Social Security Reform Opinions: A Response to Risky Markets
31 Pages Posted: 4 May 2010
Date Written: January 5, 2010
The national debate over Social Security reform remains centered on the distributive structure the program. Individual-level support or opposition for privatization can be viewed as a choice between an uncertain outcome in which market forces determine the value of one's future benefit, and a certain outcome in which benefits are predefined and guaranteed. We theorize that risk-averse individuals discount positive economic expectations when forming their opinion regarding privatization, and that risk acceptant individuals weigh positive expectations more heavily. Thus, the endearing effect of economic confidence on privatization is greater as risk tolerance increases. We use national survey data from the 2008 Cooperative Congressional Election Survey to form a multiplicative interaction model to test this hypothesis. Preliminary results yield strong evidence that risk orientation affects the degree to which positive expectations increase support for the privatization of Social Security. These results affirm an important dimension of Social Security reform opinion yet to be explained, and, with regard to other market-driven policy solutions such as trade policy, regulatory policy, and healthcare reform, reinforces the need to account for influence of individual attitudes toward risk.
Keywords: risk orientation, social security privitization, risk aversion, economic expectations, public opinion
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