Saturday, March 26, 2005


To Representative Tom Udall, with respect. Please do not follow the general Democrat line that there is no problem with Social Security. Do not even get into the argument as to whether there is merely a problem, or whether the problem is a crisis. Do not refer to "privatization" or "private accounts." Do not argue that the administration wants to destroy social security, and is starting the privatization process by taking a portion and will be back later for the remainder. Do not try to frighten the old folks (born before 1950) with the specter that their benefits, their insurance, will be diminished. These arguments are non-productive, and of course some are unfair and misleading. You are above that, but some, a few misguided Democrats, might want you to make those arguments as you go about the State next week.

When the issue of ownership comes up, the answer is that there is no ownership in insurance premiums paid, until and unless there is a loss. How could there be anything left to leave to the heirs? If we increase the amount paid in, to allow a nest egg for heirs to build up (like a whole-life insurance policy), that is an increase in taxes. Rather than increase the payroll taxes to provide such a nest egg, let each wage earner invest her after-tax income in such a whole-life policy to provide her estate with money (ownership) which she can leave to her heirs.

The issue remains, and we submit that it is the principal issue, whether our people should be required by law to buy insurance through the government, for old age partial-subsistence living expenses, for survivor's benefits (husbands and children), and for disability benefits. Should the government dictate in this regard? Should this insurance be compulsory? The compulsory feature is the essence of the plan put into place 70 years ago. Should we change this, at least in part, so that the insurance is no longer compulsory? This should be the issue.

Some refer to personal accounts as a diversion of a "small amount" of their payroll taxes into personal accounts, and argue that this would be a good thing. Whether it would be a good thing for the individual depends on whether she can buy the insurance (with the same guarantees) for less money, or whether she would be better off in the long run without the insurance. The small amount discussed is 4% of the 12 1/2% payroll tax. Does this mean 4%, that she and her employer each put 2% into her personal account?

In such case, she is taking 33% of her support from the governnment-run, compulsory insurance scheme, and presumably will take a 33% cut in the payments when and if a loss occurs (here we include payments after 62 or 65 for partial subsistence, as a "loss" in insurance terms). The nest egg in her personal account will make up for the reduction in payments from the compulsory, government-run scheme. Does anyone have any idea what the premiums would be for private insurance that would provide the coverage of the government-run scheme? Leave aside the issue of guarantee (private corporations sometimes go under, or their CEO's steal it all), who sells such insurance (coverage as in social security) and at what price? Check on this before we go from government to private.

Our only legitimate concern here is what happens when we no longer compel people to buy insurance of the nature of social security? Maybe they will do well and take care of themselves, or their relatives or friends or members of their church will take care of them. But what if they become public charges? There is the rub. You and I will not allow them to simply lie down and starve to death or do without the necessaries of life. We will be compelled by human decency, to provide for these. That is the principle behind compulsory insurance. Sen. Robert Dole advocated a safety net (though not a hammock). How can you have a safety net without compulsory social security?

Many fought that principle (compel them to buy social security) back in the 1930's (and fought the same principle in Medicare in the 1960's), and well-intentioned and fair-minded people today oppose the compulsory nature of the social security insurance safety net. They think that they can handle their money without the necessity of the government getting involved. This is the issue that should be debated, compulsory or not compulsory? Private is okay if it is guaranteed; but if it is not guaranteed and compulsory, then government-run compulsory insurance is justified.

Is there a crisis? Irrelevant. There is a problem. To fix the problem, we must raise taxes on someone (not necessarily immediately) or cut benefits for someone (not necessarily immediately). Some have suggested a means test; say no to that. No means test for social security benefits (beyond that we already have, as the rich are now scaled down in benefits); or we are all on relief. Let us get some facts, figures, as to what percentage of increase of the payroll tax on those under $90 thousand would be necessary to fund social security as we know it for 75 more years. Let us get such figures as to how high we would have to raise the $90 thousand cap to permit social security as we know it to continue for 75 years.

Democrats, stop saying there is no problem. Admit that there is a problem, and give the administration the room to make a concrete proposal or proposals to cure the problem. President Bush has said he would consider raising the cap on payroll taxes. Seems it would be helpful to find out what effect it would have if we raised or eliminated the payroll tax cap. The bottom line is that we should say, Yes, we have a problem, and yes, we will consider whatever concrete proposal the administration wants to make (no generalities, please).

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