RE: Rep. Stenholm's projections

[National Dialogue Moderator <moderator>]

I would like to respond to Mr. Baker's comments questioning the
legitimacy of the Kolbe-Stenholm plan because of differences
regarding stock market projections.  Specifically, he wrote:

** "In the absence of such projections, Rep. Stenholm's 4.5 percent
return is simply an invented number. It is always possible to solve
problems by just inventing numbers. However, it is not a good basis
for policy. **

We do not rely on "invented numbers" to "solve" the problem.  As
Senator Gregg has already said, the Kolbe-Stenholm plan and the
Senate bipartisan plan do not rely on stock market returns to solve
the problem. The assumptions regarding rates of return are not our
estimates, they are estimates put forward by independant analysts
at SSA and the Congressinal Research Service.  Mr. Baker may be
right in pointing out shortcomings in the estimates by SSA and CRS,
and I agree with him that more work needs to be done to determine
what assumptions would be reasonable.  But for now, we have to rely
on the best, most independent estimates put forward by the folks
who are responsible for preparing those estimates.But the most
important point that I want to reiterate again is that we do not
rely on any particular assumption about rates of return to "solve"
the problem.  Our plan will work and holds together even if the
assumptions made by SSA and CRS are too optimistic.  The total
retirement income for some higher income retirees would be lower
than have been projected, but those workers are better able to
absorb that risk and, more importantly would still be better off
under both plans because they would have a much lower tax burden
under our plan because they would bear the brunt of the taxes that
will be necessary under current law to meet the unfunded obligations
of the current system.  More importantly, the lower income workers
who depend on Social Security to meet their basic needs would be
completely protected from investment risks because the safety net
for low-income workers is stronger than current law under both the
Kolbe-Stenholm bill and the Senate bipartisan bill.  These workers
would be better off even if the stock market crashed and the returns
of individual accounts are negative.


Congressman Charlie Stenholm