News Release

Debate Heats up on Social Security and Savings


WASHINGTON — On the eve of the National Summit on Retirement Savings, some analysts are denouncing new efforts to tilt the debate on savings and Social Security.

The Heritage Foundation released a report Tuesday, entitled “How Government Policies Discourage Savings,” calling for privatization of Social Security. But scholars and other researchers said today that such policy prescriptions would do irreparable damage to Social Security rather than save it.

Among those available for interviews are:

A lecturer in the International Banking and Financial Law Studies Program at Boston University School of Law, D’Arista said: “We have a dual system, public and private. The public system does what it should do, redistribute income. A purely private system would widen the gap between rich and poor. Social Security provides a floor, so those who don’t have a lot can save something. It is also a very important system of preventing poverty, especially among the aging poor.”

An economist at the Economic Policy Institute, Baker said: “Privatization is very unlikely to increase savings. If our system was modeled on Britain or Chile, two of Heritage’s examples, you’d be giving about $50 billion to whoever runs the fund, as compared to $2.8 billion to manage the existing system. Under privatization, instead of the government forcing you to send them money for Social Security, they’ll force you to send it to a stock broker. It’s still a tax. It’s just going somewhere else.”

Social Security Project Coordinator for the Institute for America’s Future, Matzzie said: “Throughout its history Social Security has faced forecasts of impending deficits. We’ve lived through this before. It’s difficult in terms of political will, but not in terms of policy remedy.”

Hess, a commentator and specialist on aging, termed Heritage’s call for more tax shelters on savings “demagogic” — since “earnings are taxed more than savings. Social Security could be made more fair by removing the ceiling on taxed earnings, and by taxing non-labor income such as dividends or capital gains.”

The editor of Left Business Observer said that “there are countries with far more generous welfare states than ours that have higher savings rates. Also, one reason the savings rate has gone down is that the middle class has been squeezed, so they’re borrowers instead of savers.”

For more, contact Sam Husseini or Theresa Caldwell at the Institute for Public Accuracy, (202) 347-0020 or (202) 332-5055.