From an email:
“1.) By making the implicit liability in Social Security explicit, policymakers are more likely to reduce spending below what it would otherwise be (and raise tax revenue compared to where it would otherwise be), thereby raising national saving. This argument assumes policymakers react more to explicit debt than implicit debt, which is probable, although not certain. Admittedly, the cause of the increase in national saving is one step removed from SS reform itself.
“2.) Social security makes it difficult for many people to own equity securities, in particular people at the lower end of the income spectrum. Reform could overcome the effect of the liquidity constraint and transactions costs faced by such investors, allowing them to more closely approach the optimal portfolio they ought to hold for retirement purposes. In turn, by getting them to hold more equity than the current system, these individuals will tend to vote for better policymakers, who would likely pursue policies enhancing national savings.
“3.) Personal accounts are a sweetner/smokescreen necessary to do what really needs to be done, which is reduce benefits via price indexation (or increasing the retirement age). In an ideal world, policymakers could just reduce benefits without resorting to such tactics, but democracy is messy and we let too many people vote and so such tactics have to be adopted from time to time to get the right policy. Reducing benefits will not only increase national saving by increasing government saving; it will increase personal saving as individuals try to offset the reduction in benefits.”