Model for Social Security Reform

Cato Institute ^ | Dec 01, 2004 | José Piñera

[farlander]

Santiago, Chile — During his visit here last month, President Bush pointed out that the Chilean pension model was a "great example" for Social Security reform in the United States.

For 24 years, I have championed the Chilean retirement system, which is based on ownership, choice and personal responsibility. Having discussed our reforms with Mr. Bush as long ago as 1997 when he was governor of Texas, and having spoken at the White House Summit on Social Security in 1998 during the Clinton administration, I believe there is now an opportunity for a bipartisan agreement in the United States in this crucial area of public policy.

The Chilean retirement system was originally based on exactly the same principle that guides the United States' system. It originated in 19th century Prussia, where Bismarck created a pay-as-you-go-system. But such a defined-benefit system is not only hostage to demographic trends, it also has a fatal flaw: it destroys the link between individual contributions and benefits, or, in other words, between personal effort and reward.

[farlander]

As with everything, it all comes down to personal responsibility. I can't wait.

[farlander]

http://www.cato.org/research/articles/pinera-041201.html

[Dalite]

I was wondering when this would come out in the news.

Michael Reagan was a big proponent of this back in the mid 90s, and devoted some time in his talk show explaining the concept.

It apparently was very effective in Chile, and we would do well to look at it in retrospect to see if it could work here...