Summary of first week's discussion on values

Date: Tue, 27 Apr 1999 11:35:37 -0400 (EDT)
From: National Dialogue Moderator <moderator>
Subject: Summary of first week's discussion on values
Contributor: SUMMARY: Barbara Brandon

WEEKLY SUMMARY OF THE DIALOGUE ON VALUES

We thought it would be useful to summarize the comments posted during the first week of the dialogue on values. I have arbitrarily broken this discussion down into three perspectives. Obviously, such a broadbrush classification does not do justice to the many nuances of the dialogue but it will provide some background in order to get newcomers up to speed and to encourage others to join in. Each viewpoint was strongly critiqued during the dialogue. The following provides a summary of each viewpoint along with a summary of the less "technical" attacks made on each perspective.

Viewpoint #1- Several participants advocated maintaining the structure of the current system. While they recognized that some adjustments might need to be made to insure long-term solvency, they stressed the importance of keeping the current structure intact. They emphasized that social security is essential in keeping older Americans independent and in maintaining an income floor for lower income workers in their retirement years. These postings viewed social security as one of the federal government's fundamental responsibilities since many private pensions are shaky and others have not saved enough for retirement. In order to cover the projected shortfall, some suggested that the government invest a portion of payroll tax revenues in the stock market in order to increase the rate of return on trust fund monies and to avoid cutting benefits now or in the future. Alternatively others advocated measures to accelerate economic growth to increase retirement income.

Critique- It is unrealistic to think that rapid economic growth will provide enough taxes to sustain benefits at current levels and unacceptably large tax hikes will have to be imposed on younger Americans unless changes are made. Moreover the promise of substantial retirement benefits has lulled many into a false sense of security and kept them from saving for their own futures. Others questioned the wisdom of having the federal government assume the role of an institutional investor in the stock market.

Viewpoint #2- Many participants advocated remaking the social contract behind the system because of intergenerational inequities present in the current system. Members in this group did not have a common laundry list of reforms but most suggested means testing the benefits of more affluent seniors. Some also advocated raising the retirement age and one suggested eliminating the early retirement option. Without these types of reforms this group viewed the present system as unsustainable because generation X will not be able to fund the retirement of the baby boom. Many in this group think it is unfair that younger low-income workers are now supporting the retirement of affluent seniors under a regressive payroll tax.

Critique- Some objected to means testing because it penalizes people who have worked hard and been financially prudent. Many objected to raising the retirement age because age discrimination is a real factor in the job market; others thought that some of the elderly would find it a physical hardship to continue working past 65. Others viewed such reforms as too inadequate in meeting the fiscal and budgetary challenges of reform.

Viewpoint #3- Privatization of social security was also strongly advocated with some arguing for mandatory savings accounts that would be individually invested and controlled while others voiced support for a purely voluntary system. The privatizers advocate such an approach because it reinforces traditional American values of personal and family responsibility and a limited role for government. They saw other advantages in such a reform. Younger workers would not be paying into a system that they had little confidence in and retirees would have real predictability in their benefits. They also see such a reform as increasing the national savings rate.

Critique- There is no guarantee that private savings could cover retirement costs, especially when individuals make foolish or risky investments. The transition to a self-financed retirement system would create an unmanageable burden for those who are in the first generation to retire under such a scheme. Low-income retirees would suffer under such a system because the current redistribute retirement benefit formulas would no longer boost their retirement incomes. Some suggested that welfare or Medicare would have to be expanded to fill in the gaps. More fundamentally others believe that it is government's responsibility to provide public support for the elderly and those unable to work. Finally many questioned their competence to invest well enough to ensure their retirement.