This isn’t surprising. Social Security is a demographic and financial time-bomb. With something like 60 million Baby Boomers about to begin retiring, the so-called “Social Security lock-box” is going to take quite the beating—especially considering that that famed “lock-box” is stuffed not with money but with IOU’s, placed there by the Treasury as it used the Social Security money to finance deficit spending.
People aren’t blind or stupid, even though they do seem to act that way most of the time. They know that Social Security can’t possibly afford to pay off what it owes the Baby Boom generation. Politicians of both parties are making rumbling noises, essentially in two directions: Cutting benefits, and finding an “alternative system”.
One of those alternative systems some American pundits and politicians have been looking at is the Chilean system of AFP’s—Administradoras de Fondos de Pensiones, literally “Managers of Pension Funds”.
This system is a workable free market solution to the problem of funding worker pensions. Unfortunately for this good idea, the system was imposed by decree by the dictator Augusto Pinochet back in 1980—so right there, you have some major political hurdles to overcome. Already one American politician fried herself irredeemably by merely mentioning the “P”-word: I’m not sure if it was “Pinochet” or “privatization” of Social Security that did her in—but one or the other was to blame.
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