RE: Values

[Andre Dermant <adseale@aol.com>]

Walter Hart says it very well. In support of his position, please
find below the text of a presentation by Mike Tanner made recently:

                  The Future of Social Security

   A presentation by Mike Tanner, Director of Health and Welfare
   Studies, Cato Institute at a Conference of the Business Round Table
   Washington April 8, 1999.

I appreciate very much the opportunity to talk to you about what
I think is going to be the dominating political issue of the next
year or possible longer, which is Social Security Reform, and I'd
like to try, if I could, to put it in a slightly different context
than you have been hearing all day, because I think that what you
come out with in many ways depends on what question you ask about
Social Security reform.

The most fundamental question is: "What are we trying to achieve
by Social Security Reform?". Is the goal, the sole goal really
Social Security solvency? Is it all to be driven by where a couple
of lines cross on a graph? That seems to be the way much of the
debate is handled in Washington: the procedure comes out with the
report and it moves the date downward and we all panic and then
they come out with a report which has some economic growth and they
move it upward, so that today it is almost back to where it was
two years ago and everybody in Washington heaves a sigh of relief
and says: "Well, we don't have to address this after all". Is that
really what it is all about?

Because the whole question is solvency: how are we pumping up enough
money into Social Security to keep it going? There are a lot of
ways to do it. We just heard some: we can have more taxes, we can
let the government invest, despite all the problems that means that
for the first time in American history, the federal government
actually would own part of your corporations. That's what the
President's plan does and if you plot it all out, you get the right
assumptions, you assume this rate of growth and you assume that
rate of fertility, you get all the lines on the chart to measure
out, but I don't think that is enough.  I don't think that just
because we get Social Security into balance for 75 years or whatever,
that we have solved the problem. I think there are other questions
we should be asking: for example, do we want a higher rate of return
for young workers? Social Security used to have a very high rate
of return, which was a good deal for people who retired 20 years
ago. They got back everything they paid into the system with
interest, and a lot more beside. Someone who retired this morning
will get about 2.2% back on their money. For most young workers,
if they are really lucky, may be they can expect a 1% rate of
return, bit most of them will probably see a negative return on
their taxes. They will actually lose money in the program, especially
if you raise taxes or cut benefits in order to keep the system
solvent.

Do we want a system that actually increases the amount of money
people have in retirement? You know, despite Social Security, a
lot of people are left behind in retirement. Despite Social Security,
13% of all seniors live in poverty, 40% of all elderly widows have
an income below the poverty level, and 30% of all African-Americans
women have an income below the poverty level when they retire, when
they are seniors; do we want to have a system that actually increases
the amount of benefits we give to these people and make for a better
retirement, a better way of life for these people.

Do we want a system that is fair or do we want a system that
penalizes groups in our society that don't live as long. If you
live to be hundred, Social Security is pretty good for you, you
get a lot a checks; on the other hand, if you drop dead at 66, it
is not quite such a good deal; and there are groups in our society,
the poor, African-Americans and others that simply have a shorter
life expectancy and they are therefore penalized by Social Security.

That is why the Rand Corporation, no right-wing think-tank, estimates
that over a lifetime, Social Security transfers money from the poor
to the rich, as well as from blacks to whites, and from men to
women. I don't think that is a very fair system. Do we want a system
that continues to penalize working women, where because of the dual
entitlement rule, when a woman can receive money, receive Social
Security benefits either as a spouse as a percent of her husband's
benefits or on her own, it means that a woman that goes out and
works every day of her life and pays Social Security taxes out of
every paycheck and then makes only enough money over her life time
that she earns half of her husband's benefits on her own, receives
not one dime in additional benefit, based on having paid Social
Security taxes her whole life. Is that what we want to preserve?

Or do we want a system in which we want an opportunity for people
to own wealth? I am one who is very disturbed at the division
(distribution) of wealth in our society. The wage gap is narrowing,
but the wealth gap is growing. We now live in a society where 1%
of the population controls almost 50% of the wealth in this country.
The reason is that millions of Americans are outside the real wealth
creation opportunities. ... that minimum wage worker, that fellow
earning $20,000 a year does not have an opportunity to invest. But
that is not why the real wealth is not created (by them). Right
now, they are paying 12.4% of their income (employee + employer)
into a system that is going to get them 1% or less in terms of
return. They don't have an opportunity to create something that
can build up real wealth, that can be inherited, passed out to
younger generations, that can enable their children to go to college,
to enable someone in their family to start a small business.
Don't we want to create a system in which that wealth is created
for everybody? And do we want a Social Security in which people
have ownership over their retirement benefits? That's the dignity
of knowing that they have a legal right, a legal claim to their
benefits. Now, I go around the country and I talk about Social
Security. Seniors often believe (that their benefits) are an earned
right, are a guarantee that they have some money coming. Because
after all, they have been paying taxes into that system. Didn't
that give them something? Unfortunately, the Supreme Court says: "No".
In the case of Nestor vs. Fleming, the Supreme Court ruled that
Social Security is a tax and a welfare program. And there is no
connection between the two whatsoever, Congress can cut people's
Social Security benefits any time they want and it has. And there
is more discussion now about how to cut people's benefits. So, that
means right now that we have a system in which people work hard
their whole life, they pay their taxes, and I'll just mention that
3 out 4 Americans pay more in Social Security taxes than they pay
in Federal income taxes. They play by the rules, and then when are
65, to go hat in hand to the government and say: "Please, give me
whatever retirement benefit you feel like (giving me)". Their
retirement benefits are up the whims of 535 politicians in Washington.

Or would you rather have a Social Security system in which people
own their retirement benefits and no politician could ever touch
them or take them away? So, I would suggest that when we are looking
at Social Security, if all we need to ask is: "Do we just want to
find a financial balance in this system, with all its flaws?", or
do we want to create a new and better system? The only way we can
create that new and better system is to move to a system of
individually owned privately invested accounts. It is that type of
system that would earn a higher rate of return, it is that type of
system that would give people a higher retirement benefit. It is
that type of system that would be fair to the poor, to the minorities,
and to working women; it is that type of system that would create
a new system of wealth more broadly distributed in our country and
give the poor people a chance to really own part of this economy.
It is that type of system in which people actually own their benefits
and have a real stake in their own retirement.

I'll just leave you with this: Social Security was invented in the
1880's in Prussia, at a time when people communicated by giving
someone on horseback a letter, to ride it across the country; now,
here we are about to start the 21st century: the internet age; you
push a button and all the knowledge in history can move across the
country in a fraction of a second. Shouldn't we have a 21st century
Social Security system instead of a 19th century one? Thank you
very much.