Social Security Privatization: A Simple Proposal

38 Pages Posted: 17 Jan 2015

See all articles by David Altig

David Altig

Federal Reserve Banks - Federal Reserve Bank of Atlanta; Federal Reserve Bank of Cleveland; University of Chicago - Booth School of Business

Jagadeesh Gokhale

Cato Institute

Date Written: April 1, 1997

Abstract

This paper proposes a Social Security reform for the United States that gradually, but ultimately fully, privatizes the system. This proposal follows the “no-harm, no-foul” principle in that it preserves the benefits of older generations and yet promises the same or higher retirement benefits for the young. As such it is both economically and politically feasible.The paper demonstrates that the transition to a privatized system can be financed without any additional taxation, including additional payroll taxation. Our approach is likely to improve U.S. national saving and work incentives compared to the current system. It also has advantages over other privatization proposals that recommend or may require additional taxation to finance the transition. The paper points out, however, that there is only a limited window of opportunity for implementing such a reform of the U.S. Social Security system.

Suggested Citation

Altig, David and Gokhale, Jagadeesh, Social Security Privatization: A Simple Proposal (April 1, 1997). FRB of Cleveland Working Paper No. 9703. Available at SSRN: https://ssrn.com/abstract=2550369 or http://dx.doi.org/10.2139/ssrn.2550369

David Altig (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Federal Reserve Bank of Cleveland ( email )

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Cleveland, OH 44101-1387
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216-579-2041 (Phone)

University of Chicago - Booth School of Business

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Jagadeesh Gokhale

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

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