When viewed in this way, the debate quickly turns to administrative structures and costs. It then seems quite natural, to some at least, to conclude that a government-controlled investment strategy makes sense since it would seem to be easier, quicker, and cheaper than turning the problem over to 100 million or more people. I believe the answer is no. In the testimony that follows, I identify the key differences between personal accounts and centralized investment, highlighting the benefits of the former approach that can not be achieved with the latter.
Centralized investment offers the prospect of more revenues for the trust funds.
Centralized investment would not change in any way the nature of workers' claims to future benefits, which is statutory at base, not contractual. Personal accounts would allow low-income workers to accumulate financial wealth and to share in the benefits of capital ownership. With centralized investment, workers' retirement incomes from social security would continue to be politically determined. These risks would be mitigated by the design of the government safety-net that buttresses all proposals for personal accounts. Financial risks are present under both systems.