Grassroots Action in Iowa!

February 27, 2003

"The architect of Chile's pension reform program has some advice for Americans who wish to emulate his efforts with Social Security. 'Keep it simple,'" were words of the wise Dr. José Piñera, Co-Chair of the Cato Institute's Project on Social Security Choice. Erik Hogstrom of the Telegraph Herald reports on Piñera's introduction, marking the beginning of statewide grassroots efforts in Iowa advocating personal accounts.

"Piñera, as Chile's Labor and Social Security minister from 1978 – 80, scrapped the then troubled state pension system and gave workers control of retirement accounts, funded by mandatory contributions. Piñera spoke about Chilean pension reform during a private gathering Monday evening in Dubuque."

"[In] Des Moines, Piñera will help launch a statewide Social Security alternatives awareness effort called "For Our Grandchildren … Monday's Dubuque audience included former governor Terry Branstad, who will assist in the group's statewide efforts."

"More than two decades ago, Piñera gave Chileans a choice – remain with a government-backed pension program teetering on the verge of bankruptcy or opt out and place their pension contribution instead in a personal investment account."

"'You can invest as safely as you want,' Piñera said. 'The key element is that you accumulate money over 45 years with compound interest.'"

"'It's common sense,' Piñera said … Neither the worker nor the employer pays a social security tax to the state. Instead, a worker has 10 percent of his wages automatically deposited into his individual account each month.'"

Similar to leading individual account proposals in the U.S., Chilean workers had the choice to adopt a personal account or remain under the current system. "Today, Piñera said, 95 percent of Chile's work force has opted for the pension alternative and the rate of return has been more than 10 percent … 'This can be a win-win reform,' he said. 'In this system you make everyone an owner.'"

Reform model 2 of the President's Commission to Strengthen Social Security contains certain precautions to act as a safety net. In Chile, "A worker who has contributed for at least 20 years but whose retirement fund falls below a legally defined minimum level will receive state benefits once his account has been depleted."

Among many others, "Mike Whalen, of Bettendorf, the Iowa state chairman of For Our Grandchildren, believes now is the time to explore Social Security alternatives in this country. 'We have deferred this problem as long as we can,' said Whalen, who estimates the current Social Security program will become bankrupt in a little more than 10 years. 'Twenty years ago they said this was 'the third rail' of American politics,' Whalen said. 'Nobody wanted to touch it.'"

"Whalen believes times have changed and that people are receptive to Social Security alternatives. 'Overwhelmingly the polls indicate people do understand there is a problem,' he said."

Cato Institute Social Security experts Michael Tanner and Andrew Biggs agree. December 4 th , the Cato Institute held a widely publicized conference on the Hill, "The Third Rail Is Dead." Among speakers were successful 2002 Congressional candidates Senator John Sununu (R-NH) and Representative Pat Toomey (R-PA), and pollster David Winston of the Winston Group. Click here for an analysis of a recent polling study on public opinion and personal accounts conducted by Zogby International.

Click here for Dr. José Piñera's Cato Letter, "Liberating Workers: The World Pension Revolution."

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