Social Security Under the Gun

PUBLISHERS WEEKLY 6 GEN 2003

Reforming Social Security is one of the most important and complex issues facing the country, and one of the most misunderstood. This well-written and well-argued primer should help dispel the myths and misinformation surrounding the debate. Benavie, an economist and author of Deficit Hysteria, casts a skeptical eye on the alarmism about Social Security's eventual bankruptcy, noting that minor adjustments to the system, like small tax increases and benefit reductions or raising the cap on taxable earnings, would make the system solvent for the foreseeable future. He then turns to the two major reform proposals: privatization, which would let individuals place some of their payroll taxes in private investment accounts, and what he calls "diversification," which would let the government invest some of the Social Security trust fund in the stock market. Neither plan is guaranteed to give better returns to retirees than the current system, he argues, and both entail serious risks: privatization would sharply increase administrative costs and put individual retirees at the mercy of the stock market and unscrupulous investment advisers, while diversification would embroil the government in the affairs of private corporations to an unprecedented degree. Benavie gives a lucid account of the dollars-and-cents details underlying the controversy, while arguing that the real issue is not financial, but ideological-whether we wish to abandon the ideals of social solidarity and providing for the poor that are enshrined in the current system in favor of individual autonomy and potentially high returns.