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Social Security Reform: Mechanisms for Achieving True Pre-Funding

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Treasury today released the fourth in a series of papers on Social Security. Issue Brief No. 4 is entitled Social Security Reform: Mechanisms for Achieving True Pre-Funding.

  • “As was discussed in the second brief, there is nothing currently in place to prevent current contributions in excess of current benefits from being unwound by larger deficits in the non-Social Security portion of the federal budget. This brief reviews the need for true pre-funding and its implications for reforms that achieve a financially sustainable Social Security system. The brief then analyzes possible mechanisms to help ensure that attempted pre-funding is in fact real pre-funding. The institutional reforms considered in this issue brief, including several variants of personal accounts, are discussed solely in terms of the contribution they make to ensuring that attempts to pre-fund Social Security actually result in an accumulation of resources to fund future benefi ts. Accordingly, elements of these reforms that do not directly bear on the question of pre-funding—for example, the inheritability of personal accounts—are not discussed. In addition, it should be emphasized at the outset that none of the mechanisms for pre-funding considered here involve the privatization of any function of Social Security.”
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