RE: The fiscally responsible middle ground

[Michael Jones <powderfinger99@yahoo.com>]

Congressman Steinholm,

The Kolbe-Stenholm plan presents a much better alternative than
either the Clinton administration plan or the Archer/Shaw plan.
The plan moves the reform discussion in the right direction. I have
a few comments and questions:

* The plan allows workers to contribute 2% of their own 
contributions to an individual account. In addition, there
are matching contributions that the government will make on
behalf of low income workers. As far as I can tell, this 
tax credit would require new revenue. How will it be funded?

* If the 2% contribution is actually OWNED by the worker, then
they should have the option of not contributing towards the
account. In other words, a REAL tax cut!

* Refer to section, "Impose progressive changes in the 
current benefit formula". This change forces a benefit cut
for so-called high income workers, while at the same time
increasing their risk since they will need to get a decent
return on their individual account to make up the difference. 

As a young worker, this change will hurt me more than help me.
Here are the facts, as I understand them:

Under the current rules:
* My return on investment will be negative, adjusted for 
inflation, assuming full solvency.
* Full benefits will not be available until age 67.
* Projections forecast that only 75% of benefits will be
available when I retire.

This is where a young worker like myself is at right now
under the current system. If the proposal above goes into
law, the following will likely happen:

* My return on the 10% base contribution will become even 
more negative because my benefits will be lowered by the "bend".
This will in effect "lock in" the expected shortfall anticipated
when I retire.
* I did a quick calculation. The 2% contributed in the individual
account will reach perhaps 40% of the value of the other 10.4%
contributed in the pay-as-you go part. Over time, people will
realize what a bad deal that 10.4% contribution is.

Under this bill, the best route that someone like me would take
is to try to option out of the 2% individual account. I'll take
the tax cut and forgo the investment account. I don't need to 
invest anymore money for retirement. The tax cut would give me 
an opportunity to save 2% on taxes that are currently going in 
the Social Security black hole. I'll take it!

Michael