Response to Moderator Search for Common Ground

[National Dialogue Moderator <moderator>]

Ron,

    I appreciate your thoughts on how we could reach common ground.  

    While the elements of the compromise you have outlined do not agree with my
thinking in every respect, unquestionably they would create a reasonable basis
for discussion.  If the President were interested in joining in talks with
members of Congress, offering this as an "opening outline" drawing from the
elements of various plans, I would interpret that as a very serious and
constructive step forward, and needless to say would be pleased to participate
in any discussions that worked from this basis.

    As a technical aside, I would raise the point that there are substantive
considerations that must accompany any effort to reach a middle ground between
positions.  For example, various elements that you have outlined take effect in
different ways.  Raising the cap on taxable wages would bring in additional
revenue in the short term, but would result in additional outlays later. 
Savings that come from gradually raising the retirement age do not appear to any
large extent until later in the valuation period.  CPI corrections are somewhere
in the middle.  They produce savings more rapidly than raising the retirement
age, but are not nearly as "front-loaded" as raising the cap on taxable wages.

    The reason I note these factors is that the appropriate measures to take
often depend as much upon the way that the rest of the system is looking under
any reform package as it does upon the desire of participants to reach a
political middle ground.

    I would, in particular, raise technical concerns about two matters:  1)
Using General Revenues, and 2) Raising the cap on taxable wages.

    General Revenues:  Under current law, enormous amounts of general revenues
will be necessitated beginning in the year 2014.  General revenues could indeed
be used to effect the transition to a partially advance-funded system, and I am
open to the idea of using general revenues to create this advance funding.  We
must be careful, though, not to simply make an open-ended commitment of general
revenues, for we do not know what will be the revenue needs of future
generations.  The use of general revenues can be suggestd in a proposal, either
to dodge tough choices or to effect an important transition.  Which is pursued
in a compromise plan would have a great bearing upon whether I could support
such a plan.

    Raising the cap on taxable wages is an item that often "polls" well among
individuals who do not believe that they would be affected by the change. 
However, it is another item that should provoke our caution.  Because it would
bring in revenues now, and produce additional outlays later, it could
conceivably be of no help in fixing our cash-flow problems.  If we simply added
to revenues now, when the system is already in surplus, and thus generated new
benefit obligations in years when we project large cash-flow deficits, little
will have been accomplished.  A proposal that produces its savings in such a way
could in theory be used to help cover the cost of "transition" to an advance
funded system (such as a move towards personal accounts) by bringing in revenue
to make up for the diversion of some revenues into funded savings vehicles.  I
do not advocate such a measure, but in theory it could be done. However, it
would practically be of no benefit if the system remained a pay-as-you-go
system.

    Eliminating the earnings test, of course, is a reform that I favor, and have
included in each plan that I have sponsored.  But of course, enacting the
"plums" is easy.  They must be combined with a package of comprehensive reforms
so that there is a politically palatable mix of good news and bad news in any
package that is presented to the public.

    These are technical concerns, however.  An outline for a solution that
enhanced system progressivity, created personal accounts, eliminated the
earnings test, saved the Social Security surplus, devoted general revenues to
meeting the demands of transition, dealt with such issues as the appropriate
retirement age, the benefit computation period, the measure of CPI -- clearly
this could be the outline of a bipartisan agreement.  If a larger number of
legislators were willing to join in serious and substantive talks with this as a
basis, we could undoubtedly make real progress.


    Senator Judd Gregg