RE: Concerns of Michael Jones about Younger Workers

[Michael Jones <powderfinger99@yahoo.com>]

Sen. Gregg,

Thank you for your response.

I understand the enormity of the task you have at hand and the
political obstacles you face in getting a bill passed.

Your detailed examples are very helpful. I have some comments
about the details. Here's the example of the low wage worker:

<<<<
 Consider a low-wage worker, income $13,380 in 1999 dollars.  Let's
imagine that they were born in 1975 and are working in 2025.  Under
current law, this individual would pay $1659 in OASDI payroll taxes
(again in those 1999 dollars).  Their share of the income tax burden
to pay current benefits would be approximately $241.
>>>>

I want to talk this out slowly to make sure I understand. The
$241 is the income tax burden for this worker to pay benefits
for current beneficiaries in the year 2025. These taxes are 
the workers share of the money required to pay off the bonds
that are being cashed in from the Social Security Trust Fund.
(At this time Social Security will be running a cash
flow deficit and will be required to cash in bonds to pay 
current benefits).

Sen. Gregg, I understand the numbers. In summary what you
are telling me is that under your plan my share of the unfunded
liability goes down and my benefit goes up due to the compounded
return of the individual account.

This helps the situation, but the fact still remains I will
be paying more taxes for the same benefits. The plan
reduces the amount of the future tax increase (I suppose
some people in Congress would call this a "tax cut"). As time goes
on, the liability for new workers increases, since they will
be required to pay the extra income taxes sooner relative to
their workforce entry date.

The numbers here show how bad a deal this program is for young
workers, especially ones entering the workforce in the near term.
The other plans are progessive by income level, why not progression
by age? You could pay for it by limiting at the upper age level,
who could contribute to the individual accounts. In this sense,
the older workers would be stuck in the current system, while
the younger workers would have an opportunity to escape.

Your bill cannot be called true reform unless there is a specific
plan on how to transition out of the current system to a fully
funded system.

<<<<
It is not clear to me from your question whether you would prefer
to allow the status quo to play out rather than enact a reform plan
such as ours.  Clearly, the status quo would greatly exacerbate
all of the concerns that are expressed in your message.
>>>>

>From a personal standpoint, any change won't affect me. I understood
at a young age that this program would probably fail me. I took
the steps required to secure my own retirement. But there are 
millions of other people out there who are not tuned in. 

If I had a choice in the matter, I would prefer a lower payroll
tax rate in exchange for converting the program into a pure 
means tested social-welfare program. The program would have
far more credibility if it were structured this way. From what
it looks like though it WILL become a social welfare program
under current law anyway unless I can convince my children
to fork over more tax dollars.

Probably what will happen is a continuation of the slow but steady
progression of ever increasing tax rates. The current system
did not get to a level of 12.4% in a single shot, it took years
of small incremental increases. 

It's clear that my taxes will be higher to pay for all the debt
and liability the government has taken on. My future earnings
have already been spent.

Michael