RE: Ridgeway and Mr. Hart

[National Dialogue Moderator <moderator>]

Thank you both for your comments.  I sensed a similarity in your themes, so
I decided to address your responses together.  Both of you expressed a
common frustration with the current Social Security system and suggested
that perhaps the solution was complete dismantling of our public pension
system.  

When I first started studying our Social Security program, I was intrigued
by what the government of Chile had accomplished in fully privatizing their
public pension system.  I too, thought full privatization could be the
answer.  After years of study and analysis, however, I have concluded that
this is not a viable policy option for a number of reasons.

First, I disagree with the notion that Social Security is a failed program.
To the contrary, Social Security has been enormously successful in reducing
poverty rates among senior citizens.  Without Social Security, more than
half of our nation's senior citizens would live in poverty, compared to
approximately 11% now.  In a nation where only one-third of the elderly
receive private pensions, two-thirds rely on Social Security for 50% or more
of their retirement income.  For some retired persons, it is their ONLY
source of income.  Consequently, I do not believe that Social Security has
failed in its purpose.

I do believe, however, that Social Security was built on flawed assumptions.
In 1935, the architects assumed that the birthrate would rise slowly and
steadily, and that people would live a relatively short time between
retirement and death.  Moreover, there was no way the actuaries could
predict the generational bulge created by the Baby Boom generation.  Ergo, I
believe it is our repsonsibility in Congress to redesign Social Security to
function under these new demographics, not to eliminate the program
altogether.

Second, Countries that have fully privatized their public pension system
have been able to do so only under specific circumstances -- circumstances
that don't exist here in the United States. In Chile, the government
possessed a large portfolio of state-owned assets that they were able to
sell to private owners.  The Chilean government used the money to purchase
bonds for those people who had already spent many years paying taxes into
the public pension system and would receive little benefit under the new,
privatized system.  In addition, the old Chilean public pension system was
not very effective and provided very little benefit to its citizens.
Consequently, when the government decided to end the program and begin a new
one, the Chilean people didn't feel they were sacrificing anything.  There
was little emotion or security wrapped up in the old system and it was very
easy for Chileans to embrace the new program.  These special circumstances
don't exist here in the United States. 

Third, aside from the policy complications of full privatization, there are
political reasons why full privatization is not a viable option.  Because of
the way our government is structured, any successful Social Security reform
program must be acceptable to at least 218 Members of the House, 51 Senators
and the President of the United States.  Finding common ground among this
many individuals is extremely difficult.  Did you know that during each
Congress approximately 10,000 bill are introduced?  Of these, only about 400
pass and become law.  It is easy to see how a bill as complex and
politically charged as Social Security reform would be even more difficult
to move through the halls of government.  Only a centrist bill with
bipartisan support will be acceptable to all the neccessary parties.

I hope this helps explain some of the reasons why Rep. Stenholm and I have
created the bill we did.  We had to work with a finite set of financial
resources and we had to craft a bill that would garner the support of a
majority the American people, Congress and the President.

-- Jim Kolbe