The Congressional Budget Office (CBO) recently released a projection that Social Security is heading for insolvency by 2033. CBO estimates if there are no concrete solutions, the Social Security benefits would be automatically, but by 23% across the board upon insolvency.
Social Security has been a political lightning rod as the debt-ceiling negotiations proceeds because the program’s Old-Age and Survivors Insurance Trust Fund is also projected to be insolvent by 2033.
Among the suggestions during the debate over Social Security is either to reform or privatize the program. Former Vice President and potential 2024 Presidential candidate Mike Pence proposed the reformation of Social Security by instituting private savings accounts for beneficiaries. Pence revealed his proposal during the National Association of Wholesaler-Distributors summit. He said a portion of Social Security would be withheld and put into a private savings account.
Mike Pence calls for “common sense” reforms to Social Security. (Photo: The Hill)
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Most Democrats oppose the idea of changing the basic structure of Social Security or privatization. While some Republicans advocate reforms that would enhance the program and give its future beneficiaries more control over their retirement funds.
M. Todd Henderson, a law professor at the University of Chicago, wrote a column in the Wall Street Journal in which he claimed Democrats’ persistent attachment to government-run could undermine the goal of helping workers save for retirement. He wrote, “Social Security creates two economic castes: a rich one that invests outside the system and a poor one dependent on the program.”
Henderson suggests letting workers in companies by providing an individual retirement account at birth – like a 401(k) savings account, but with more protections. He added that the government could fund the accounts through “small seed investment.” He also proposed that the government can set up a “modest” insurance program to help smooth out market volatility.
Henderson’s idea has floated even before, but it failed every time. Social Security advocates argued that private plans carry too much risk. An article from the Truthout website asserted that privatization “could be devastating for people with low incomes.”
A paper from the National Committee to Preserve Social Security & Medicare (NCPSSM) added that privatizations could result in “huge cuts in Social Security benefits” as there is no guarantee that private investment could replace the lost benefits. The NCPSSM also claims that the Social Security program can still provide to millions of retirees despite the current financial challenges. The program may require some adjustments over a period of time, but it does not face a challenging crisis that would require major changes.
Read More: Rep. Nancy Mace Urged Congress to Raise the Retirement Age
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