Former Fed Economist Warns Social Security Change May Raise Elderly Poverty Rate
As President Bush puts Social Security restructuring at the top of his list of second-term priorities former Federal Reserve Economist and Hamilton College professor Ann Owen warns:
"When considering Social Security reform, we need to keep in mind that our current system serves two distinct purposes: it is both a forced savings plan as well as a method for redistributing income to reduce poverty among the elderly."
"To the extent that privatizing Social Security enables individuals to own the money they paid into the system, the goal of forced savings is emphasized and the redistribution aspect of Social Security is reduced.
"We need to make any reforms of this nature with our eyes open, and there are several important questions for policy makers to consider in the upcoming debate about Social Security reform.
- What will we do if individuals make bad investment decisions or have bad luck and have insufficient funds for retirement?
- Are we willing to accept increased rates of poverty among the elderly?
- How might other aspects of the social safety net change in response to Social Security reform?
"All of these questions will need to be addressed, but the sooner reforms are enacted, the less drastic the changes to the current system will be," Owens concludes.
Economics professor Ann Owen served as an economist for the Federal Reserve Board of Governors before joining Hamilton College. Owen, who earned her doctorate at Brown University, has diverse research interests and has published several papers on long-run growth and income distribution. Her current research projects examine the effects of international trade on health, savings behavior, and how economic growth affects attitudes towards women in both developed and developing economies. She also serves as director of the Arthur Levitt Public Affairs Center at Hamilton College and is a board member for the Committee on the Status of Women in the Economics Profession.
