Privatization advocates have argued that young workers have the most to gain
from a Social Security overhaul. Indeed, despite a smaller political voice,
they are the group that would have to contend with any changes in the program,
and the group actually eligible for the private accounts the President has proposed.
Rhetoric aside, however, privatization would have serious adverse effects when
today's younger workers approach retirement.
Deeper cuts for younger workers
Since the cuts to guaranteed benefits accompanying privatization plan would
be phased in slowly and deepen over time, cuts would be more severe the younger
the worker. Today's middle-income 25 year olds retiring in 2045 would receive
16 percent less of their guaranteed benefit, while a 25 year old retiring with
a high income (around $60,000) would lose a quarter of their guaranteed benefit.
Future generations would have to pay back massive borrowing
The borrowing required to fund the transition to private accounts would
fall squarely on the shoulders of today's young adults, in the form of higher
taxes and reduced government services when they reach adulthood. Privatization
would add a total of $4.9 trillion in additional national debt over the program's
first 20 years—by another measure, about $32,000 for every man, woman and child
in the U.S. by 2036.
Privatization will set priorities for future generations
Finally, committing to massive borrowing now will curtail tomorrow's
voters' ability to set the national priorities they want to. While Social Security
as it is currently structured is
set to grow from roughly 4 percent of GDP to a little over 6 percent of
GDP in 2050, the current privatization plan would
increase the public debt by 18 percent of GDP in the same year.
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