Questions for Members of Congress.

[ridgeway <riridgew@nyx.net>]

To the members of the Congress, thank you for making time to respond
to our questions and comments on Social Security reform.

On or about April 22 of this year I happen to be watching C-SPAN II when
something caught my attention.  During the Senate's debate on the Social
Security "Lockbox" legislation, I believe I heard Senator Rod Grams of 
Minnesota refer to Social Security as a Ponzi scheme.  Indeed there are 
many folks that feel this way.  There is even objective evidence from 
independent expert research to support this assertion.  For example, the 
University of Delaware professor of Economics William T. Harris based 
on his research published in the international social science journal 
Humanomics in January of 1998, described Social Security as a "pyramid 
scheme" in an interview last year.  He estimated that about $6.6 
Trillion dollars was the net present value of the Ponzi-like transfers 
of the benefits paid to retirees from 1940 through present in excess of 
what their contributions would justify. Of course this can not continue 
and he indicated that younger workers will pay the price in much, much 
lower returns than the earlier generations.  The interview with 
Professor Harris on this subject can be found at the Internet address:
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http://dogbert.kepler-solutions.com/newswise/articles/1998/6/PONZI.UDE.html
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Nobel economist Milton Friedman in an article entitled "Social Security 
Chimeras" that appeared in the New York Times (1/11/99) estimated the 
unfunded liabilities of the current Social Security system to be between 
$4 Trillion and $11 Trillion dollars.  I don't know what a "Chimera" is, 
but I think $4 Trillion dollars is a heck-of-a-lot-of-money!  That's 
more than Bill Gates has!

Even here in our discussion last week in this national dialogue on 
Social Security, former Congressional Budget Office director Robert D. 
Reischauer (now with The Brookings Institution), after much debate in 
this area, said  "...its water over the dam. For societal reasons, we 
decided to provide the initial cohorts of retirees (those retiring from 
1940 through to the present) with benefits that exceeded those that 
could be justified by their contributions."  Indeed, during the first 
week of April way back in 1994 I recall hearing Mr. Reischauer giving a 
speech to the Concord Coalition where at that time he estimated the 
excess benefits at about $2,100 per retire in that year.  There are other 
more succinct and colorful ways to say it, but I'm sure you understand 
how many young workers might feel they have been taken advantage of 
given this situation that has evolved over the life of Social Security.  
This problem was brought on by Social Security benefit bidding wars in 
hotly contested elections long before the young workers of today were 
voters, perhaps even before they were born.  To their credit the younger
generations are interested in putting in safeguards in any new, reformed 
Social Security system that would prevent this from burdening future 
generations with debt and unfunded liabilities as generated by the 
transfers described above have burdened them under the current system.  

Based on the above, I have a couple of general questions I hope each of
you might answer:

(1)  How would each of you explain to young workers who are struggling 
to buy a home, perhaps generate enough income to send their kids to a 
better school, or to save for their on retirement, etc., why they should 
not believe, based on the evidence given above, Social Security is just 
a Ponzi scheme and it should just be ended ASAP?

(2)  Many believe a way to prevent the fundamental processes that led to 
the Social Security system getting out of balance as described above is 
to have individual Private accounts whose balances are owned and managed 
by each worker, do you agree or do you have other safeguards in your
proposals that would ensure that any new system would not get out of 
balance like the current Social Security system did?

I support Private personal accounts because the can do two 
very important things at the same time --- they enhance individuals
freedom to choose to invest the money they earn as they see 
fit and privately owned accounts give a better safeguard against
problems such as we have now from creeping back up on future
generations.

I would like to thank you for participating in these discussions and I 
look forward to your responses.  Thanks.
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