Should Social Security Be Privatized?
Many people don't understand how the Social Security system really works. There are no separate Social Security 'accounts' set up for each taxpayer to which he contributes his Social Security 'tax' each year. Many people believe these accounts exist, that the money they pay into their accounts grows each year until retirement, and when they retire they get back what they paid in with interest. This is not true. Most people are unaware of the fact that our current Social Security system is a 'pay-as-you-go' program, which means that the revenue the federal government raises each tax year for Social Security benefits is paid out that same year to beneficiaries.
Many economists believe that our Social Security system is in need of a major overhaul if today's workers are to receive future benefits.
Thomas R. Saving, Director of the Private Enterprise Research Center at Texas A&M University says, 'What is wrong is that the Social Security system was never set up to be a sound investment-based retirement system.'
Karl Borden, professor of financial economics at the University of Nebraska recently wrote, 'Social Security is an unfunded pay-as-you-go system, fundamentally flawed and analogous in design to illegal pyramid schemes. Government accounting creates the illusion of a trust fund, but, in fact, excess receipts are spent immediately.'
Robert M. Ball, former commissioner of Social Security said, 'Some of the trust fund money should be put into the stock market. I want to do it to get a better return for the Social Security system. Historically, long-term government bonds have had a real return, after inflation, of 2.3 percent a year, compared with 6.3 percent for stocks.'
Paul W. Boltz, economist for the T. Rowe Price mutual fund said, 'When we examine the pending financial crisis of...