Social Security
The Financial Economists? Roundtable met in July 1997 to consider long-run problems facing the Social Security system. The goal was not necessarily to endorse any particular proposal for Social Security reform, but to explore how the principles of modern finance can clarify the current debate.
The Roundtable reached definite conclusions on the following points:
Investing part of the Social Security Trust Fund in common stocks does not help solve the basic problems facing the current, pay-as-you-go Social Security system.
A reformed Social Security system should be partly funded through individual retirement accounts. But it should preserve a safety net, that is, a minimum benefit for all participants, financed on a pay-as-you-go basis.
Individual retirement accounts should be invested in well-diversified portfolios of securities, including common stocks. But the money?s worth ratios reported in the Report of the Advisory Council on Social Security exaggerate…
