The Case for Social Security Reform

August 1, 2024 by Dan Mitchell @ International Liberty

Since both Kamala Harris and Donald Trump want government to be a bigger burden, there is zero chance of entitlement reform in the next four years.

But that doesn’t change the fact that personal retirement accounts would be an excellent idea, as explained in this clip from a discussion with Gene Tunny.

Depending on your mindset, there’s glass-half-full and a glass-half-empty case for Social Security reform.

If you’re an optimist, the case for personal retirement accounts revolves around having a system that will be much better.

• Much better for workers (higher retirement income).
• Much better for national prosperity (replacing a tax-and-debt-based system with a savings-and-investment-based system).
  

If you’re a pessimist, the case for personal retirement accounts is based on avoiding some of the bad things that inevitably will happen with a program-wide $61.7 trillion shortfall over the next 75 years.

• Massive tax increases.
• Massive debt increases.
• Big benefit reductions (which is what automatically will happen under current law).

If personal retirement accounts produce very good results (and preclude very bad things), the obvious question to ask is why it hasn’t already happened? Shouldn’t this be a no-brainer?

The answer, as I explain in the video, is that the transition to a new system will be costly in the short run while producing benefits in the long run.

Unfortunately, politicians generally care only about their next election and that means they are loath to push for things that involve short-run pain. This doesn’t mean reform is impossible (as we see from some European nations), but it does mean we will need better-quality leaders than we have right now.

P.S. Amazingly, some politicians want to expand Social Security.

P.P.S. Too bad they are unwilling to learn from Australia, Chile, Switzerland, Hong Kong, Netherlands, the Faroe Islands, Denmark, Israel, and Sweden, all of which show that it is possible to fully or partially replace debt-based systems with savings-based systems.