NATIONAL ACADEMY OF SOCIAL INSURANCE
1776 Massachusetts Avenue NW, Suite 615
Washington. DC 20036-1904
Telephone (202) 452-8097
Facsimile (202) 452-8111
E-mail nasi@nasi.org
Website: www.nasi.org
Statement for White House Conference on Social Security
Pamela J. Larson, Executive Vice President
Virginia P. Reno, Director of Research
The National Academy of Social Insurance is a non-profit, non-partisan
organization of 500 of the nation's leading experts on social insurance.
The Academy conducts objective, non-partisan analyses of Social Security,
Medicare and other social insurance programs. It does not take
positions on legislation or policy issues. Its members hold diverse
views on policy proposals.
The Academy is founded on the premise that, through research and
education, it can contribute to sound policy development of social
insurance that fits with the needs and values of the American
people. Our staff and expert members are available to help policy
makers reach informed decisions.
Our major study by a blue-ribbon panel on Evaluating Issues in
Privatizing Social Security was released on November 23, 1998 and
is available from the Academy and our website,
www.nasi.org. Our
new book, Framing the Social Security Debate: Values, Politics and
Economics, includes essays from 30 experts with varied views on
Social Security reform. It is available from Brookings Institution
Press and is summarized on our website. Social Security Briefs
are also on the website.
Our recent research reveals widespread agreement among experts, as
well as sources of their disagreements, on Social Security reform.
- First, experts agree that Social Security faces a long-range
Financing short-fall, not a near-term crisis.
- Second, experts agree that it is prudent to restore long-term
balance sooner rather than later.
- Third, past approaches to balance Social Security used a combination
of gradual benefit reductions and future tax increases. Experts
agree that these must be part of any reform that achieve balance.
There is no free lunch.
- Fourth, new economic issues in the current Social Security debate,
while sometimes confusing, are not a major source of disagreement
among experts. Three new concepts are: (1) prefunding; (2)
diversifying investments; and (3) privatization. Privatization
refers to proposals to set up individual savings accounts as part
of Social Security. Such individually owned accounts would be a
significant change from the traditional system, which shares across
all contributors protection against the risks of disability, death
of a family worker, a low-earning work life, and the prospect of
living a long time in old age. By prefunding, experts refer to
building up more funds inside Social Security to help pay future
benefits. It requires sacrifices in the near term -- either higher
taxes or lower benefits -- in order to set aside more funds for
the future. By diversifying investments, experts refer to changing
the current policy of investing Social Security funds only in
Treasury bonds to include investing part of the funds in stocks
and corporate bonds. Many economists agree on the desirability of
prefunding and diversifying investments, which could be done with
similar economic effects in either the traditional system or in
privatized accounts.
- Experts differ on the desirability of setting up privatized
individual Social Security accounts.
- The heart of the privatization debate is about values -- for
example, how much one values individual choice and control, on the
one hand, versus collective provision for shared security, on the
other. On values, experts differ.
- Experts also differ in their personal predictions about how future
political events might unfold with and without privatization. These
differences are outlined in Evaluating Issues in Privatizing Social
Security and are examined by political scientists in Framing the
Debate.
To date, there has been much analysis of how individual accounts
would be invested, but relatively little attention to the kinds of
benefits they would pay to workers and their families at retirement,
or when a worker dies or becomes disabled before retirement. It
is not yet clear how individually-owned accounts would achieve the
purpose of Social Security. If it is hoped that they will, more
attention to their benefit design is warranted.
Board of Directors
Henry J. Aaron, Chair
John L. Palmer, President
Janice Gregory, Vice President
Lawrence Thompson, Secretary
Peter A. Diamond
Bill Gradison
Robert Greenstein
William B. Harman
William C. Hsiao
Karen Ignagni
Charles A. Jones
Jerry Mashaw
Olivia Mitchell
Marilyn Moon
Gerald M. Shea
Bruce C. Vladeck
Founding Chair
Robert M. Bull
Executive Vice President
Pamela J. Larson
Director of Research
Virginia P. Reno
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