Response to Reed Davis

[National Dialogue Moderator <moderator>]

Thank you for your input and ideas on the need to be forthright with 
respect to Social Security's financing and future costs.  

I share your concerns in this regard, for unfortunately there is far 
too much misunderstanding about Social Security's financing and the 
ramifications on the well-being of various demographic groups and 
birth cohorts.  As can plainly be seen from the exchanges contained 
within this forum, there is considerable divergences of reporting 
among public officials, Social Security policy analysts and concerned 
citizens over the true extent of the program's financing problems, as 
well as over the methods and assumptions that analysts use in 
projecting future costs of the program.  This debate, while at times 
can be esoteric, has important implications for our perception of the 
magnitude of the financing problem that Social Security faces and 
possibly for what solution we ultimately pursue.

Your suggestions about instituting explicit divisions among Social 
Security's finances for its various facets is an interesting one, and 
may be one part of more clearly separating the adequacy and equity 
elements of the program than current law does.  I firmly believe that 
if more Americans were to be able to view the program in terms of the 
amount of redistribution that occurs, who pays what and who receives 
what, and the overall fairness of the system, there would be far more 
agreement than disagreement on many of these issues.

And your point about more fully distinguishing Social Security's 
disability insurance program and retirement program is well taken.  As 
has been remarked before in this forum, there are considerable 
differences between disability insurance (and survivor, and juvenile 
dependent insurance) and old-age (retirement) insurance.  
For disability, the type of insurance it provides is essentially a 
term insurance.  As in the case of buying fire insurance for one's 
house, it is possible to determine within reasonable probability the 
chances of a worker dying and leaving dependents or becoming disabled. 
We should be concerned in this respect that individuals are getting 
actuarial value for the cost of the insurance.
With regard to retirement benefits, however, we should be concerned 
with the accrual of wealth in the form of Social Security benefits 
during a worker's career and the rate of return on that wealth 
accumulation.  There is certainly concern that workers might have an 
unfortunate labor force experience, and this again might be likened 
more to term insurance.  But we should not be turning over to Social 
Security the task of trying to protect workers from the very real 
necessity to save for retirement.  If Social Security taxes were low 
enough to allow workers to save sufficiently for their retirement, we 
may not be having this discussion.  But as we know Social Security 
taxes are not low, and without structural reform and a component of 
advance-funding, they will continue to get higher, thereby further 
crowding out the ability of most low- and moderate-wage Americans to 
save for retirement.  The size of the lifetime Social Security taxes 
workers make for their benefits, plus the widespread availability of 
alternative vehicles for accumulating retirement savings (even through 
government bonds!) invite comparisons to alternative, more efficient 
and fairer mechanisms for accumulating retirement wealth.   

I am hopeful that our bipartisan process can pay special attention to 
the notion that any long-term reform should treat all demographic 
groups and birth cohorts in a roughly comparable way.  This issue is 
too many times lost in our reform discussion.  I am very mindful of 
it, and your interest in national debt levels under various reform 
plans is one useful barometer in assessing this criterion.  

I have not yet received detailed analysis from either SSA or CBO on 
the debt level effects of my reform proposal, but will be glad to 
provide them to you when they become available.

Again, thank you for your questions and comments.


        Senator Rick Santorum