Questions for Members -- ridgeway & Hart

[National Dialogue Moderator <moderator>]

Thanks for your observations, comments and questions.  I see Rep.
Kolbe has already addressed a couple of your questions, so let my
comments be brief.

You are correct in that it has been remarked on many occasions and
on many levels that our current pay-as-you-go Social Security
resembles the investment program named after Charles Ponzi whereby
new contributors pay off earlier ones in the hope and expectation
that future entrants will provide the funds to pay them off in
turn.  This issue goes to the very crucial debate that has been
the center of the Social Security program since its inception:
how to finance a system of social insurance/public pensions.
President Franklin Roosevelt was very sensitive to and concerned
about leaving a mountain of debt and taxation on to future generations
of taxpayers, and always had in mind incorporating some form of
advanced-funding of benefits.  The problem was, that early Congresses
found it much easier to expand benefits early rather than save
surplus payroll taxes for future benefits.

We know the nature of the problem -- the failure of wages and the
workforce to continue growing means that workers have to contribute
an ever-larger share of their earnings to the system or promised
benefits have to be cut somehow.  Thus, unless we take steps to
save and strengthen the system through some form of legitimate
funding, we will likely erode Social Security's dual pillars of
adequacy (of benefits) and equity -- so that benefits at least
recognize the amount of contributions to the system.

Another band-aid approach to the current system is insufficient --
the demographics are just relentless.  We have to look to ways that
provide younger workers with more control and ownership over their
retirement dollars so that they can garner an adequate return on
taxes being paid, while at the same time also keeping the system's
social insurance safety net in place forever.

Concerning your comments/questions about how best to address this,
I too am an advocate of advance-funding a portion of Social Security's
growing liabilities through personal retirement accounts (PRAs)
for all workers out of a portion of payroll taxes currently being
paid.  My proposal would call for a progressive formula, where
lower-wage workers receive a higher portion of their covered earnings
in their PRA than higher wage workers.  And we must find equitable
ways to slow the rate of growth of benefits to ensure that the
system is not vulnerable to changing demographics and remains
actuarially sound.

I should have on the Web site soon the outline of my Social Security
reform plan, and look forward to discussing this and other issues
with you in the near future.

I hope this addresses your questions.


U.S. Senator Rick Santorum