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224 IRET Congressional Advisory 1 (2007)

handle is hein.taxfoundation/iretcgadv0221 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies thait will promote growth and efficient operation of the market economy. May 18, 2007 Advisory No. 224 SOCIAL SECURITY REFORM: A LASTING SOLUTION AND AN UNPRECEDENTED OPPORTUNITY Over the last ten years or so, our nation has had a vigorous and open discussion concerning the future of Social Security. Many new ideas have been offered, ideas not developed prior to the onset of the debate. The climate of opinion has changed; more Americans are now aware of the issue, and more Americans want the option to leave Social Security and save and invest for their own future. We are getting closer to the point when important decisions will be made, decisions that will affect each of us and the strength of our economy. But in some respects little has changed politically; many of our elected representatives are still advocating raising taxes and reducing benefits. And nothing has changed legislatively. We have wasted precious time. A Collision Course Like other nations we face an unprecedented challenge-how to deal with a reality that mankind has never confronted, and one that most people are unaware of. How we and other governments respond will affect each American citizen, our families, businesses across the land, indeed our very way of life. The reality is not only unprecedented, it is unyielding. Dr. Karl Otto Pohl, former president of the German central bank, the Bundesbank, stated it this way: In a relatively short period, we must adapt our domestic institutions, international relationships, and even our individual life plans to a new, and powerful reality. What he was speaking of, and what confronts each American, is the fact that there are two powerful forces on a collision course. The first is the aging of society, the reality that the elderly population is increasing more rapidly then the population as a whole. In America, but even more so in other countries, the elderly rely on Social Security to survive financially. Should Social Security falter, many elderly will be destitute. The second force is that most Social Security systems, including ours, are, in fact, faltering. They are financially unstable, and not sustainable as they are presently structured. The challenge is to avoid the collision of these two forces. By staying the present course, we will not. But should we prevail by structuring a lasting solution, the rewards will be as unprecedented as the challenge itself. The Early Years: Social Security's Roots Social Security was enacted in 1935 during the Great Depression. During the first half of the 1930s real GDP fell by about 25 percent, unemployment jumped to 22 percent and the stock market virtually imploded, falling about 70 percent. Our nation was on her economic knees. President Roosevelt had to do something, something big, but large government g~em I, 0 I g6~ g Agg

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