ABSTRACT
This chapter discusses both the magnitude of the financial crisis facing social security and the economic and political elements of a solution. Although the social security programme in the United States (UN) is operated on a largely pay-as-you-go basis, the financial condition of the programme is discussed with regard to the trust funds out of which benefit payments are made. The growing financial imbalance in social security is the result of three factors that have become critically important over the last quarter century: lower productivity growth, lower fertility, and lower mortality. Social security also provides critical relief from poverty, especially among surviving spouses and the oldest old. In the UN, there are many tax-advantaged opportunities to save, including defined contribution pension plans, individual retirement accounts, and Keogh plans for the self-employed. The Commission listed several reasons why personal retirement accounts should be a part of a reformed social security system.
