DAILY SUMMARY May 23-24

[National Dialogue Moderator <moderator>]

		DAILY SUMMARIES FOR MAY 23-24, 1999

PUBLIC COMMENTS

The registrants offered additional commentary during the Investing
in Stocks roundtable.  This included a debate between two actuaries
on the proper type of reform.

--The Actuarial Debate - Andy Lang, a retired actuary, who advocates
converting Social Security into a defined benefit plan, posted a
series of provocative question in a post entitled "Questions and
Puzzles." He asks why do the defined corporate benefit plans have
ten times the assets of the Social Security system whereas the
governmental system has large unfunded liabilities. He asks why
Social Security costs double or triple what a defined benefit plan
would cost in the private sector. He argues that an annual actuarial
valuation report should be prepared and that rumor has it that one
was prepared years ago and suppressed.

Robert Randall responded that private defined benefit plans have
higher asset accumulations because they are pre-funded. The only
substantial pre-funding of Social Security has to do with the extra
retirement costs of the baby boom. He pointed out that pay-as-you-go
financing is not feasible in the private pension context because
there is no assurance that the employer will still exist at the
time the benefits come due.  In contrast, the government will be
there with the power to tax.  Mr. Randall also points out that the
pay-as-you-go approach was adopted to avoid placing control of an
immense pension fund in governmental hands. Mr. Randall also objected
to Mr. Lang's assertion that an actuarial report had been squelched
as an unsubstantiated rumor.  In addition he stated that the 75
years projection contained in the annual Social Security report is
the equivalent for pay-as-you-go plans of the annual valuation
reports required for private pension plans.

--Response to Reischauer and Weaver - Ridgeway responded to Mr.
Reischauer's observations that younger generations had benefited
from the  higher payouts to previous retirees because their parents
could fund their college educations and be self-supporting. He
asked for econometric data supporting this and countered that with
lower FICA taxes younger generations could have invested more
themselves. He apologized to Ms. Weaver for too closely associating
her views with the Social Security Advisory Council plan.

--Cries in the Wilderness - Two registrants interested in reforming
the system are depressed about the political stalemate in Washington
and the inability to reach a consensus on reform in this Dialogue.
[Dermant and Hart]. In discussing the situation of the late boomers,
Mr. Hart fears that time is running out in developing a solution
for this cohort of retirees.  Michael Jones agrees but fears that
problems in the system will only be addressed incrementally.  All
three stress the need for greater public education.

--Opening the System to Scrutiny - Reed Davis argues for greater
transparency in the benefit structure of Social Security so that
the public has a greater understanding of the systems components.
Because he thinks payroll tax hikes are no longer sustainable
politically, he thinks the system must be made more open so that
the public can scrutinize the various components.

-- Intergenerational Inequities - Marvin Rohrs pointed out that
this has in some sense become a dialogue of the deaf on this issue.
He complains that some of those arguing that the system is screwing
them refuse to acknowledge that their generations have many advantages
that their predecessors did not have. Another participant responded
that his generation was only honestly facing up to the problems
that earlier generations had created. [Jimenez-5/25]

Andre Dermant* sparked a debate with James on the investment
decisions made by the Social Security Trustees.  Andre asserts that
the trustees could have invested the funds in  normal or special
government obligations and that the returns would have been much
greater had the trustees chosen the former over the latter. James
countered that the trustees steered away from marketable governmental
securities in order to avoid interfering in private markets  and
this was consistent with congressional intent that the trust fund
bonds not affect interest rates.

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*  This discussion occurred on Saturday, May 22nd but was not
included in that summary because of time constraints.


Barbara Brandon