Complexity and Redistribution

[National Dialogue Moderator <moderator>]

		Complexity and Redistribution

Several participants have commented on the complexity of social security and 
the value of greatly simplifying the nature of the program.  I couldn't agree 
with more.  I have long believed that this complexity has contributed to the 
expansion of the system over the years, has hidden the true redistribution 
effected by the system, and is an obstacle to people trying to make prudent 
financial decisions about how much to save for retirement and how much and 
what kinds of insurance to carry.  I have written about these concerns in a 
number of places, including in a supplemental statement on public 
understanding, which I wrote as a member of the U.S. Social Security Advisory 
Board in 1997.

As some of you have correctly noted, one of the many benefits of personal 
retirement accounts is that they are inherently simple to understand.  
Workers would know how much they contributed each year and how their 
contributions affected their retirement accumulations.  They would know 
precisely what they had accumulated at any point in time.  They would know 
how extra work (or an extra dollar of contributions to their accounts), 
either before or after "retirement," affected their future retirement income. 
 And they would know that everything they accumulated was theirs, backed by 
private ownership and the full force of law.

I also agree with the comment on the growing complexity of the rules and 
regulations governing private retirement saving vehicles.  Regulations 
designed to "perfect" various pension arrangements generally increase costs, 
making it less likely that companies will offer them or that individuals will 
take advantage of them. 

Carolyn Weaver