There you go again. Even after President Bush has temporarily withdrawn his campaign for privatized Social Security, your Jan. 9 editorial "Still a Worthy Idea" resurrects it.
The idea languished because it was a bad one. The president stated that private accounts would have no effect on the solvency of the Social Security system. Financial experts stated it would add $2 trillion to the already runaway federal deficit.
Analysis of privatization proposals show that younger workers will get hit twice. Once with a reduction in Social Security benefits (yes, a few skilled investors might make that up). Then they will have to bear the burden of paying off the hugely increased federal debt.
Some leaders of the opposition to private accounts did not offer solutions to a possible solvency issue because no solution to any possible financial shortfall was offered by the president.
I have some possible solutions for a potential shortfall in Social Security funds that may or may not occur in 2052. These solutions would not require private accounts and would allow Social Security to continue as a social insurance program guaranteeing not only long-term retirement benefits, but also the disability and survivor benefits provided by the program. Here they are:
Invest the trust fund in a well-diversified portfolio of financial instruments as recommended by the late Franco Modigliani, a Nobel laureate in economics. This would increase the earnings on the funds while only minimally increasing the volatility.
Increase the payroll tax earnings cap. At one time, the maximum earnings base for the Social Security payroll tax covered 90% of all wages; today the maximum base is about 85%. By bringing the base back to 90%, more income would enter the system. Fewer than 6% of working people would be affected.
Tax Social Security so it is given the same tax treatment as pension benefits. Income tax on Social Security earnings is placed in the Social Security Trust Fund.
Develop a cost-of-living adjustment based on the spending pattern of retirees, instead of the general CPI. Retirees spend money differently from families and working singles.
These are four relatively benign suggestions. If these changes do not solve the full problem (they probably would) then let me make a request of your readers:
You spend all your time trying to figure out how to create personal wealth for the few, why don't you take some time and see if you can figure out how to keep Social Security as a social insurance program protecting all working Americans with a guaranteed income retirement plan as well as survivor's protection and disability protection?
Mel Aaronson
treasurer and chairman
United Federation of Teachers
Pension Committee
New York
