The principal thing lacking in efforts over the years to privatize Social Security has been a serious commitment of experts from a range of related fields to produce well-researched analysis of the high costs of the government-run system and to propose a practical plan to implement a changeover to a private system.
But now the Cato Institute, the Washington think tank and policy advocacy group, is remedying that neglect. For the first time by any organization, it is bringing together a well-informed group of experts to develop a politically and economically workable plan to eventually replace Social Security with a privatized mandatory social retirement system.
Called the Cato Project on Social Security Privatization, it is made up of 22 academics, investment advisers, insurance executives, economists, and former government officials, including a former chief actuary and a former commissioner of Social Security.
The co-chairmen, William G. Shipman and Jose Pinera, are appropriate leaders.
Mr. Shipman, principal at State Street Global Advisors, Boston, has done insightful, original analysis of the problem of Social Security and privatization. Aside from having written commentaries and policy papers, he is writing a book on the subject, which he hopes to complete by next year.
Mr. Pinera, as minister of labor and social welfare in the Chilean government from 1978 to 1980, privatized the country's ineffective government-run pension system. Mr. Pi?era was schooled in Chile from some so-called Chicago Boys of the University of Chicago's department of economics and in their free-market philosophy, although he received his doctorate in economics from Harvard University.
The Cato Institute derives its inspiration, in part, from the success of Chile's revolutionary social security privatization, which now serves as a model for pension reform throughout the world. In fact, Mr. Pi?era is president of the International Center for Pension Reform. This fall, he participated in a conference sponsored by the government in Croatia on developing a Chilean-style pension system.
Among others working on the Cato project are: Gary S. Becker, the 1992 Nobel laureate in economics and a professor of economics and sociology at the University of Chicago; Robert Genetski, economist and managing director of Chicago Capital Inc., Chicago; and Dorcas Hardy, commissioner of the Social Security from 1986 to 1989.
Also, Robert J. O'Connell, president and chief executive officer of the AIG Life Cos.; Bruce Schobel, corporate vice president and actuary for New York Life Insurance Co. and former chief actuary of Social Security; Paul Craig Roberts, president of the Institute for Political Economy; Timothy J. Penny, a Minnesota Democratic member of Congress from 1982 to 1994; and Anne Canfield, principal at McClure Gerard & Neuenschwander Inc. - a Washington government relations firm - who spent the last 10 years as manager of government relations for General Electric Co.'s GE Capital Services, developing legislative strategies.
Even with such an impressive project, it won't be easy to privatize Social Security. The pay-as-you-go system is considered sacrosanct, and almost no politician is willing to propose changing it. Even the Republican-controlled Congress didn't make Social Security reform part of its Contract with America.
Michael Tanner, director of the Cato project, calls Social Security the largest government program in the world and, ipso facto, the largest government failure. He said the members of the group will contribute analysis and suggestions on the important issues in privatizing the system, from protecting participants now receiving benefits and those still working to developing a private system fair to all and steering its passage through Congress.
He expects it to take about a year to develop proposals, though it might be longer, given the complexity of replacing the existing system and the political difficulty. The sooner the better.
