Conference nyoss1::market_investing

    IMHO, the original intent of Social Security was based on the concept
    of the working public supporting those that were too old to compete in the
    marketplace.  It envisioned, i'm sure, a uniform ratio of those working
    as compared to those not.  When it started it was a ratio of 30 workers
    to every benefitiary, that has now been reduced to 8:1 by the
    demographic shift associated with the baby boom.
    
    The government, in it's eminent wisdom, i'm sure never intended SS to
    be a 'ponzi' game.  However, because of the demographic shift, it sure 
    is starting to look that way.  Of even greater concern is the fact that 
    the government is removing the Tax $$$ (ie: CASH) put into SS for use 
    in the general budget, replacing that money with Treasury Bonds.  
    This is in effect an IOU that happens to pay interest.
    
    Now this is all fine and good, if you assume Treasury Bonds will 
    continue to be worth something.  However, with the state of our
    National Debt, 'when' (Not If) the government defaults the SS program 
    will be worthless.  So maybe outright fraud isn't so far fetched.
    
    
    

I also read somewhere that when Social Security was proposed, and retirement age
was set at 65, the average life expectancy for working people was 63.  I don't
have actuarial numbers, but I think average life expectancy is in the mid-70's,
which implies the retirement age should be flexible.

I know it has recently changed so people born after 1959 will have to reach age
70 before being able to collect 100% of the social security.  I'm not certain
what the cutoff date is, but my statement for my 1960 birthdate made it seem
like 1960 was the effective date.

I personally would like to keep it in the family.  The workers in my family
would pay the retired people in my family directly (thereby eliminating the
middle men), and also pay some small percentage to the government for people
with no families.  Now _that_ would bring back family values!

Elaine

    I would not say that the Social Security system is a Ponzi scheme.  In
    such a scheme, the motive for new investors to invest is that they will
    in the future attain a huge reward for their investment.  Some
    "investors" in Social Security may believe that, and the possibility of
    future gain may, to some extent, make the continuance of Social
    Security politically possible.  However, the main reason that we
    "investors" do invest in Social Security is that we are forced to do
    so.  While it is true that the Government tells us that we will someday
    get something for this investment, I think that the number of people
    who would voluntarily invest on the basis of any  promise of
    return (whether the promise is true or false) is very small.  Also, if
    our politicians were completely honest with us and said "Our deficit is
    completely out of control.  We don't intend to do much about it.  We
    intend to borrow from Social Security until there's nothing left, but
    in the mean time, I'll get as much money for my district as I can even
    though the nation as a whole will suffer", I don't think that it would
    change things a lot.  So, what the Government is telling us does not
    have an effect on the degree of investment.  This is not the case with
    fraud.
    
    -Bob 

    Donno Bob, it's more like, "There's nothing to be concerned about, we'll
    fix the deficit and the debt when we find enough tiome to get around to
    it but right now we have more pressing issues to worry about like
    health care, world trade and violent crime, so continue to send your 
    checks and we'll sort of talk about campaign finance reform and PAC
    limitations.  Again, nothing to be concerned about, Social Socurity is
    just fine until the year 2003."
    
    Sounds like a 'ponzi scheme' to me...
    
    		But then again, i tend to be skeptical...
    

    It's not a Ponzi scheme. Congress can, and will, change the rules so
    that SS remains relatively solvent. There have been many changes in the
    past, there will be many more in the future. The changes to come,
    however, will likely be benefit reductions while most of the changes in
    the past were tax and benefit increases.
    
    Straightforward extrapolations into the future rarely turn out as predicted.
    
      John

    The Social Security system was started to rescue the elderly from
    poverty.  Prior to Social Security there was a vast population of
    homeless elderly people, in some cases dying of starvation.  It was
    a very depressing situation.  
    
    Social Security has achieved its objective.  The elderly living in
    poverty has been reduced from something like 40% down to something less
    than 5%.
    
    Social Security is not in any way a retirement fund, or investment
    plan.  How the public has come to believe this is beyond me.  There is
    no such thing as a Social Security account where "your" contributions
    are held for you.  It is not that way, and was never intended to be.
    
    Social Security is welfare for the elderly. Plain and simple.  That is
    fine with me.  I accept it and think its a worthwhile program that
    works.  The way this welfare plan is funded may confuse people into
    thinking it is an investment retirement account.  It is not.  They
    could just as easily fund the social security (elderly welfare) system
    by placing a national sales tax on automobiles, or raising the
    inheritance tax by 10%, or eliminating the standard deduction for
    each of your dependant children.  Maybe funding the system in some of
    these ways would wake people up to the fact that the money you pay into
    Social Security has absolutely nothing to do with what if anything you
    will recieve when you retire.
    
    Actually now that I think about it a few more nanoseconds I can see how
    some people are confused.  You are given a SS card a birth, with your
    very own "account" number on it.  Your paycheck shows your weekly and
    annual "contribution" to SS.  Your paycheck also has your SS account #
    on it.  The amount you receive when you retire is calculated based on
    what you earned (and therefore contributed) in your last three years
    of earnings.  This again reinforces the mistaken notion that what you
    paid in determines what you get out.  It really doesn't.
    
    Social Security is welfare for the elderly, and welfare is not a dirty
    word in my vocabulary.  In my opinion, Social Security should only be
    paid to those who need it to avoid poverty.  It should not be paid to
    those who have provided for themselves.  Maybe if it was done this way
    people would get the idea that is was not an investment plan.
    
    

>    Social Security is welfare for the elderly, and welfare is not a dirty
>    word in my vocabulary.  In my opinion, Social Security should only be
>    paid to those who need it to avoid poverty.  It should not be paid to
>    those who have provided for themselves.  Maybe if it was done this way
>    people would get the idea that is was not an investment plan.
    
In my opinion, the fatal flaw in any welfare program is that they are
a disincentive for people to provide for themselves - or should I say -
to be "responsible" for themselves.  At least providing ALL elderly 
with SS payments is fair to those who did sacrifice to provide for themselves.
I could go on with general comments about how there has been a very large
attitude shift in American society over the past 100 years from the expectation
that people were responsible for their own lives towards the expectation that
Big Brother (or anyone else for that matter) is responsible for our health,
security, and welfare, but that is not what this note is really about.  :-)

    I worked in the actuary's office at Social Security for a year. My
    short answer is: no, SS is not a Ponzi scheme, but welfare for the
    elderly. It's also one of the parts of the government that works very
    well, at least in isolation. Since they have been running a surplus,
    though, they have not been allowed to stay in isolation,
    unfortunately.
    
    >     Social Security is not in any way a retirement fund, or investment
    > plan.  How the public has come to believe this is beyond me.
    
    A little background: SS had alway been intended to be a pay-as-you-go
    system. However, when FDR started it in 1935, the work ethic was very
    strong, and much of the public was not keen on "charity", either giving
    it or with accepting it. The government sold the program to the public by
    saying that it isn't really charity, it's like putting away some
    money away for retirement. Apparently they sold the message too well,
    because the illusion continues that the checks from SSA is money that
    the retiree paid into the system.
    
    > The way this welfare plan is funded may confuse people into
    > thinking it is an investment retirement account.  It is not. 
    
    However, there are many elements of the retirement program in it. You
    do not qualify for benefits unless you have been paying SS tax for a
    certain number of quarters, or if you are the dependent of such a one.
    The number of quarters comes to three years, last I heard. Your benefit
    is based on the salary during those last three quarters, as has been
    said. It's not linear, but something like 90% of your first $X plus 32%
    of your next $Y plus 10% of next Z, and 0% of the rest. (X+Y+Z is also
    the max salary you have to pay SS tax on, around $70K I think.) So this
    flattens the benefit across all recipients somewhat. Still, unlike most
    welfare programs, it pays the highest benefit to those least in need of
    it.
    
    When I was with the office, I often ran simulations of the trust fund
    performance under various assumptions (tax law changes, decreased
    benefits, economic variables). One interesting one that I ran on my
    own was that we could save 25-33% of the payouts from SS ($100-$150
    billion, more or less) if we completely leveled the benefit so that all
    recipients received $1000 above the payment needed to keep a person
    right at the poverty line. So everyone would be above the poverty
    level; wise investors would supplement this with pension and savings;
    and the gummint would save a lot of money. This solution is also
    totally untenable politically.
    
    Someone earlier mentioned that the ratio of workers to retirees is
    about 8 - 1. It's actually around 3 - 1 because of our increasingly
    healthy aging population. When the baby boomers start retiring, this
    will be around 2.5 - 1 or less. This is the disaster that SS is trying
    to plan for and avert. They would succeed if they were left alone.
    
    See, even though SS is pay as you go, it does have trust funds which
    provide the "bank account" out of which the checks are written. In the
    past, these funds ran about a 2 month surplus. Around 1981, they were
    on the verge of being exhausted; what's more, the long-term baby boom
    crisis was seen to be approaching. To avert this, tax rates were raised
    above what was necessary for monthly payments, in order to build up the
    funds. The funds would sit around accumulating interest until they were
    needed around the year 2005 - 2015. Then lots of baby boomers retire,
    and the funds start collecting *less* than they pay out. But that's
    okay, because the accumulated surplus is worked down. Everything works
    fine. However, as a previous noter noted, the rest of the Federal
    gummint is borrowing from the funds and basically writing IOU's to
    them. In ten or fifteen years, what happens when SS needs the money
    back and calls in its IOU's? Will they be honored, and if so, what will
    they be worth in today's money?
    
    Doomsayers should keep in mind, however, that having SS run out of
    money will be tough, but not an all-out calamity. We faced that
    possibility in 1982, and only borrowing from the Medicare fund allowed
    us the few months needed to legislate a solution. What if the trust
    funds ran out of money in July? Well, tax revenues would still be
    coming in. July's checks might have to wait until July 3 to go out; the
    next might be sent August 5, September 7, etc. The result is an
    effective reduction in the benefit, but not barbarians at the gate.
    
    Other long-term measures are in place as well. In 1982, the law was
    passed to gradually increase the retirement age to 67, from 65. This is
    consistent with increasing life expectancies (about 75 for men and 80
    for women, I think), but not with early retirement plans :-o
    
    As for return on your investment, hitherto SS has been a good deal. The
    first retiree paid $105 in taxes and received something like $80K in
    payments. Since then the ratios have been going down; today's retiree
    just about breaks even in what he contributed versus what he can expect
    to collect. This will get worse in the future, but I don't think of it
    as paying for my retirement. I'm paying for my parents'. For myself,
    I'm investing as if SS will not be there when I retire. It's thirty
    years away, so who can tell?
    
    				Jim

    Thanks Jim for the well written, thorough explaination of the SS
    system...seems you have a lot of experience in this area.
    
    The only comment i have to try to balance somewhat your assessment of
    the 'borrowing' being done with the SS system is this...the big concern
    with 30 year Treasuries earning 6% being used to fund SS is if we end
    up in an era of hyper-inflation, which is not at all unlikely, the
    investments in bonds will be worthless when inflation is raging at 50%,
    100% or, yes, even 1000%...if this ends up being a real life scenario
    then 'cash' in a money market fund would be the only way the fund could
    keep up.
    
    Any thoughts???
    
    			Doug  
              

    re: .9

    I find hyper-inflation a fascinating subject. I think what makes it so
    interesting is that its' principal effect is the destruction of one of
    money's two functions: A store of value. (Means of exchange is the
    other.)

    Hyper-inflation seems to occur in economies whose output has
    drastically shrunk. Note that I'm only identifying a correlation
    between the two phenomena, not which caused the other, nor am I
    asserting that significantly shrunken output is a sufficient condition
    for hyper-inflation, only that it is a necessary condition. 

    Can someone cite an instance of hyper-inflation where output remained
    relatively constant (or increased)?

    If having one requires the presence of the other, then I do not believe
    we will experience hyper-inflation in the US, because I cannot envision
    a scenario (short of a nuclear winter or meteorological cataclysm) that
    would reduce GDP by 50% or more.

A minor digression from Social Security....
    
    i'm not sure but i'll go check The Economist's write up on Latin
    America.  In country's like Argentina and Brazil i think the GDP has 
    stayed pretty much constant or dropped slightly, but what has fueled 
    their inflation is the money supply.
    
    In Figgie's book he warns that increasing the money supply by any
    government to reduce their national debt would be like throwing gas on a 
    fire.  The worst possible thing that could be done.
    
    i was reading of interest recently that although M2 has actually
    declined over the last 3 years or so (they cited the move from Money 
    Market funds into equities) that the 'broad measure' (all cash and
    securities) of money has actually sky rocketed.
    
    This to me is a warning sign within our own economy that inflation will
    return.  News reports of a strengthening economy are just the
    beginnings of the push to increase prices.  Companies have come out of
    the recession very lean, but are actually in a position were they almost
    have to increase prices to justify the high earnings expectations of
    their stock.
    
Now back to the Social Security Discussion....    
    			
    				       		Doug
    

    Yes, back to it!
    
    > The only comment i have to try to balance somewhat your assessment of
    > the 'borrowing' being done with the SS system is this...the big concern
    > with 30 year Treasuries earning 6% being used to fund SS is if we end
    > up in an era of hyper-inflation, which is not at all unlikely, the
    > investments in bonds will be worthless when inflation is raging at 50%,
    > 100% or, yes, even 1000%...
    
    My experience dates back from the early Reagan years, when the national
    debt was only $1 trillion and the Reagan's chief economist was Rosie
    Glasses. At that time, the fear of large-scale fiscal disaster was much
    lower than it is now, so I don't think Congres was planning for the
    possibility of hyper-inflation. (Nor are they today). Their strategy in
    the solution to the long-range shortfall they saw in social security
    was motivated in part by fairness. If the tax rate had not been raised
    at all, or only enough to cover short-term shortfalls, then the
    generation who had to support retired baby boomers would need to be
    taxed at 10% or 12% in order to keep the same level of benefits. It was
    felt to be more fair to spread the burden by raising the rates to 7.65%
    in the near term, build up the surplus, and spend it down when the time
    comes.
    
    For Congress, the legislation which enacted this solution to the SS
    crisis in 1983 was a very good piece of work. Democrats had wanted tax
    increases to fund the shortfall, Republicans had wanted reductions in
    benefits or a freeze in the annual increase of benefits. A
    fifteen-person bipartisan committee headed by Alan Greenspan managed
    to hammer out a package that had both, and could pass Congress (one
    reason why I admire
    Greenspan to this day). It also tied the increases in benefits to the
    increase in annual wages, rather than prices, in order to avoid the
    Carter-era problem in which we had double-digit inflation in two years
    (and thus a similar increase in SS benefits) when the wage growth (and
    thus tax income) was around 5%.
    
    One last note on the Ponzi-scheme theme. SS was never meant to provide
    a full pension for retirees; it was just meant to be a supplement to
    other retirement income and/or family support. Yet many of the elderly
    live entirely on that benefit. That is part of the reason why those who
    get the benefits resist any attempt to lessen them. It's also why I'm
    trying to provide for myself & family in other ways, whether or not SS
    is there when I retire. I expect it will be, but don't want to depend
    on it solely.
    			Jim

    Thanks Jim...good synopsis of the system...much appreciated.
    
    Doug

             I'm still confused that if SS is such a good deal then why is
    Congress exempt from participating in it?
    
                                                JRW

    re: -.1
    
    Two cynical answers:
    
    1) They DO participate - reread the preceding replies for an
    understanding of what they've done for SS through the years.
    
    2) For the same reason they've exempted themselves from so many 
    of the other laws they pass - in order to maintain a detached 
    (from reality) perspective.
    
    Stan

    Congresscritters are required by law to pay into a separate retirement
    fund. (I think *all* "civil service" types do) This is a law passed
    around the time SS was born.May even been part of the same bill)
    Hmmm...wonder if *their* retirement fund is in the shape ours is in?
    Bet it's not! Whaddya think?
    
    Ken
                                                                    

    Re: Congress not participating in Social Sec: As the previous note
    said, all Federal employees (including Congress) pay into their own
    pension plan. They can *also* participate in Social Security if they
    work outside the government. There used to be concern about "double
    dippers": people who worked for the federal government most of their
    lives, but then worked for a few years before retirement in the private
    sector. They would qualify for *both* Federal retirement and SS
    benefits. (in some cases there were triple dippers, who also had a
    military pension coming). Laws passed in the early '80's provided that
    the SS benefit paid would be only the amount by which the normally
    calculated benefit exceeded the Federal pension. I would guess that
    that is usually nothing.
    
    I can't speak for the Federal pension fund's health because I didn't
    work in that area, but I imagine that it is in good shape. It is
    probably pay-as-you-go as is SS, and as long as there isn't a drastic
    drop in the number of federal employees, it should stay funded at
    healthy levels.
    
    > Au contraire,mon ami! The bill that FDR signed in the mid "thirties"
    > certainly created what was/is called a "trust fund" that would in
    > effect hold your contributions until you retired. What happened was
    > that this "trust fund" grew and grew because benefits paid to retirees
    > lagged far behind the taxes being paid.
    
    True so far. There were far more employees paying taxes (since that was
    virtually every employee) than there were qualifying beneficiaries, at
    first. There were and are actually three funds: Old Age/Survivors,
    Disability,  and Medicare.
    
    > Somewhere in the "fifties"
    > Congress decided to do something. Instead of lowering SS taxes (like
    > they should have) like the free-spenders that they were,they decided to
    
    SS tax rates were far too low for a long time, certainly through the
    50's. They were only sufficient to keep up with the current retiree
    population, which started very small but grew to eventually include
    almost all the elderly.
    
    > start giving the money away. Programs like SSI were born. Money was
    
    SSI (Supplemental Security Income) is a benefit like welfare paid to
    the elderly and disabled who don't qualify for regular social security
    (i.e., didn't work enough "quarters" to qualify). It is very small
    compared to the hundreds of billions paid through social security, and
    it draws from the regular budget, NOT from the SS trust funds.
    
    > The original program was designed to be self-sustaining forever and
    > probably *would* have been if Congress had left it alone.
    
    Not so. The tax rates were far too low initially. For 1937 - 1939, the
    MAXIMUM tax per year was $35! This was gradually increased with time,
    but only recently has become sufficient.
    
    > Also (contrary to popular belief) there *were* people in the government
    > in the mid "thirties" who could predict fairly accurately the life
    > expectancy in say sixty years. That was taken into account.
    
    Not entirely true. Actuaries, then and now, look mostly at demographic
    factors, such as birth rates, life expectancies, immigration rates,
    etc., and add in some economic factors like inflation and interest
    rates. The models usually include some assumptions about life
    expectancies, and they are usually based on actual experience, i.e.,
    "how long are people living now?" In 1935, the actuaries might well
    have added an assumption that life expectancies would continue to
    increase, but they couldn't have modeled that increase precisely, and
    they certainly couldn't have predicted WWII or the baby
    boom that followed.
    
    btw, the noter was correct that Congress could be exceedingly generous
    with the taxpayers' money. A problem in the 1960's and early 70's was
    that Congress found that voting for an increase in SS benefits was a
    sure vote-winner. They voted for 10% and 20% increases in years when
    the inflation rates were 5% or so. In defense, a law was passed in 1972
    tying benefits to the CPI, which at the time was fairly low; this
    eliminated the need for congressionally mandated benefit increases.
    However, this policy bit back when inflation reached double digits at 
    the end of the decade.
    
    			Jim

    re: .17
    
    According to a Money Magazine article published last year, the kind of
    "retirement" benefits these "law makers" get, it indicates that their
    retirement fund is no where near the shape of the SS fund. I guess it
    figures. These people are difinitely not stupid.
    
    Mike

	Many governments have this problem, in the UK, this is what is 
	happening......

	In 1987 - law passed that everyone had to contribute to a pension, 
	either company, private, or through government "serps", if you worked 
	more than 16 hours a week.

	Increase in retirement age of women from 60 to 65, for those under 40
	today.

	Increase in employees national insurance contributions by 1% from April.

	Only increasing pensions by RPI ie price levels, not wage levels.

	The "serps" part of the governemnt pension - that which is in line with
	salary, not the flat rate - being phased out for those under 40.

	Basic pension today is a flat 2,900quid (approx), and you need 42+ years
	contribution to get this.

	I am currently paying about 140 quid a month (whatever the max is), if 
	I retired I would get 240 quid a month from age 65........I started
	contributing at age 18......47 years contributions.

	There is talk NOW, about only paying the pension to those that need it,
	ie if you don't have other income, so although I can expect to get this
	at the moment, the rules could change in the next 25 years - and I 
	expect them to.

	I don't expect to get any pension back from the government, the writing
	is on the wall.

	Heather

    For some stupid reason,I thought the British would at least be able to
    manage money somewhat better than us. Guess I was wrong. You guys are
    in the same boat as us. *Only* difference is *your* free-spenders is
    called Parliament and *ours* is called Congress.
    
    Ken

	Manage money?.......that's what our finance institutions do.

	Our government just collects and spends, it seems to be good at 
	collecting, and even better at spending!

	Heather

   ..in some other places like India. There it's called a "Provident Fund".
   It's an account established for each individual who gets a paycheck
   somewhere. Your contribution along with the employer's contribution
   which is usually twice yours is deposited in a bank account. You're given
   a passbook for this and the money earns interest at the current savings
   bank rate. The account moves with you when you switch jobs. You can get
   a lumpsum on retirement (it's at 60, I think) or get paid monthly from
   the accumulation.

   Avoids a pyramid scheme, substituting notes for hard cash and allowing the
   Govt to play number games, etc... Does what it's supposed to do. You get
   what you pay into it leaving big government out of it. Most banks are
   state-owned and so you get not so good service, but with private banks
   competing for these deposits that drawback can be fixed too!

   Nari

    What you are describibg in India is a retirement plan.  Social Security
    is NOT a retirement plan.  It is a welfare plan for the elderly,
    whether they worked or not, funded through employee and employer
    taxes.
    
    Of course the India plan is better for those who worked.  But what
    about spouses who didn't work or those that couldn't work ?  Our
    Social Security system covers those people.
                                      

   ...about the differences between Social Security and Pension Plans.
   However when Social Security was first established, life expectancies
   were shorter and nobody stayed retired for the rest sixty years of their
   life playing golf in Florida. So new realities call for new approaches.

   Employee and employer contributions should go towards two piles of
   money. Your own pot and the general pot that's used for Social security
   for those that did not or could not work.

   If you work regularly and retire at a newly set age that allows for
   the latest life expectancy figures, then you should be able to receive
   payments that you can set per month but subject to a maximum that includes
   interest and the money you have contributed. If you set a high payment
   you run out sooner. 

   Those who did not work should necessarily get a much lesser amount every 
   month but it could be for life. There should be some incentive for those
   who could but did not work to work at some point in their life.

   Those who could not work would also get the much lesser amount every month
   but for life.

   To me that seems like a fair deal to everyone. Nobody gets what
   they don't deserve and the free ride is not as attractive as
   the one you have worked for. 

   What have I missed?

   Nari

    Nobody *ever* accused Congress of being logical and fair. These
    "bottom-feeders" will do whatever to get re-elected. God help us if
    some disaster like an asteroid should strike Florida thus wiping out
    90% of our retirees.(the rest live in Arizona) Congress would find
    itself with excess money from FICA taxes and the "giveaways" would
    start again.
    
    Ken

    Hey Ken...it's funny you mention asteroids...The Econimist's 150th
    aniversary issue had a big asteroid on the front and they did a cover
    story on the potential of us getting clocked by a 1Km diameter stone.
    
    Seems it's more probable than most would want to admit...better chances
    of that happening than getting hit by lightening or run over crossing
    the street...about 1 in 30,000....
    
    They were debating on whether money should be spent on star wars
    technology to detect asteroids and then use ICBM's to blow them up 
    if they are on a collision course...give us something to do now that we
    don't have to worry about the Russians (or do we).
    
    Now that's what i think we ought to spend money on....*;')
    
     

    I read that article.  It's not the same chance as getting struck
    by lightening--it's about the same cost, if you turn it to a per-year
    cost (examples using bogus numbers to make it easier to understand):
    
    	Lightening: 1000 per year world-wide * chance of 1.0 that it
    		happens = 1000/deaths a year
    
    	Asteroid: 10,000,000,000 die ("per year") when it happens *
    		chance of one in 1,000,0000 that it will happen in 
    		any one year =  1000/deaths a year
    
    So the article's conclusion was that it was worth spending money on
    prevention even though the event was unlikely, as if it happens it
    will have such a high cost.
    
    Given the recent news about the fossil crater in Yucatan which makes
    it very likely to have been the dinosaur killer and the coming big
    fireworks when that comet hits Jupiter, it's a pretty timely article.
    
    By the way, if there is any intelligent life on Jupiter, it sure
    could use an anti-asteroid system now, as the comet is going to hit
    this spring!  The estimate I saw in Sky and Telescope was something
    like half a million megatonnes energy equivalent.
    
    		-John Bishop

	Here is the editorial that inspired the base note.  At first
	I took it to be a broad approval of the SS system as it now
	stands; a few re-readings make me think it is opposed to any
	changes now because it doesn't trust that they'll be improvements.


  Editorial, Boston Sunday Globe, December 26, 1993 p. A26

	The security of Social Security

Full Social security benefits at a later retirement age, floated as a
possiblility by Treasurey Secretary Lloyd Bentsen last weekend, will 
probably not make the grade politically and my be unnecessary, but
even mention of the issure calls for a look at the system  The view 
is a good one.

Bentsen reopened a discussion that had been part of Congress' major
overhaul of Social Security in 1983, when it faced a serious and growing
imbalance between revenues and retirement benefits.  Included in that 
package were major adjustments in the payroll tax to meet obligations 
well into the next century, including automatic increases in the maximum
amounts subject to the payroll tax to keep pace with inflation.

Close students of Social Security are confident that the system will 
continue to show surpluses at least until 2015 or 2020, at which time it 
may be necessary to make some further adjustments.  It is possible, however,
that changes in retirement practices might come into play if qualified
employees are in short supply, reducing the number of retirees using the
benefit.  Furthermore, improved productivity could raise wages and salaries
above current expectations, adding to revenues.  In any event, it makes no
sense to consider changes in age eligibility for full benefits before that
picture gets a lot clearer than it is today.

Workers now nearing retirement should bear in mind that no adjustment has
ever been proposed in teh age at which one is first eligible for reduced 
benefits - 62.  that figure appears immutable in any likely set of political
circumstances.

Another element in Bentsen's casual remarks deserves attention.  The Social 
Security retirement system has been in surplus for years, and those surpluses
have reduced the Treasury's need to borrow to finance deficits in the rest of
the budget.  They also tend to disguise the size of the deficits in the 
operating budget that is otherwise supported by general taxes, since the two
elements are reported in a combined format.

Some politicians have always been tempted to increase the Social Security 
surplus by curtailing benefits or nching up the payroll tax.  At other times
an increase has been suggested in the portion of retirement benefits subject
to ordinary income tax, either by raising the percentage or by lowering the 
gross income at which a taxpayer becomes subject to the tax.

None of these maneuvers is desirable.  The payroll tax remains the most 
regressive portion of the entire federal tax structure and is justifiable 
only in part because the benefit structure is skewed somwwhat in favor of 
lower-income beneficiaries and because they escape enritely the income tax
on benefits.  To the extent that this redresses the inequity of the payroll
tax structure, it deserves to (be) preserved.

Social Security's retirement system is in excellent health and will remain so 
for a long time barring something totally unforeseeable.  Tampering with it at
this juncture is not only unnecessary, it could lead to inferior tax policies.

Your editorial defending Social Security's financial soundness
on December 26 was timely and reassuring, since my relatives use 
a very similar family plan to provide needed funds for nonworking
relatives.

Those of us still employed contribute to a fund, which then distributes
this money.  Some years ago, we foresaw proportionately more retirees
who lived longer, so we workers increased our contributions and set this
excess aside for the future.

Regrettably, an uncle with a long history of being a spendthrift gained
continuing personal access to these funds in trust, through some deft 
political and legal chicanery.  Now all that the family can show for 
these increased payments are his unwanted IOUs.

Your ringing endorsement of this contrarian approach to sound benefits
planning gives me hope that there may be other similar retirement plans,
hopefully including the Globe's.  That would assure a large pool of retirees 
who could share advice and experiences with trying to either collect on
or spend a pile of IOUs no one else seems anxious to claim.

    Geez...and I just pulled that asteroid stuff out of "thin air"! So
    somebody thinks it might happen? Would it hit Florida?
    
    Ken

    RE .31 > Good rebuttal...who says a little sarcasium won't go a long
    way...*;')

    re. .30 --
    > Bentsen reopened a discussion that had been part of Congress' major
> overhaul of Social Security in 1983, when it faced a serious and growing
> imbalance between revenues and retirement benefits.  Included in that 
> package were major adjustments in the payroll tax to meet obligations 
> well into the next century, including automatic increases in the maximum
> amounts subject to the payroll tax to keep pace with inflation.
    
    To nitpick a bit, automatic increases in the max amounts were
    legislated in the early 1970's, when benefits were also indexed to
    price increases. (in 1983, both were re-indexed to wage increases). How
    do I know? Because I performed the calculations for the annual increase
    when I worked in the actuary's office at SSA in 1982! Yes, I increased
    everybody's taxes by about $1 billion! hahahahahahaha!
    
    re: .31 -- that was an excellent response! Great satire; I had to read
    it twice to realize that it *was* satire. Hope it isn't too subtle.
    
    To be fair, though, I agree with the editorial that the SS system is
    basically sound. Perhaps you should make clear that what you object to
    is not SS itself and how it is administered, but the deceitful practice
    of the rest of the government to dip into that surplus, leaving an IOU
    in its place; and to use their surplus to disguise part of the deficit
    run by the rest of the government.
    				Jim
    

    Kind of makes you wonder: If "Slick" gets re-elected,how many more
    "give-away" programs will he come up with? Maybe he'll push for another
    FICA increase citing increased demands on SS then,when a surplus is
    evident,he'll just decide to get rid of it by spending it.
    
    Ken
    

re: .34 and other commentary - I'm pretty sure my reply wasn't 
published.  Here is a revision (new last paragraph is the only
change) I've sent in. I don't expect it to fare any better.   /Stan


Your editorial defending Social Security's financial soundness
on December 26 was timely and reassuring, since my relatives use 
a very similar family plan to provide needed funds for nonworking
relatives.

Those of us still employed contribute to a fund, which then distributes
this money.  Some years ago, we foresaw proportionately more retirees
who lived longer, so we workers increased our contributions and set this
excess aside for the future.

Regrettably, an uncle with a long history of being a spendthrift gained
continuing personal access to these funds in trust, through some deft 
political and legal chicanery.  Now all that the family can show for 
these increased payments are his unwanted IOUs.

Like our family plan, Social Security would be even more financially
secure if it could hold real assets instead of a spendthrift's promises
to pay later.  Let's permit the Social Security administrators to 
improve their excellent stewardship by getting the politics and Federal
debt financing out of our Social Security fund.