Privatizing Social Security

Social Security is a big issue in politics today. Many people argue that we should change the system completely by privatizing it, which would set up private accounts in which retirees could receive money upon retirement. There are also many that argue that we should keep the current system that we have because it has stood the test of time. They argue further that we should reform the current system, not throw it away. According to Daniel Mitchell, we should privatize Social Security because it would guarantee all workers would receive money upon retirement and it would benefit the younger workers as well as the older. Social Security should be privatized because the rate of returns would be much greater than in the current system, workers would be guaranteed money upon retirement, it will benefit workers of all ages and it would increase savings.

The first side to this argument is that we shouldn't privatize social security but instead reform the current system that we have (Deets 1). Horace Deets is the executive director of the American Association of Retired Persons and is an advocate of reforming the current system and not privatizing it. Deets argues that privatizing social security would destroy a sound system that has stood the test of time for many decades. In the current system workers pay a portion of their income into the system where the government uses it and pays the workers back upon retirement. Deets goes on to argue that without social security nearly half of the nations elderly would live in poverty. There would be widespread poverty among the elderly or those about to retire if the system was privatized because if younger workers were allowed to drop out then it would reduce the benefits that older workers and the elderly currently receive (Deets 3). Under a private system the funds would not be inflation-proof and the amount of money received upon retirement would be based on your investment skills. Many say that that's unfair because under the current system the investment risk is spread out, providing a more predictable retirement income (Deets 3).

However, there is a flipside to this argument. Many people believe and support the privatization of social security. Daniel Mitchell is the McKenna Senior Fellow in Political Economy for the Heritage Foundation and is an advocate for the privatization of Social Security. According to Mitchell, privatizing social security would increase a retiree's returns by up to five times as much money as the current system provides. Instead of paying up to 12.5 percent of their incomes to the government where it's spent immediately, workers would set up private accounts where the money they send in is invested into stocks and bonds (Mitchell 2). This would produce a much higher rate of return than the current Social Security system. Workers could switch into this system anytime during their careers and would have the option to stay in the current system if they wish (Mitchell 2). Older workers who have been paying into the current system would be able to collect what they have paid into the old system as well as receive the benefits from the new system upon retirement if they were to switch to privatized accounts. This assures that it's fair to all who pay into Social Security (Mitchell 2).

Mitchell presents a clear and easily understood argument that social security should be privatized for a lot of reasons. Unlike the current Social Security system, the privatized system would be like private property. Workers would have their own private accounts that could not be touched by the government, and unlike the current system, retirees would be guaranteed all of their money upon retirement. If social security were privatized, workers would be able to save up much more money and receive a lot more upon retirement than they would today. Instead of sending up to 12.4 percent of their income to the government today, where it's usually spent immediately, they would send it to private retirement accounts where it would be invested into private stocks and bonds (Mitchell 2). This would be a beneficial financial advantage to all workers because the The Institute for Research on the Economic Taxation found that private investing can allow a worker to retire with five times as much money as the current system can provide.

Despite this, there are many skeptics that doubt that could work. They worry about the older workers who have been paying into the system for many years. Most analysts agree that younger workers will benefit since they haven't been paying into the current system for very long or at all, but how would older workers benefit from the privatization of Social Security (Mitchell 2)? Workers could set up private accounts anytime throughout their