Will States Opt Out of Social Security?

The Oregon Legislature became the first in the nation to recognize that reforming Social Security may best be done at the state level. Oregon's House and Senate approved Senate Concurrent Resolution 2 on May 5th asking Congress to enact a waiver system so states can design and implement alternative retirement plans for all workers.

The waiver process was first proposed by Cascade Policy Institute in June 1996 when it sponsored a talk in Portland by former Chilean minister of labor and social welfare José Piñera. Dr. Piñera privatized Chile's social security system in 1981 and is now working with the Washington D.C.-based Cato Institute to help other countries reap the benefits of such plans.

"Most younger workers worry that Social Security won't be there when they retire. Many older Americans share that concern for their children and grandchildren," said Steve Buckstein, president of Cascade Policy Institute. "We must develop alternatives that allow current retirees to be secure, while letting their children opt for fiscally sound retirement alternatives." Some options have existed in the past, but only for certain classes of public and private employees.

Social Security is no longer the "third rail" of American politics. It is on the table for serious discussion. Several national organizations are designing private alternatives to Social Security. Cascade Policy Institute is designing a new Oregon Option which will give every worker the right to invest for his or her own retirement. According to Buckstein, "We believe many younger workers will jump at such an opportunity. Current retirees will support their choice as the best way to move away from a system destined to become insolvent early in the next century."

If the experience of other countries is any example, America's savings rate could skyrocket, and the economy could grow substantially. American municipal workers allowed to opt out of Social Security prior to 1983 have also realized the significant advantages of private, fully-funded retirement systems.

"It's time for all Americans to talk about alternatives to Social Security," says Buckstein. "Oregon is the first state to ask Congress to begin this discussion. We expect other states will follow. Together, we can develop plans that give all Americans the retirement choices they want and deserve."

The following Oregon State Senate Concurrent Resolution was submitted by Senator Gene Derfler on February 3, 1997. It was approved by the Oregon State Senate March 14, 1997, and by the Oregon State House on May 5, 1997. It will be delivered to each of Oregon's Congressional delegation.

Summary

Urges Congress to enact legislation amending Social Security Act to authorize issuance of waivers to states allowing design and implementation of alternative retirement plans.

Concurrent Resolution

To the Senate and House of Representatives of the United States of America, in Congress assembled:

We, the Sixty-ninth Legislative Assembly of the State of Oregon, in legislative session assembled, respectfully represent as follows:

Whereas Social Security is a federal program that does not recognize the individual retirement needs of many Americans, and

Whereas Social Security tax revenues alone will be insufficient to pay current benefits as early as the year 2012, and

Whereas the Social Security Trust Funds may be completely exhausted by the year 2029; and

Whereas the investment return on Social Security contributions made by many workers today is significantly below that available from other sources; and

Whereas Oregon workers deserve the opportunity to invest more productively for their own retirements; and

Whereas more retirement investment alternatives might dramatically increase Oregonians' savings rate and retain more young adults who otherwise would leave the state for jobs elsewhere; and

Whereas the federal government has recognized Oregon's ability to develop successful alternatives for managing programs at the state level through waivers for the Oregon Health Plan and the welfare-to-work JOBS Plus program; now, therefore,

Be it Resolved by the Legislative Assembly of the State of Oregon: (1) The Congress of the United States is urged to enact legislation amending the Social Security Act to allow the issuance of waivers to the states that will permit the design and implementation of alternatives to Social Security.

(2) A copy of this concurrent resolution shall be sent to each member of the Oregon Congressional Delegation.