A new video, released by the Center for Freedom and Prosperity Foundation (CF&P), that exposes Social Security’s unsustainable finances and points out that policies to address the giant unfunded liability, such as tax increases and benefit cuts, would make the program an even worse deal for workers.
Entitled, „Saving Social Security with Personal Retirement Accounts,” the mini-documentary is narrated by Dan Mitchell of the Cato Institute, and it explains how personal retirement accounts are the only way to address the long-term fiscal problem while also helping workers enjoy a better retirement.
As documented in the video, Social Security has changed significantly since the 1930s. Both the payroll tax rate and the amount of income subject to taxation have expanded drastically, so today’s workers get a much lower return than those who entered the program in its early years. Future workers will have to pay even more to get even less.
Faced with the same demographic and fiscal problems as the American Social Security system, many nations, such as Chile and Australia, have successfully chosen to modernize their old age programs with personal retirement accounts.
The video provides six reasons why the U.S. should follow their lead:
1) Social Security is broke;
2) Payroll taxes already are too high;
3) Social Security is a bad deal for workers;
4) Personal accounts are safer than Social Security;
5) Personal accounts boost economic growth; and,
6) Personal accounts are working in other nations.
„Like other entitlement programs, Social Security is facing a fiscal crisis,” said
CF&P Foundation President Andrew Quinlan, who added that, „but we should seek fiscal sustainability and good retirement policy, and that means personal accounts.”
„Other than demagoguery, the only obstacle to personal accounts is the transition cost, but there’s an even bigger cost to bail out the current system,” said the video’s narrator, Dan Mitchell of the Cato Institute. „About 30 nations around the world have implemented some form of personal accounts,” he also noted, „and reform is working every place from Sweden to Hong Kong.”
Executive Summary
There are two crises facing Social Security. First, the program has a gigantic unfunded liability, largely thanks to demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.
