Re: Question on Safety Net

[WFurst@aol.com]

It seems to me that the safety net function of the social security system is 
very important and should be preserved. At the same time it is important to 
preserve the universality of the system to assure continuing public support 
from all levels of the community. 

The current approach to providing a safety net through a special 
redistributive formula as described by Bob Myers seems well suited to 
accomplish the desired twin objectives. No systemic change appears to be 
needed. 

Public comment on incomes by elder Amwericans frequently emphasize the gains 
in incomes made by older Americans during the past 30 years. These gains are 
uneniable and are due in some degree to improvements in social security and 
to the initiation of medicare. At the same time Elder Americans as a group 
are still among the poorest Americans and their aver their income is 
significantly below average or mean American income. Only unmarried mothers 
with small children seem to be in worse shape. Heritage Foundation studies 
and representatives have been especially active, in my opinion, in stressing 
the gains made by older Americans in recent years, without stating at the 
same time that average income by older Americans is still very low. ( I have 
not looked at the study you cite in your query but base my comment on other 
reading, including  comments by Heritage and other conservatives submitted in 
earlier rounds).

I am attaching a memorandum I prepared last month in response to one of your 
earlier inquiries but never sent. This memo also deals with the question of 
social justice. 
Comments on the proposal to establish private accounts and to invest social security funds in the stock market:

I am a retired civil servant  who does not participate in the social security and disability fund. Nevertheless I am very much interested in the continued success of the this fund because of the past contribution it has made to social stability and because I attach great importance to the objectives of social justice served by this fund. Also I have children who will presumably be beneficiaries some day but who are active savers and who do not not expect  to rely on social security as their main support..        
        
I have not read the contributions to this debate by Mr Reischauer and Ms Weaver and I suspect that I agree with the former rather than the latter, but I want to thank them both for their effort, as well as Brookings and Enterprise.        <
        
I support the president's proposal to improve the return on the Social Security Trust Fund by investing part of the federal budget surplus in the stock market, with the funds to be managed as the president proposes,  By the way I discount some of the criticism, by Ms Weaver and others, of the alleged low return of funds returned to individuals in the form of old age pensions. For the most part, these criticisms rely on uncertain projections and more importantly, do not take into account the social justice aspects of the social security system, i.e. paymetns made for disability, to orphans and widows etc. Nor do these calculations take into account that old age pension payments favor lower income people over those with higher incomes who are able to rely more heavily on individual savings and pension plans.        
        
I have thought about Fed Chairman objections to this plan. His first objection appears to be that the management of the funds could become politically motivated and therefore a threat to the independence of stock markets. I believe that this objection can be overcome by carefully structuring the management of the fund, similarly to the managemet of the fund that is responsible for civil servants' pension moneys and which does not appear to have become a political problem. Also State pension programs invest in the market without posing a visible threat to the stability of the markets. Then there is the Chairman's concern that these investments represent a shift in investments rather than additional investment. This is true, of course, but what is the harm, if fund management serves generally the same economic inteerests as the previous investors would have done.              

I am very doubtful about the advisability of investing government funds in private retirement accounts. In the first place it is crucial that such accounts should be additional to the current old age program and not replace that program in any way. Therefore, the government contribution must come out of regular tax receipts and so that it does not reduce the trust funds. Moreover,  these accounts should be closely controlled by the government to assure  that they are properly managed and are not dissipated for non retirement purposes. The extent of the control required, in my opinion, would largely vitiate the "private" nature of the accounts. Finally the cost of management of such private accounts would seriously cut into any returns.        
        
The argument that the social security system discourages or prevents private savings makes no sense and is inconsistent with the repeatedly annoounced objectives of the social security program. Social Security has always been intended as a safety net and there is nothing in the program to prevent private savings. Quite to the contrary, the program makes it clear that the success of social security depends on it being supplementary to adequate savings and pension plans.