Comment & Debate
Greg Anrig and Bernard Wasow. “Twelve reasons why privatizing social security is a bad idea.” The Century Foundation.: “Reason #1: Today’s insurance to protect workers and their families against death and disability would be threatened. ‘Rate of return’ calculations neglect the value of Social Security’s insurance protections. Of the 47 million Americans who collect payments from the Social Security program, over one-third (almost 17 million) are not retired workers. Among those currently receiving Social Security payments are 5 million spouses and children of retired and disabled workers, 7 million spouses and dependent children of deceased workers, and 7 million disabled workers and their dependents. Proposals to privatize Social Security involve shifting some of the money financing the current insurance program into investment accounts assigned to each worker. But the payroll taxes carved out to pay for personal accounts are resources that are needed to support today’s payments to recipients of Social Security’s survivors and disability insurance as well as retirement benefits. Simple arithmetic suggests that every dollar shifted from Social Security programs to personal accounts is a dollar less to provide guaranteed income to the 37 percent of beneficiaries who are not retired workers. The three alternatives put forward in 2001 by the President’s Commission to Strengthen Social Security would, in the absence of individual accounts, restore long-term Social Security solvency either largely or entirely through benefit reductions that would apply to all beneficiaries— including the disabled. In the principal proposals put forward by the commission, the reduction in disability benefits was draconian, with cuts ranging from 19 percent to 47.5 percent after the year 2030. The commission itself somewhat disavowed this aspect of its proposals, suggesting that a subsequent commission or other body that specializes in disability policy might revise how its plans apply to the disabled. Economists Peter A. Diamond (MIT) and Peter R. Orszag (Brookings) have noted that the disabled would have limited ability to mitigate the effects of these benefit reductions by securing income from individual accounts.1 One reason is that their individual accounts often would be meager, since those who become disabled before retirement age may have relatively few years of work during which they could make contributions to their accounts. Second, under the commission proposals, disabled beneficiaries (like all other beneficiaries) would not be allowed access to their individual accounts until they reached retirement age.”