Research On Legislation For Market-based Social Security

Nowadays the emphases of legal research on Legislation for Social Security have gradually transferred from the design for its structure to the issues on its system content. Market-based legal system could be a new idea for the legislation for Social Security. It may be helpful to the research in this field.Our present Social Security is an unfunded pay-as-you-go system in nature, fundamentally flawed and analogous in design to illegal pyramid schemes. Pay-as-you-go system does not fail just because the accounting numbers do not add up. It will fail because it violates basic principles of financial economics and justice assumption of law. Therefore, it can be predicted, without relevant innovation, such system could face crisis very soon and go into bankruptcy in the future. Moreover, without competition system, the personal account and pension investment uniformly managed by the state could be a disadvantage to the yield of Social Security. A magnitude of funds totally invested by single institution would negatively affect the fund security and capital market. Social Security's relatively poor rate of return makes the program an increasingly worse investment for today's young worker.The liabilities already created, represent commitments by the state that cannot be recovered. Only adjustments in spending system can pay for those commitments. Short-term fixes to increase revenue or reduce benefits will be unsuccessful in the long run and unsuitable for legislation. The system design itself is fatally flawed and cannot be repaired. It must instead be replaced by one derived from free markets and operated by a citizenry making individual decisions in their own self-interest. The choice remaining is between continuing to support a bankrupt system and building a sound legal mode for the future.Construction for legal system of Social Security is long overdue. If we fail to act soon, our children will either inherit a bankrupt system or be forced by law to pay an impossibly high level of taxes. Only market-based legal system with individual property rights to accumulated fund balances can create a secure Social Security. Chile, which alternated its system in 1981, provides evidence of such a legal system's effectiveness. Chile's new legal system has been both successful and popular, but it stops short of fully basing on market. Various plans have been proposed for our nation by researchers, but most suffers the effects of compromise with central-planning approaches.A much bolder legal system is called for. Legislation that achieves the dual objectives of security and personal liberty would be characterized by real personal retirement accounts, managed by the financial securities industry. Modern risk-management methods should be stipulated for the portion of the account necessary to finance minimum retirement needs. Personal decision rights should be entitled to guide the investment of fund balances in excess of the minimum. Individuals should have the right to choose their own retirement age. Government intervention and regulation should be minimized. Several pension funds could be set up to provide options for policy holders to make their selections according to achievements of the funds. Such funds could compete between each other to gain more yields and attract policy holders. Transition to the new legal system of marketed-based Social Security requires the recognition of current intergenerational commitments and the legal system design that minimizes transaction costs as we liquidate obligations. We could and have to make the right decisions.