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Despite their sharply opposing views of President Bush’s proposal to privatize Social Security, Randall Kroszner and Austan Goolsbee agree on one point: creating private accounts will do nothing to solve the question of whether Social Security is financially solvent.
They offered opposing views February 28 at the Hyde Park Center during a panel discussion hosted by the George J. Stigler Center for the Study of the Economy and the State and moderated by Anil Kashyap , Edward Eagle Brown Professor of Economics and Finance.
Kroszner, professor of economics and former member of President Bush’s Council of Economic Advisers from 2001 to 2003, sees an important need for reform. He predicted a $10 trillion deficit in the Social Security treasury, due partly to a decreasing number of employees paying into the system. He also called Social Security a bad deal because you can’t pass the benefits on to your children if you and your spouse pass away and you can’t have a diversified portfolio. Additionally, private accounts would give ownership, Kroszner said. The government can’t take away an account with your name on it.
Goolsbee conceded there’s a long-run solvency problem with Social Security, but he disagreed with Kroszner’s figures, putting the figure at $3.7 trillion. It’s not an immediate crisis, he added, I don’t care whether you raise taxes or cut benefits. For sure, you should not borrow the money to fix the situation, which is the backbone of the current proposal.
Goolsbee and Kroszner agreed that establishing private accounts would not address the solvency issue. Kroszner said, I think the administration has been very clear about that, but there have been other very strong advocates of the personal account system who say, ‘They will set you free. Once you have all this equity, every poor person will become a wealthy person.' That’s not true.
If nothing else, Kroszner said, Just encouraging people to talk about these things, even if this doesn’t pass, this will be a valuable exercise for getting people to focus on their retirement benefits.
Patricia Houlihan