Social Security: Not All Reform Approaches Are Equal

May 2001, Vol. 22, No. 5
Paperback, 12 pp.
PDF, 75 kb
Employee Benefit Research Institute, 2001

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Executive Summary

Social Security: Not All Reform Approaches Are Equal—President Bush advocated the creation of individual accounts within the Social Security program during his presidential campaign, and in his recent State of the Union message he announced that he would appoint a Social Security Reform Commission to work on the issue, again noting his interest in these accounts. This follows bipartisan legislation introduced in previous sessions of Congress by Sens. Judd Gregg (R-NH) and John Breaux (D-LA) and Reps. Jim Kolbe (R-AZ) and Charles Stenholm (D-TX), to create individual accounts in Social Security. In the last Congress, Reps. Bill Archer (R-TX) and Clay Shaw (R-FL) also released a plan that included individual accounts, although it was never introduced as legislation. Clearly, the concept of individual Social Security accounts is receiving significant and growing attention as a public policy issue.

The pros and cons of Social Security reforms with individual accounts have been debated frequently. An important consideration in the debate is that the reliance of individual accounts on the stock market adds a new element of uncertainty to already uncertain projections of the Social Security program's future benefits and actuarial balance. For proposals such as those of Gregg/Breaux and Kolbe/Stenholm, this increased uncertainty relates to future individual account benefits. For a proposal like that of Archer/Shaw, which guarantees current-law benefits, it affects the program's actuarial balance.