President Bush proposed funding Social Security with private accounts. This idea was summarily rejected on the grounds that it was not financially feasible. Long-term performance of security markets indicate this idea ought to be reconsidered. A person in the 1920s buying an equal amount of every stock listed on the New York Stock Exchange and holding all of such investments until the 1990s would have realized an average annual return of 11 percent. This is amazing when one considers some of these companies would not have survived until the 1990s.
Chile has a successful experience with the use of its private accounts in financing social security. People I talked to in Chile were enthusiastic about that program. Under their system, people have the option of investing in three accounts.
Chile has the highest per-capita income of any country in the Americas, south of the United States. Santiago has six million people. New high-rise buildings throughout the city are impressive evidence of their prosperity.
In evaluating use of private accounts, we should have a comprehensive proposal. That proposal should cover the timing and amount of changes in Social Security taxes, the transition and the estimated benefits under the new system. To minimize any possible shock to the economy, the transition should be phased in gradually.
The advantages and disadvantages of the changes ought to be evaluated.
We will need to adjust to an economy in which there will be a broader distribution of wealth.
Consumer spending will increase, resulting in increased employment opportunities. The Chilean experience may, in some respects, be helpful in creating a new system.
Considering the long-term performance of the American economy, this is an opportunity to significantly benefit a large portion of our population. We need to use the American talent for innovation to create a system of private accounts that will result in realizing the huge potential benefits of such a change.
Jim Winter, Payson