President Bush plans to use his political capital to "privatize" a portion of the Social Security program. Whether or not such a change is desirable and the extent to which it solves Social Security's financing problems will dominate much of the policy agenda over the next few years. This Issue in Brief is intended to highlight the key points in the debate. First, it documents the magnitude of the Social Security financing problem. An enormous problem may justify a complete restructuring, while a more modest problem may call for marginal adjustments. Second, it clarifies that the privatization debate usually encompasses two separate issues - how to close Social Security's financing gap and how to structure benefits. Third, it addresses the slightly esoteric, but quite important issue, of how to account for the higher expected returns earned on more risky assets. The conclusion, to the extent that one emerges from this overview, is that the issues are extremely complicated and that solving Social Security's solvency problem requires serious decisions - rather than a silver bullet.
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Paper provided by Center for Retirement Research in its series Issues in Brief with number
ib25.
Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Peter Diamond, 2004.
"Social Security,"
American Economic Review,
American Economic Association, vol. 94(1), pages 1-24, March.
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