SORTING OUT SOCIAL SECURITY
Your excellent article ''Social Security: Let it be'' (News: Analysis & Commentary, Nov. 30) and your editorial ''What Social Security crisis?'' neglected to mention the Social Security actuaries' assumption of a 6% average unemployment rate. This is far more crucial to their pessimistic main projection than the 1.7% growth rate. Their alternative 5% unemployment projection--generally ignored--had no problems for the future.
The potential (full-employment) growth rate is determined by the long-term labor force trend (highly predictable) and the productivity trend (not so predictable). But the average unemployment rate is determined by economic policy--which should be managed, not predicted. Unemployment has been well below 6% for several years, without inflation. So let's refocus the Social Security debate on the economic policies that so largely determine its financial health, not on speculative projections.
John S. Atlee, President
But Social Security has worked well because pyramid schemes always work for the few who get in early. It is later, when liabilities mount, that the problems begin. Second, the Social Security ''trust fund'' does not exist. Third, today's workers already pay for current retirees while saving for their own retirement. Privatizing Social Security would mean my contributions as a young worker would belong to me, perhaps offsetting my current retirement contributions and effectively cutting my taxes. Needless to say, this is preferable to seeing my contributions be poured down a sinkhole in exchange for nothing, as is currently the case.
As for ''financial market whims,'' money moves around in a financial market to attain higher returns, which makes growth possible. The private financial market is a perfect place for retirement savings--investments that are intended to pay off decades down the road.
Whatever debt the federal government now has to the Social Security Trust Fund at 5% should be repaid at 1% of the outstanding balance per year. Admittedly, this would take 100 years to pay off but should not be a significant burden on the taxpayer. At least a target would be established to amortize the debt. This repayment schedule should also reduce the amount necessary to be paid through payroll taxes.
Frank C. Haugh
Graff L. Kennelly
Updated Dec. 10, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.