During its first fifty years, the Social Security system?sometimes referred to as the Old-Age Survivors and Disability Insurance (OASDI), was all things to all people. To the American public, it looked like a pension plan that yielded an excellent return on contributions. To advocates of income redistribution, the Social Security system provided a vehicle for substantially reducing poverty among the elderly without the stigma of "welfare."
For more than three decades the system's income routinely exceeded its outflow and its trust funds grew. This situation changed in the early 1970's when benefits were increased substantially, followed by higher inflation and leaner economic growth. However, as first recognized by the Social Security reforms of 1983, it is clear that, as presently implemented, the Social Security system cannot meet all its future obligations. Even if it does, future Social Security beneficiaries will not receive returns as favorable as their parents received.
One of the most divisive issues in modern American politics is the privatization of Social Security. President Bush has introduced legislation to Congress that requires citizens to dedicate a portion of their income, presently used to fund Social Security, to a private investment account. The Social Security debate is centered on the ability of the current system to continue to provide Social Security benefits to the next generation of elderly. Many argue that Social Security, as it exists today, will become unable to provide benefits to the next generation of working people.
This paper will review a brief history of Social Security, and then will examine arguments made by social scientists in favor of incorporating private accounts to the Social Security pr ...