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1 J. D. Foster, Reforming Social Security 1 (1999)

handle is hein.taxfoundation/taxfaaoc0001 and id is 1 raw text is: TAX -mmmW FOUNDATION February 1999 Reforming Social Security House Ways & Means Committee Testimony Chief Economist ByJ.D Foser, h.D.Mr. Chairman, Members of the Committee, ExectiveDirctorand it is with great pleasure that I appear before Chaef Eonomisn this Committee to testify to the importance of reforming the Social Security program. I am the Executive Director and Chief Economist of the Tax Foundation. The Tax Foundation is a 62-year-old non-profit, non- partisan research institution. Our mission is a simple one: to provide accurate and timely information on matters of federal, state, and local fiscal policy so that policymakers may make better policy. Mr. Chairman, as an economist I am professionally compelled to make a prediction. And so I offer this prediction with more than the usual amount of confidence: Five years from now, after Congress enacts and the President signs Social Security reform, after the kinks have been worked out and the Five years from now, after Congress enacts and the President signs Social Security reform, after the kinks have been worked out and the American people have had a chance to see how it works, the question on everyone's mind will be, What took us so long? American people have had a chance to see how it works, the question on everyone's mind will be, What took us so long? We are now finally debating Social Secu- rity reform in earnest with the justified expec- tation that reform will soon happen. We are at this point because, as is now widely recog- nized, the Social Security Trust Fund is pre- dicted to run dry in a time frame which actuarially speaking is rather soon. The pending exhaustion of the Trust Fund is both bad news and good news. It is bad news because of its implications for fiscal policy; it is good news because it forces action. However, once we look at reform and see its consequences for the soundness and security of our national pension system and for the future tax burden on America's workers, we must truly ask ourselves why it took so long to consider these reforms. Even if Social Security was sound for as far as the actuaries could calculate, personalization would still be the best way to go. True Social Security reform centers on the idea of individuals investing some portion of their payroll taxes in the private market. For many Americans, this is a novel idea. For diehard defenders of the status quo, the proposition is anathema. For millions of people in many countries, it is already work- ing. As is now well known, Chile personalized its public pension system 18 years ago. Since then, Argentina, Colombia, Uruguay, Bolivia, Mexico, and El Salvador have followed suit in Latin America alone. As John Goodman, President of the National Center for Policy Analysis has pointed out, If the current trend continues, every country south of the border - with the possible exception of Cuba - will have privatized their pension programs long before Congress can agree on how to save our own. I think John is too pessimistic. I believe the Congress and the President, working together, can get this done in the near future. Nevertheless, it is curious that the leader of the free world, the light on the hill drawing - - - - W _J I EF

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