“Automatic Adjustments Within Entitlement Programs: A Look at the Swedish Pension Reform Model,” by James C. Capretta, American Enterprise Institute
“The United States has significant fiscal challenges due to population aging. While the finances of all advanced economies are under pressure from similar demographic trends, some countries have responded more aggressively and creatively to the problem than have US political leaders. In 1998, Sweden enacted a reform of its public pension system that combines a defined-contribution approach with a traditional pay-as-you-go financing structure. The new system includes better work incentives and is more transparent to participants. It is also permanently solvent due to provisions that automatically adjust payouts based on shifting demographic and economic factors. No pension system is entirely problem-free or can be replicated easily in a different political context. Nonetheless, US policymakers should examine the Swedish model and consider what they could do to make Social Security more personalized and self-correcting, too.”
LTC Comment (from Stephen A. Moses, President, Center for Long-Term Care Reform): Ironically, the alleged socialist paradise of Sweden may hold part of the secret to controlling burgeoning U.S. entitlements before it’s too late.