What is needed is fundamental reform, a permanent fix, that will provide a sound retirement program for our children and grandchildren. When the Social Security committee looked at different options for fixing the program in 1983, the Chilean model was not considered an option. In 1924, Chile became the first country to adopt a Social Security program. In 1981, when it ran into the same demographic problems that we are facing today, it privatized its program. So in 1983, there was not enough evidence to draw conclusions about the Chilean experiment.
Today there is considerable evidence that Chile made the right move.
The country's gross domestic product has been growing at the annual rate of 7 percent for the last 10 years. Its pension fund has registered a 12.6 percent annual return since being established 15 years ago. By 2012, the federal government no longer will have the Social Security surpluses to apply to its annual deficit. At that time, if not sooner, the federal government will have to get along without the subsidy that the surplus funds have been providing. Instead the federal government will have to find money to fund both its own budget and the annual deficit that will begin occurring in the Social Security program.