President Bush has wasted no time in letting it be known that he intends to push Social Security reform to the top of his second-term agenda, and that privatization is part of that package.
Seems everybody has an opinion on this, but a great source from an unabashedly pro-privatization point of view is the Cato Institute's Project on Social Security Choice. Cato has its own plan, which it calls the the 6.2 Percent Solution.
Under this proposal:
- Individuals would be allowed to divert their half (6.2 percentage points) of the payroll tax to individually owned, privately invested accounts. Those who chose to do so would agree to forgo all future accrual of retirement benefits under the traditional Social Security system.
- The remaining 6.2 percentage points of payroll taxes would be used to pay transition costs and to fund disability and survivors' benefits.
- Workers who chose the individual account option would receive a "recognition bond" based on the accrued value of their lifetimeto- date benefits. Those bonds, redeemable at the worker's retirement, would be fully tradable in secondary markets.
- Those who wished to remain in the traditional Social Security system would be free to do so, accepting a level of benefits payable with the current level of revenue.
They have a really cool calculator that shows how you would fare under their plan versus the existing social security plan (at least if you are the average person for your age, sex, and income group). Here's an example: If you are a 35 year-old female earning $100,000 per year, under current formulas you can expect benefits equal to $29,435 per year (adjusted for inflation) if you retire at age 67. Under the 6.2 Percent Solution, annual payments would be about $69,000.
The Cato site has a lot of other resources about Social Security reform, including a substantial library of other proposals and papers on the topic. You might recognize the author of one of them.