ABSTRACT
All reform or "privatization" proposals seek to capture higher returns on Social Security's taxes and to avert the coming crisis. Three commonly proposed approaches are: divert some of the existing tax into publicly or privately held individual retirement accounts; increase the tax and direct the additional portion into such accounts; or invest part of the "trust fund" in the stock market. This chapter examines the basic approaches of private accounts, with some examples, to illuminate the problems of Social Security reform. In 1999, in response to the clamor that Congress is "raiding" the Social Security "trust fund," congressional Republicans proposed creating a "lock box" for the "fund," whereby Congress would be prohibited from using Social Security surpluses to finance non-Social Security spending or tax cuts. Two-tier plans call for splitting the existing payroll tax into two parts, or "tiers," hence the name.
