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Analysis of Current Social Security Reform Proposals

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  • Lyon, Andrew B.
  • Stell, John L.

Abstract

This paper provides an analysis of the long-run actuarial effects of four significant Social Security reform plans and their effects on representative workers. The reform plans include three plans establishing private accounts: the Social Security Guarantee Plan (proposed by Representatives Bill Archer and Clay Shaw), the Social Security Solvency Act of 1999 (Senator Moynihan), and the Bipartisan Social Security Reform Act of 1999 (Senators Gregg, Breaux, Kerrey, and others). A fourth plan is a hypothetical plan named the Trust Fund Investment Plan. This plan is a modified version of the Administration’s FY 2001 budget proposal calling for significant General Fund revenue transfers to the Social Security Trust Fund and providing for limited Trust Fund investments in equity. Each of the plans is shown to result in long-range actuarial balance of the Trust Funds under the assumptions most typically used by the actuaries of the Social Security Administration, but in the absence of an "equity premium" the Trust Fund would fail to achieve actuarial balance under the Social Security Guarantee Plan. Beneficiaries are shown to be affected differently under each of the reform options. In the absence of an equity premium, all reform plans that achieve actuarial balance result in a lower net benefit for a worker with lifetime average earnings. This occurs even though all but one plan makes significant use of General Fund revenues.

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Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 53 (2000)
Issue (Month): n. 3 (September)
Pages: 473-514

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Handle: RePEc:ntj:journl:v:53:y:2000:i:n._3:p:473-514

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  1. Martin Feldstein & Jeffrey B Liebman, 2002. "The Distributional Effects of an Investment-Based Social Security System," Working Papers, Center for Economic Studies, U.S. Census Bureau 02-08, Center for Economic Studies, U.S. Census Bureau.
  2. Peter Diamond & Jean Geanakoplos, 1999. "Social Security Investment in Equities I: Linear Case," NBER Working Papers 7103, National Bureau of Economic Research, Inc.
  3. Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2002. "Long-Run Effects of Social Security Reform Proposals on Lifetime Progressivity," NBER Chapters, National Bureau of Economic Research, Inc, in: The Distributional Aspects of Social Security and Social Security Reform, pages 149-206 National Bureau of Economic Research, Inc.
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Cited by:
  1. Thomas A. Garrett & Russell M. Rhine, 2005. "Social security versus private retirement accounts: a historical analysis," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Mar, pages 103-121.
  2. John Sabelhaus & Julie Topoleski, 2007. "Uncertain policy for an uncertain world: The case of social security," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 26(3), pages 507-525.

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