On 5/14/05, Erik Reuter <[EMAIL PROTECTED]> wrote: > > http://waysandmeans.house.gov/hearings.asp?formmode=printfriendly&id=2627 > > House Committee on Ways and Means > > Statement of The Honorable Lawrence B. Lindsey, President and Chief > Executive Officer, The Lindsey Group, Fairfax, Virginia > > Testimony Before the House Committee on Ways and Means > > May 12, 2005 > > Mr. Chairman, members of the Committee, I am honored to have been > asked to testify today on the issue of Social Security reform. It is > surprising that the issue of promoting national saving is not at the > center of the current debate over Social Security reform, and that will > be the focus of my comments today. > > Last year Americans spent . on consumption, investment, and government > -- $1.06 for every dollar they earned. We balanced our collective > checkbook only by selling assets we owned and by borrowing directly > from foreigners, including institutions like the People.s Bank of > China, to whom one might prefer not to be increasingly indebted. This > borrowing is directly tied to an ever growing trend for us to consume > foreign-produced goods at the expense of American production. Done > right, the reform process offers enormous potential for improving our > national saving rate and thus reducing the amount we will be borrowing > from foreigners over the next century. > > The first part of any credible Social Security reform plan is to > permanently eliminate the actuarial deficit in the system. Currently > the system has promised to pay out, in present value terms, $11 trillion > more than it will collect in revenue. There are a number of ways of > closing this gap, but with different implications for national saving. >
Anyone who starts out this badly falsely representing the state of Social Security is pursuing a different agenda I am not interested in. He and other Republicans make the shortfall seem as big as possible by using dollar figures and estimates for an "infinite horizon." Instead of emphasizing that the shortfall over seventy-five years is 1.92 percent of payroll, which can obviously be eliminated by any combination of income increases or benefit reductions that are equivalent to a 1 percent increase in the contribution rate for employees and employers each, the GOP talks about a present value shortfall of $11.1 trillion figured over an infinite horizon, adding up shortfalls decade after decade for hundreds of years after the program's financing could quite easily have been fixed. $11.1 trillion sure sounds big! But it is not pointed out that estimates using the infinite horizon approach would show a gross domestic product so huge that the total future shortfall in Social Security would weigh in at only about 1.2%. Let us contrast that with a Dem plan to balance Social Security and not just for the next 75 years. The Robert Ball plan. 1. Gradually raise the cap on earnings covered by Social Security so that once again 90 percent of all such earnings would be taxed and counted for benefits. 2. Beginning in 2010, dedicate the proceeds of the revised estate tax to Social Security. (Hey, someone else thought this was a good idea.) This would make the 2009 $7 million dollar exemption for couples permanent instead of the GOP plans to abolish the estate tax entirely. 3. Improve the return on Social Security funds by gradually investing part of them in equities, These three steps bring Social Security to with actuarial defined acceptable risk/close balance previously used for Social Security and long term pensions but let us go further. 4. Replace the present COLA with the chained CPI inflation factor. 5. Make the program universal - bring all state and local employers under it. This puts the plan in a slight surplus using the GOP Social Security governors accounting This does only protect Social Security for the next 75 years or more. So make a future automatic correction. 6. If in 2023 or later when the ratio of the trust funds at the beginning of a year to the benefits in the following year starts to decline increase the employer and employee contribution by 0.5%. Result a plan in balance or surplus for over a century and perhaps to infinity and beyond. Robert M. Ball served as Commissioner of Social Security under Presidents Kennedy, Johnson, and Nixon, served on many statutory advisory councils, and on the bipartisan commission that produced the 1983 amendments. His latest book is Insuring the Essentials: Bob Ball on Social Security, (New York: The Century Foundation Press, 2000). http://www.socsec.org/publications.asp I am not in complete agreement with this plan. The chained CPI uses a lot of subtle and difficult to quantify estimates of the value of improvements in new merchandise and I think a CPI index for seniors and people actually receiving Social Security is needed. Still this is for those wanting a Democratic alternate to all the plans proposed which reduce benefits more and sooner for median retirees than simply doing nothing while also pushing the federal deficit higher and faster. Beware of Republicans saying I am here to help you. -- Gary Denton Easter Lemming Blogs http://elemming.blogspot.com http://elemming2.blogspot.com _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
