Our current prosperity has extended the solvency of the program well into the next century. Even then, Social Security will take in enough in payroll taxes to meet 70 percent of its obligations. So while there is a gap, there will still be money to pay benefits. Privatization will work only if real stock returns average 7 percent during the next 75 years. If the economy exceeds the Trustees' projections, Social Security will have enough money to meet its obligations indefinitely.
Privatization also entails risks.
If, as Governor Bush proposes, workers divert 2 percent of their payroll contributions to IRAs, Social Security would have to reduce benefits by as much as 30 percent. Indeed, the privatizers themselves acknowledge that private accounts will compensate for benefit reductions only on average. Yet, averages can be deceptive. Averaging my income with Bill Gates' would make me look like a billionaire. Unfortunately, this is not the case.