President Bush has stated in the past that the United States could "take some lessons from Chile, particularly when it comes to how to run our pension plans." Chile's retirement insurance program has gotten attention lately because the reforms enacted in the country a little over twenty years ago share many similarities with reform plans being discussed by U.S. Republican leaders today. The major similarity is that Chilean workers pay a percentage (roughly 10 percent) of their salaries into private investment accounts. This system was put in place with the thought that these accounts would spur economic growth as well as provide monthly pension benefits larger than what the traditional system could offer. Two major differences, however, include the fact that Chile's private pension system is not currently optional, and also, according to this article in the New York Times, the country "was careful before it started its private system to accumulate several years of budget surpluses." The U.S., unlike Chile, is considering a social security reform in the midst of multiple consecutive years of budget deficits. The New York Times article provides a good description of how Chileans have fared under this system. As the first group of workers to depend on this system begin to retire, it is becoming evident that benefits are falling short of what was originally advertised when the program was put into place, and will unfortunately plunge many once-comfortable retirees into poverty. Not only that, but the Chilean government has had to continue diverting billions of dollars into a safety net for workers whose monthly contributions were not large enough to ensure a minimum pension. While the Chilean and U.S. economies and workforces are different and thus will benefit differently with private pension plans, it helps to look at the problems Chileans are experiencing with their private accounts if we are going to be considering enacting similar policies.

Federal Budget

• State Budget Crises Begin to Result in Actual Cuts
• Social Security Will Impact More Than Just Seniors
• Will Bush's Social Security Reform Plan Succeed?
• Budget Battle Looms as Advocates Prepare

The lack of a proposal from the White House on the President's specific plans for Social Security reform has continued to raise doubts and widen the divide of consensus on the proper way to approach this issues. In yesterday's Washington Post, House Ways and Mean Committee Chairman Bill Thomas (R-CA) was quoted as saying the President's plan would be a "dead horse" upon arrival in Congress and that it "cannot, given the politics of the [Congress]" win passage. Representative Thomas is one of the most powerful Republicans concerning tax policy and will have a huge influence on the fate of Bush's domestic agenda in his second term - particularly Social Security reform. Also recently released, a new analysis by Center for American Progress/The Century Foundation senior fellow Ruy Teixeira on recent polls concerning Social Security. It seems not only has Bush lost Congress, but he continues to be unable to sell the American public on his policies.

With all of this talk about social security, many analysts and politicians are looking to examples from abroad to either back their proposals or disprove others' proposals. One particular case getting a lot of attention is Great Britain. In her American Prospect article, "A Bloody Mess," author Norma Cohen discusses Britian's go at pension privatization approximately twenty years ago. In fact, it appears that there are basic similarities between what Britain enacted, and what President Bush may propose in the very near future; that is, a cut in guarenteed benefits with the option for beneficiaries to make up for those cuts by earning high returns on private accounts. Check out the article to see why there is now growing consensus in Britain that the privatization policy must be reversed. Paul Krugman also discusses the issue in a column today titled "The British Invasion."