Social Security Reform: Mechanisms for Achieving True Pre-Funding. Issue Brief No. 4

摘要

This is the fourth in a series of Treasury issue briefs on Social Security reform. It expands on a point introduced in the second issue brief; namely, that making Social Security reform fair to future generations requires building up and safeguarding resources in the near term that can be used to fund future benefits as the number of retirees per worker increases. As was discussed in the second brief, there is nothing currently in place to prevent current contributions in excess of current benefi ts from being unwound by larger defi cits in the non-Social Security portion of the federal budget. This brief reviews the need for true pre-funding and its implications for reforms that achieve a fi nancially sustainable Social Security system. The brief then analyzes possible mechanisms to help ensure that attempted pre-funding is in fact real pre-funding. The institutional reforms considered in this issue brief, including several variants of personal accounts, are discussed solely in terms of the contribution they make to ensuring that attempts to pre-fund Social Security actually result in an accumulation of resources to fund future benefits. Accordingly, elements of these reforms that do not directly bear on the question of pre-fundingfor example, the inheritability of personal accounts are not discussed. In addition, it should be emphasized at the outset that none of the mechanisms for pre-funding considered here involve the privatization of any function of Social Security.