RE: What "values" created the existing system?

[RRand98163@aol.com]

Dear Michael Jones, 

	I would like to respond to your comments on my comments. I note that 
you have changed and now concede that the question is what changes are wise 
and desirable, not whether the present system should be continued without 
change.

	The original tax legislation provided for an immediate tax rate of 
2%, increasing in stages to 6%, which is really the rate that should be 
compared to the current 12.4%. A godd part of the increase reflects added 
benefits, including disability and survivor benefits. I think  appropriate 
changes in the current system should and can be made without increasing the 
current tax rate. At some point, consideration should be given to the 1992 
Clinton proposal to allow deduction of Social Security taxes for income tax 
purposes.

	The covered taxable wage is increased under present law in line with 
inflation. From time to time, Congress has passed increases beyond this 
inflation rule. When feasible, consideration should be given to rolling back 
to the 80% rule of thumb for setting the covered wage. This somewhat 
arbitrary rule says that covered wages should approximate 80% of total wages 
and now we are closer to 85%.

	The current system with wise and prudent changes will pay 100% 
benefits indefinitely. That the current system is projected to pay only 70% 
beginning in 2034 is relevant only if you assume that no wise and prudent 
changes will be made before then.

	Under a pay-as-you-go system, the question of investment return does 
not exist. Presently, the so-called surplus is scheduled to be used to pay 
the extra cost of the baby boomer generation.  Under a pre-funded personal 
account system, investment return would be very important, but it is 
impossible to consider such a system without some rational scheme for dealing 
with the six trillion dollar transition cost.

	The present law calls for increasing the retiremnt age in very 
gradual stages, reaching 67 in 2027, not in one year as you falsely assert. 
This only partly addresses the problem of increasing longevity. A fuller 
answer is a schem proposed by Robert Myers which would increase the age to 70 
in 2037 and 75 in 2074. Such schedules can always be modified if anticipated 
improvements in mortality do not occur.

	You say changes would put more seniors into poverty., Continuing the 
present retirement age of 65 and ignoring increasing life expectancies would 
tend to bring more seniors out of poverty, while recognizing the problem 
should have no effect on poverty among seniors.

	Instead of discussing the transition cost problem, you advised that I 
study Chile's experience. I do intend to study it further. I would point out 
that the Chilean plan includes a minimum guarantee, less than promised by the 
prior sytem but large enough so that low-income workers gain no benefit from 
taking out personal accounts and as a result low-income workers have not 
participated in the personal accounts in Chile.