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THE CATO PLAN IS BAD FOR WOMEN REVISITED


I'd like to offer a brief response to Darcy Olsen's comments on my comment on 
the Cato earnings sharing plan.  IWPR hasn't published its response yet, but 
we'll put it up on our web site when we do:  http://www.iwpr.org.  In the 
meantime participants can find other information about Social Security and 
women's lives there.

Darcy is technically correct that the CATO Institute doesn't have a plan.  
Individual writers at CATO propose different plans.  And the most recent 
report from the CATO Institute that I've seen explicitly disavows the 
earnings sharing idea put forward in the CATO report on why privatization is 
good for women.  It says it is too complicated and costly to administer, 
something most other reformers agree on.

Please note that Darcy does not dispute my central point that the main gains 
for women from the privatization plan she put forward come from the earnings 
sharing not the privatization.  In fact for it to really look good for women, 
the privatization would have to be total, a full 10 percentage points of the 
12.5 percent payroll tax going to individual accounts (the other 2.5 being 
reserved for disability and life insurance).  No such plan is politically 
realistic, and any such plan creates a huge transition problem because all 
the payroll tax would have to go to the new system--who would pay for current 
retirees?

Nothing much beyond 2 percentage points into private accounts is being 
discussed in Congress and most Americans when polled prefer the President's 
Add-On USA accounts to the privatizers' carve-out accounts.  The privatizers 
have already lost the war on this issue, so you might as well forget it for 
awhile and relax.
  
By the way, if one of the main things the privatizers want to accomplish is 
to allow people to benefit from the stock market, that, can of course be done 
without privatization, simply by allowing the govt to invest the Social 
Security Trust Fund in the stock market.  Then individuals will be able to 
benefit from those earnings gains.

The finances of the current plan do have to be shored up, but that can be 
done without radical reform like priatized individual accounts.  The 
privatizers are being dishonest when they say switching from PAYGO to 
PREFUNDED doesn't have huge transition costs.  It does.

I for one am not worried about the so-called unfunded liability of the current 
Social Security system.  I am confident that through the political process we 
will continue to ensure that Social Security benefits are paid.  

A lot of changes that we cannot anticipate now will occur in the next 75 
years, and beyond and as insurance against those unknown changes I'd like to 
stick with the system that has served us well and can continue to do so with 
some minor adjustments.  Darcy prefers to trust the market and compound 
interest for the future.  I prefer to trust our democracy.  Darcy, let's 
agree to disagree.  Neither of us can win the argument about what's best for 
today's 21 year old young woman or man.  It all depends on what assumptions 
you make about the future, which is unknowable, and where you want to place 
your faith.


Heidi Hartmann


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