President Bush's Personal Retirement Accounts: Saving Or Dismantling Social Security

Abstract

President Bush devoted considerable attention to reforming the Social Security system in his 2005 State of the Union address. After pointing out that the system faces a long-term deficit, the President suggested that carving personal accounts out of the current system would help solve the deficit. Personal accounts, however, would not eliminate Social Security's long-term financing difficulties. Instead, they would fundamentally transform the system from one of social insurance to one of individual ownership and would be the first step toward dismantling it. This Article explains why the Social Security system faces a long-term deficit and why personal accounts would not eliminate that deficit. It then explains why personal accounts would fundamentally transform the current system and would be the first step toward dismantling it.

Keywords: social security, retirement income

JEL Classification: H55, J26