This article considers the Social Security program and President George W. Bush’s proposal for individual accounts. The article begins by addressing the nature of the Social Security program’s trust fund and explains how the federal government’s ability to pay benefits is a function of political will more than the pecuniary intricacies of governmental trust fund accounting. The article then critically examines the components of the long-term financial situation of Social Security, including the use of economic growth rate assumptions that are extremely low by historical standards. It then analyzes several different possible responses, including reallocating governmental expenditures, changing the formula for calculating initial retirement benefits, increasing the cap on Social Security’s payroll tax, and raising the retirement age, among others. Finally, the article notes that folks who would prefer to depend on their own individually managed retirement assets have a mechanism already available in the form of the Individual Retirement Account, a mechanism that is superior to President Bush’s proposal for individual Social Security accounts in several dimensions.
Date of this Version
Richard L. Kaplan, "The Security of Social Security Benefits and the President's Proposal" (April 2005). University of Illinois Law and Economics Working Papers. Working Paper 24.