RE: The Big Picture

[National Dialogue Moderator <moderator>]

It is important to distinguish between that portion of the unified federal 
budget surplus that is attributable to FICA taxes collected in excess of 
benefits paid and the non-Social Security surplus. The former should be 
used to ease the transition to a more funded Social Security system. Social 
Security should compete with other budget priorities for the latter, should 
it eventually appear. 

I think there is a substantive difference between proposals that would use 
the surplus to fund new benefit obligations (Archer/Shaw and President 
Clinton's USA accounts) and those that would use the surplus to help ease 
the transition to a system where some of the current payroll tax is 
reallocated to individual accounts. (The surplus would be used to continue 
to meet benefit promises to current retirees by replacing the reallocated 
payroll tax income that would no longer be available for that purpose.) I 
admit that proposals that reallocate payroll taxes will require cuts in 
future guaranteed benefits, but these will be replaced by the assets 
accumulated in the individual accounts. In contrast, proposals that would 
create new benefit entitlements out of projected surpluses, without any 
offsetting reduction in guaranteed benefits, strike me as irresponsible. We 
should not make our problem worse.

Ann Combs
William M. Mercer