. It focuses on what the United States needs to do to reform its system.
(To listen to RealAudio, you need the RealAudio Player from Progressive Networks.)
Social Security Administration
"Social, but Insecure" by J.D. Tuccille Forum
In December 2004 this page was modified significantly from its original form for archiving purposes.
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