FIXING SOCIAL SECURITY

February 2005
		President Bush has launched a national campaign to generate support for his plans to reshape Social Security, including the controversial option of personal investment accounts for younger workers. Peter Orszag, senior fellow in economic studies at the Brookings Institution, and Michael Tanner, director of health and welfare studies at the Cato Institute, answer your questions about the voluntary personal accounts and other aspects of the president's plan. Special Report: Social Security Reform

Forum Introduction What are President Bush's plans for Social Security disability? Didn't Great Britain undertake the personal accounts experiment with their version of Social Security to detrimental results? How do the personal accounts affect employers' contributions to Social Security? How would removing the $90,000 income limit on Social Security taxes affect the system's future? What happens if a person's private account runs out? How will the average person who knows nothing about investing fare under President Bush's new plan? How does the federal Thrift Savings Plan differ from Social Security? Under the personal accounts proposal, will there be fees for investing, and who and how will they be paid? If the IOUs in the Social Security trust fund were paid, would the system remain solvent for a much longer time? Why would anyone want to change Social Security, an insurance program, into a savings account? I'm 48, how drastic are my benefit cuts going to be?	Denise Cooke of Doniphan, Mo., asks: Many of the people in this area make minimum wage. Unemployment is high and literacy is low. The average person knows nothing about investing. How will these people fare under President Bush's new plan? Peter Orszag responds: Not particularly well, in my view. The plan does ostensibly restrict investment choices to well-diversified index funds, and that may help to avoid really poor investment decisions. But it's unclear whether that restriction will be sustained over time. Social Security is supposed to provide the foundation of retirement income, not be the end-all-be-all for a comfortable retirement. There are places to take risks in retirement planning; the core tier of retirement income (provided through Social Security) is not one of them. Michael Tanner responds: They would be among those who would benefit most. Today low-wage workers have little opportunity to save and invest, to build real, inheritable wealth. But, individual accounts would give them that opportunity. The money in their accounts would belong to them, and could be passed on to their children at death.