Re: Hutchison "C. Weaver: National Treasure", and "2% Solution"

[National Dialogue Moderator <moderator>]

    Re: Hutchison "C. Weaver:  National Treasure", and "2% Solution"

Thanks for the honorary degree.  I hope that all of you come away from this 
debate feeling that you've learned something from Bob Reischauer and me.  
I've learned something from all of you.  (I always learn something from Bob 
too, no matter how many forums we participate in together.)  None of us has 
all the answers.

As for the "2% solution" business, don't be distracted from the more 
fundamental issues even for a moment.  This has been trotted out by everyone 
who wants to hold on to the status quo, without owning up to what would be 
required to do so.  As you may have learned in the other debate, a 2% tax 
increase imposed today and left in place for the next 75 years would, under 
one particular and very specific set of assumptions, close the long-range 
financing gap in social security--meaning it would (on paper) allow benefits 
to be paid on time through year 75.  Broke in year 76, but hey, that's 
somebody else's problem I guess!  And, within a decade from now, the system 
would be "out of actuarial balance" again--the actuaries' term for the 
current situation.  (The long-range outlook is so poor that with each passing 
decade, the actuaries have to drop out of their calculations the relatively 
favorable years we are moving through and begin incorporating 10 very adverse 
years after year 75, presently years 76-85, moving on year by year to years 
86-95 and so on).  And broke much earlier if any of the actuaries' 
assumptions prove to be too optimistic (presently there's concern that they 
are understating likely future improvements in life expectancy, which would 
have a big impact on a pay-as-you-go system).  

The "2% solution" also presumes that we can run large surpluses in the next 
couple of decades--and jack up the number of IOUs in the trust funds--and 
meaningfully "save" those revenues to cover deficits in later decades.  We 
know better than this.

The "2% solution" also implies that, once having borne this significant tax 
increase, workers would then have a system that makes sense for the 21st 
century.  In fact, we'd have a propped up version of what we have today.  No 
extra benefits, no extra retirement income security, no property rights or 
investment opportunities.  Just more taxes.

It's a disengenous proposal that people throw on the table to obfuscate the 
issues,  I've yet to see anyone endorse it.  

Also, what's so magic about 75 years?  Some like to suggest 75 years is too 
long to even contemplate in designing a retirement plan.  This would be true 
if we were talking about a voluntary, defined contribution plan.  If things 
don't work out as expected, you can always drop out of the plan and take your 
money with you.  With social security, you're in, period.  75 years is only 
long enough to cover the expected period of retirement for today's young 
workers and taxpayers.  Don't let anyone sell you short on this.  If they 
aren't concerned that your taxes are contributing to a system that enhances 
your retirement income security--let alone you (or my) childrens--they aren't 
seriously interested in enhancing the well-being of American workers and 
creating a sound and sustainable system for the 21st century.  

We should have a system that can withstand a range of economic and 
demographic conditions on a reasonably indefinite basis.  The days of "ad 
hoc" adjustments--when benefits were increased whenever the trust funds 
looked temporarily flush--are over.  


Carolyn Weaver