This past Thursday, Professor Stephen P. Zeldes of Columbia University gave a talk on the political hot topic of Social Security privatization, titled “Should the U.S. Privatize Social Security?” Over the following hour and a half, he described the history of Social Security and addressed both sides of the privatization debate, concluding with his personal recommendations.
Professor Zeldes argued that a compromise between the two parties is necessary if Social Security is to be reformed. He suggested a plan that which combines elements of carve-out, which uses existing tax revenue to pay for private accounts, and add-on, which levies new taxes, as well as the indexing of retirement age to life expectancy. Such a plan would effectively bridge the positions of Republican and Democratic parties.
Swarthmore professor Mark Kuperberg introduced Zeldes, calling him “the coauthor of the most important paper on Social Security in 47 years.”
Zeldes began the lecture with a brief overview of the history of the Social Security Act, including a video playback of its signing by President Franklin D. Roosevelt, marred slightly by technical difficulties that prevented the video from displaying, but allowed the audio to play normally.
He next summarized the Social Security program itself, introducing the various benefits provided for retirees as well as its costs. Particular emphasis was placed upon the role of the Social Security Trust Fund, which holds treasury bonds that earn market rates of return.
After establishing the effects of Social Security in the past, Zeldes moved on to the future, examining what President Bush has described as a “Social Security crisis.”
Zeldes noted that there are two possible strategies for the establishment of private accounts: carve-out, in which part of payroll taxes are diverted to individual accounts, and add-on, in which payroll taxes are increased to cover the costs of establishing the accounts.
The talk concluded with a short question and answer session, during which Zeldes provided more details on his compromise plan, such as how it would protect solvency. He also noted that the disappearance of the budget surplus attained during the Clinton Administration is now making it difficult to “fix” Social Security, due to lack of funding.
Response by the audience, comprised primarily of economics students and faculty from the department, was mostly positive. David Luong ’06 approved of Zeldes’ evenhandedness: “He covered the issues from a lot of angles. I liked his conceptual programÃ¢â‚¬Â¦ you relax the constraints a little bit, so that politicians will like it.” Hitesh Bhattarai ’08 was slightly less enthusiastic, stating, “I thought it was very good, but not very interestingly presented.”