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March 25, 2005
Questions for Susan Davis
Tomorrow, Susan Davis, my representative in Congress, will be hosting a local Social Security Forum at the University of San Diego. Unfortunately, I will be out of town this weekend but I thought I'd post some questions that I hope get asked at the event. While Congresswoman Davis doesn't have much in the way of information regarding her opinion of if or how Social Security should be reformed, she does link to a calculator showing how much individuals would lose under a Bush proposal for private accounts. As such, I'll assume she is in agreement with the majority of her party who has been more vocal on the issue, and phrase my questions accordingly:
Questions:
1) No one disputes that Social Security, in it's current form, has promised to pay out trillions more in benefits than it will take in from payroll taxes. Much has been made of the "transition costs" to private accounts, but these "costs" are not new, they already exist within the current system in the form of unfunded liabilities. Wouldn't dealing with these costs now in the form of treasury debt be a better option than waiting for decades when much more debt would need to be issued to fund the system?
2) When Bill Clinton proposed private accounts as a way to help shore up the Social Security system in 2002, there was no uproar of opposition from the Democratic Party. In fact, many Democrats still support some sort of voluntary investment accounts within Social Security. Given these facts, is the current debate more of a battle over political power than honestly evaluating the best options for reform?
3) Much has been made of the White House's Commission on Social Security Reform's recommendations for fixing the system. Specifically, the calculator on your own website estimates the benefit cuts under the commission's "Model 2" plan, which would slow the rate of growth of current benefits by indexing them to prices instead of wages. But your calculator ignores a key aspect for lowincome workers. As the report states the plan:
"would enhance the existing Social Security system’s progressivity by significantly increasing benefits for low-income workers above what the system currently pays. This provision will raise even more of our lowincome elderly – most of whom are women – out of poverty."
Given that benefits cannot continue to be paid at their current levels indefinitely, would this not be a fair solution? Keeping benefits, in real terms, at their current levels for higher income workers, while at the same time increasing the benefits for those on the lower end of the income scale, seems like something Democrats should support. Why then are they attacking this aspect of the plan?
4) Do you agree that the Social Security system in it's current form is a Ponzi scheme where older workers' retirement is funded by a larger number of younger workers? Wouldn't it be beneficial to move towards a system where workers have the ability to rely on their own savings for retirement, instead of the tax dollars of their children and grandchildren?
5) It is often stated that Social Security will be able to pay full benefits up until 2041, at which time it will still be able to pay 75% of promised benefits. But according to Dr. John Cogan at Stanford, if in 2041 we decided to keep benefits unchanged for those in or near retirement (above age 55), this would mean cutting benefits by 2/3 for everyone else in the system. Is this an acceptable solution?
More questions can be found here. I'm looking forward to hear how the event turns out and, again, regret that I will be unable to attend.
Posted by Peter Mork at March 25, 2005 12:19 PM
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