Social Security cannot afford to pay all of the benefits it has promised. Beginning in 2017, it will run cash deficits that get bigger every year.

One old myth against personal accounts has been the so-called “transition costs.” This refers to the fact that in the early years of fully-funding Social Security via personal accounts, both current retiree payments and personal account pre-funding has to happen simultaneously. This can appear expensive except when viewed in the context of the trillions of dollars in savings that results from this up-front cash being allowed to compound. Now, new data on the budget deficit indicates that even this up-front transition financing isn’t as difficult as was once thought. Due to supply-side dynamic revenue effects because of the Bush tax cuts, the 12-month moving average of the deficit has plummeted from 3.9% of the economy in April 2004 to 2.8% today—a reduction of 28% in just one year.

Each percentage point reduction in the deficit could finance a $1000 annual personal account contribution for 120 million younger workers.

The system has a problem, and we need to fix it. Personal accounts are the solution.

Deficit Falls Enough to Finance $1000 PRA Contribution for 120 Million Workers
Source: Congressional Budget Office & American Shareholders Association
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