The Social Security Program and the Private Sector Alternative: Lessons from History

Abstract

As the Social Security program in the United States emerged from the crisis of the 1970s with a solid set of reforms intended to guarantee the program's financial solvency into the twenty-first century, a new attack on the system arose in the form of debates centering around the relationship of the Social Security fund to the federal deficit. Conservative economists used concerns about the national economy as fuel for their own arguments that Social Security has negatively affected the economy and that heavier reliance should be placed on private sector benefits. This paper uses historical evidence to analyze how adequately private sector benefits functioned in the past. Among the conclusions reached are that the private sector failed to provide adequate protection for older citizens, and that benefits were inequitably distributed on the basis of gender and social class. Any tendency toward heavier reliance on the private sector for provisions for old age security would only exacerbate existing inequalities.