And Now for Some Reform Ideas.

[ridgeway <riridgew@nyx.net>]

I think that the published expert references I've given provides
clear and convincing evidence of the core problem with the
current Social Security system --- i.e. it is a government
enforced integenerational Ponzi Scheme (a.k.a. pyramid
scheme, a.k.a. chain letter, etc...).  So the question
becomes: How do we get ourselves out of this damn mess!?!?!?!

Back in the summer of 1996 Slate (the online magazine) had
an online discussion somewhat like this debate --- they
call it the "Committee of Correspondence" and it was on the
subject of "Making Social Security Secure".    They had 
people like Herb Stein, Henry Aaron, Senator Bob Kerrey (D-Ne), 
Carolyn Weaver, etc... post their views and discuss it over
the course of several days.   I'd like to post into this debate 
some of the views and ideas expressed during that debate by 
Carolyn Weaver (one of the experts I've referenced previously):
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   > 7/15/96
   ...
   Dr. Stein is right, privatizing some or all of the Social Security
   retirement program is the idea that is attracting all the attention.
   In my view, this is not because privatization appears painless, but
   because the status quo--and tinkering reforms to it--are so   
   unappealing to many working-aged Americans. Public opinion polls  
   reveal growing skepticism among workers that the government will meet
   its long-term benefit obligations. Also the relationship between 
   taxes paid and benefits received under Social Security is becoming 
   much more unfavorable. Whereas earlier generations enjoyed double-
   digit rates of return on their taxes, younger workers are projected 
   to receive only 1 or 2 percent on average, net of inflation, which is 
   well below the real return to private capital investment. Two-earner 
   couples, single people, and high-wage workers will fare even worse. 
   Conventional fixes for Social Security--cuts in future benefits or 
   increases in taxes to close deficits that have a way of reemerging--
   will only reduce the return on workers' taxes, while doing little to
   enhance benefit security.
                 
   Little wonder there is interest in privatization, which would involve
   moving toward a system of personal investment accounts in which
   workers taxes are saved and invested for the future rather than being
   siphoned off to pay current benefits--or to fund other government
   activities. Similar to an IRA or 401k plan, workers would own their
   accounts and the interest thereon, and they would decide how best to
   invest their taxes. These accounts would be managed by private
   financial institutions.
   
   Individual workers and the economy as a whole both stand to gain from 
   a system built on real capital investment. Our complex and
   low-yielding system of income transfers would be replaced by a set of 
   straightforward, fully-funded retirement accounts.                
   
   There are no free lunches, though. If we are to move to a system of 
   personal accounts, while at the same time meeting benefits to current
   retirees and older workers, there is a big cost of transitioning from
   where we are to where we would like to be. This cost stems from
   Social Security's big unfunded liability. Workers must perceive the 
   gains to personal accounts (the higher potential interest earnings, 
   higher potential national saving and economic growth, and decreased 
   political risk) as being large enough that they are willing to help 
   finance the transition--as well as to bear some new investment risk.             
   
   There is also the question of what to do about workers who accumulate
   very low balances: leave the problem to the poverty-relief program 
   for the elderly, provide a set of government-financed minimum 
   guarantees, or maintain a streamlined program to supplement personal 
   accounts with a low basic benefit. Each option has a cost...
    
   >7/16/96
   
   Today's workers have been handed an enormous debt by earlier       
   generations--a set of unfunded benefit promises totaling trillions of
   dollars in present value terms. The public, I would suggest, is aware
   of this debt--if not its magnitude. We can try to perpetuate this    
   system, continuing to issue new (off-the-books) debt and shifting the
   burden to future generations. Or we can move to a system of fully    
   funded, individually owned investment accounts, in which case this
   debt gradually comes due. It can be met by issuing new debt--explicit
   bonds for Social Security's implicit IOUs--and repaid over time, or
   it can be met by cutting government spending, increasing tax 
   revenues, or more likely by some combination. By whatever means, 
   current workers must help finance this debt--I say "help" because, 
   depending on the financing scheme, the burden can be shared with the 
   rest of the population or by future generations.
  
   And, yes, even if the government issues debt as workers begin socking
   their money away in personal accounts, there are large economic gains
   to privatization. They result from halting the growth of new net
   liabilities under the old system--the Social Security debt is
   essentially frozen while saving through personal accounts grows over
   time; they result from creating a tight link between taxes paid and
   benefits received, eliminating costly distortions in labor supply and
   other compensation-related decisions; they result from reducing or   
   eliminating the political risk now attached to long-range benefit
   promises by government; they result from allowing workers and
   families to be directly involved in investment decisions that will 
   affect their own future well-being.
   
   As to facts and fictions about the Social Security financing problem,
   it is important not to confuse facts with projections. The government 
   actuaries involved in assessing Social Security's long-range 
   condition would be the first to admit the high degree of uncertainty 
   surrounding their projections of the size of the deficit, future cost 
   rates, and the date of insolvency. In the past five years alone, the
   projected deficit has doubled and, in the 13 years since the last 
   bailout bill, nearly four decades have been lopped off Social 
   Security's date of insolvency....
------------------------------------------------------------------------

I don't agree completely with Carolyn Weaver (e.g. I would include
cuts to current SS benefits now, for example, no more Cost of Living
Adjustments and I'd use means testing now, etc..., so the burden to
solve this problem falls somewhat on the current generation, not
all on future generations), however, she is an expert on SS and 
I've found her ideas and work to be honest --- honesty is very
muct needed in the debate of the SS problem!

Too bad the organizers of this debate failed, for whatever reason, 
to get well-qualifed and published experts like her in this 
exchange --- it would have provided balance also.
  
I think the ideas, observations, and suggestions made by her
above have the seeds of a good transistion plan for SS in it.  
    
What do you think????????????

PS. Thanks to all emailed me or posted kind words of support for
    my efforts.  We appreciate YOUR support!  Write your
    Senator or Representative and let them know your thoughts.
    Make use of some of the infomation learned from this debate.
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