IS PARTIALLY PRIVATIZING THE SOCIAL SECURITY SYSTEM FEASIBLE WITHOUT FURTHER CHANGES?
If some of the money currently going to the Social Security trust funds were transferred to individual retirement savings accounts, something would have to be done to maintain the long-run financial integrity of the Social Security system. It clearly could not maintain the same levels of benefits with lower income for a long period of time. Although the offsetting changes in revenues or benefits are not spelled out in some of the approaches, the options are clear: benefits might be reduced to match the lower cash flow, payroll taxes might be increased (thus undermining one of the major arguments for privatization), or the system might get subsidies from general revenues. One country–Chile–that has already taken the step of privatizing a segment of its social security system illustrates the choices that must be made. Chile has privatized pensions for new employees as well as for more than 90 percent of existing employees who chose to join the new system. The remaining existing employe
