Response to Heidi Hartmann's posting of Friday, May 28th

[Darcy Olsen <dolsen@cato.org>]

This is in response to Heidi Hartmann's posting Friday May 28th. 

First, the study to which she refers (published by Cato) can be found at
http://www.socialsecurity.org/pubs/ssps/ssp12es.html I would encourage
readers to read the study for themselves. 

The study is certainly not based on misleading assumptions about women's
lives, as Ms. Hartmann asserts. In fact, the first part of the study is a
retrospective analysis that examines the actual work histories of 1,992
American women who retired in 1981, and compares what they received from
Social Security with what they would have received with private retirement
accounts given actual market returns. There was no fiddling with assumptions
because the analysis was based on actual historic data. The facts are
undoctored, plain and simple, and women would have done far better under the
private system. 

The second part of the study is a prospective analysis, which by its nature,
necessitates assumptions about work histories, earnings, and future market
returns. All of those assumptions are explained in detail in the paper.

Second, it a completely false to suggest that one generation would have to
pay for two retirement systems. The current Social Security system has run
up a $9 trillion liability--young workers are going to get stuck with that
bill no matter how you slice it, unless the government reneges on its
promises to retirees. Given the political climate, that is highly unlikely.
Young people know that debt must be paid, and they also understand that, far
better than continuing to run up even more debt would be to move to a fully
funded system, one that will not burden their children and grandchildren in
the way that Social Security burdens them today. This is one reason why
polls across the political spectrum show that young people overwhelmingly
support reforming the system to a fully funded one based on personal accounts.

Third, the Cato institute per se doesn't have plans, each author writes
about his or her own views. I have always supported earnings sharing and I
continue to do so, as does the project director Michael Tanner. The
accusation that either of us has reversed our positions is simply false.

Finally, Ms. Hartmann believes "women are better off with Social Security
the way it is." Social Security, the way it is, unless taxes are raised to
nearly 20 cents on the dollar, will not be able to pay promised
benefits--benefits will need to be cut by one-third, according to the Social
Security Administration. The average woman's benefit today is roughly $600
per month. Is Ms. Hartmann content to see that benefit drop to $400 per
month? Maybe she is, but I'm not.

Under the plans that I and others have presented at Cato, workers would have
a choice to stay in Social Security or go into a fully funded system of
personal accounts. Ms. Hartmann could stay in the current system and receive
her $400 or $600 per month, but I for one would like to take my chances, and
my payroll taxes, elsewhere. Workers deserve to have that choice.


Darcy Olsen