Archer/Shaw Social Security Guarantee Plan: Estimated Effects

[Reed Davis <rdavis2@ix.netcom.com>]

Following are the estimated effects of the Archer/Shaw Social Security
Guarantee (SSG) Plan, taken from an SSA Memorandum dated April 29, 1999.
The URL at which the memorandum can be found is shown below (I gave the
wrong URL in a previous message).
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Estimated Effects on OASDI of Social Security Guarantee (SSG) Plan

                         Est.OASDI  Est. Change   Year Exhaust
(percent of taxable      Actuarial  in Actuarial  OASDI Trust
payroll)                 Balance    Balance       Funds
                         ---------  ------------  ------------
With reduced payroll tax:
 Present Law (No SSG)    -2.07      --            2034
 SSG w/ 5.35% return     +0.09      2.15          NA       1/
 SSG w/ 6.35% return     +0.07      2.13          NA       2/
W/O reduced payroll tax:
 SSG w/ 4.35% return     -0.08      1.98          2048
 SSG w/ 5.35% return     +0.65      2.71          NA
 SSG w/ 6.35% return     +1.69      3.76          NA

1/ Payroll tax rate reduced              to 9.9 in 2050 and 8.9 in 2060.
2/ Payroll tax rate reduced to 9.4 in 2040, 6.4 in 2050 and 4.4 in 2060.
------------------------------------------------------------------------
Source: Social Security Administration Memorandum of April 29, 1999 at
      http://www.house.gov/archer/social_security/details/Actuarie.html
Note: Based on intermediate assumptions of the 1999 Trustees Report and
      other assumptions described in the text.
========================================================================
What bothers me about the Archer/Shaw SSG plan is that, like the Clinton
plan, it proposes to save Social Security with general tax revenues.  For
over sixty years, Social Security has been funded strictly with FICA
taxes.  While the FICA tax rate has risen steadily, this arrangement has
provided at least a little restraint on the system.  We are proposing to
throw even that small restraint out the window without making any serious
attempt to bring Social Security into balance.  God forbid that we should
work a day longer to make up for our longer life expectancies.  God forbid
that we should give up one penny of benefits because we have raised fewer
children who will pay taxes.  Both plans propose to guarantee the current
benefit structure regardless of current realities or of what happens in
the future.  In fact, both plans propose new benefits.  I can't help but
think of Eugene Steuerle's following statement before the Committee on
Finance on February 9, 1999:
>
> It is ironic that the legacy that baby boomers would now bequeath is
> one in which almost the sole purpose of the federal government would
> be to care for their own consumption needs in retirement.
>
His full testimony can be found at:

http://www.urban.org/TESTIMON/steuerle2-9-99.html

Reed Davis