This research paper addresses the role of government in retirement saving and investment, a subset of the larger ""Life-cycle"" theme of the conference. It is a good time to consider governments role because the players in life-cycle saving in the United States have dropped from three - government, employers, and the individual - to two - government and the individual. A partnership is necessary because in an industrialized society individuals need to accumulate resources while working to support themselves in retirement, and most lack the foresight and discipline to do so in the absence of institutionalized savings arrangements.
Taking Social Security out of the budget is an essential first step to enhancing the likelihood that trust fund accumulations translate into national saving. Broadening trust fund investments - a more controversial proposal - would reinforce the separateness of the program and could further the goal of greater saving. Personal accounts that reflect new revenues are another option that could increase national saving. This research paper explains the effectiveness of building up assets in the Social Security trust funds. It first describes the economic rationale for such a buildup.
The U.S. Social Security system has been one of the most successful public policy programs in American history. This research paper critically examines ten leading myths that have gained currency in the debate about reforming the U.S. Social Security system, including myths that have been propagated by both proponents and opponents of including personal accounts as part of any reform package. The U.S. Social Security system has been one of the most successful public policy programs in nations history.
This paper published by Boston College examines the potential impact of government matching contributions on personal-account participation in the Presidents Commission on Strengthening Social Securitys Model 3 for Social Security reform. Given the governments choice of four plan-design parameters, the magnitude of the match is determined solely by the differential return personal-account assets receive above the notional return, referred to as the ""Personal-account premium,"" akin to the equity premium.
Some Social Security reforms would provide guarantees that individuals would not receive less under a reformed system than would be provided by current law. However, the ""Current law"" benefits formula increases benefits when wages rise. Any reform successfully adding to economic growth, therefore, would affect those promised levels of benefits, as well as revenues and the interest rates that determine what could be earned and paid out of individual accounts. This paper concludes that guarantees could add significantly to the costs of Social Security and reduce any reduction in budget imbalance achieved through other parts of a reform.
Pension reform can potentially increase saving and improve incentives. The researchers investigate whether these effects are likely to occur and the potential size of the effects on private and total saving and on employment past age 55. Their survey of existing evidence and new empirical analysis focus on three issues: the possible reduction in other government saving if more assets are accumulated in a public retirement program; the reduction in non-pension private saving if assets are accumulated in new private retirement accounts; and the increase in old-age labor supply that could occur if Social Security benefits are reduced.