I greatly appreciate the tremendous effort that you and Rep. Stenholm have invested in trying to construct a realistically "passable" reform bill. I have three comments/ questions to which I hope that you will respond:
#1. It seems that every reform proposal to come down the pike is structured with "carve-outs" or "add-ons" which are applied uniformly across-the-board, equally to all age groups (in other words, both a 25 year-old worker and a 45 year-old worker would each be eligible to contribute 2% of payroll to his own private account under your plan). I know that you and Mr. Stenholm both recognize the importance of maximizing intergenerational equity in Social Security reform. Has any consideration been given to more unconventional approaches under which:
a) older workers (e.g., age 50+) remain in the current system and continue to pay a 15.3% FICA rate (with none going to private accounts),
b) young workers (e.g., age 25 and under) pay the 15.3% FICA tax rate (none to private accounts), and
c) workers between ages 25-50 would divide their 10.2% Social Security contributions between personal accounts and federal contributions on an age-weighted basis, such that the older these workers are, the higher the percentage of payroll taxes would go to personal accounts and the lesser percentage to Uncle Sam?
It would seem that such a structure would meet several key objectives-- it would more equitably balance out integenerational contributions to the system while concurrently "aiming the fire hose at the fire"-- more effectively pre-funding the retirement needs of the problem baby boom generation.
#2. Radical tax reform is desperately needed, and remains a high profile issue. I'm a vocal advocate for scrapping our current tax code in favor of a consumption tax (like Bill Archer's "Fair Tax" idea), believing that such reform would foster vigorous, sustainable economic growth which would greatly ease resolution of entitlement reform problems. Would not your Social Security reform proposal, if adopted, make it far more difficult to adopt systemic tax reform?
#3. Your proposal "carves out" 2% of FICA taxes and places a significant additional burden on general revenue. After watching the recent congressional shenanigans with the "emergency spending" bill, where will the budgetary savings come from to fund the significant revenue losses/spending increases which your plan would create?
