In response to Vice President Al Gore's invitation for ideas on controlling spending, Grady L. Patterson Jr., treasurer of the state of South Carolina, sent several suggestions to him. The following contains some of the proposals excerpted from his letter.
Pursuant to your invitation, I herewith respectfully offer the following suggestions for saving money. Repeal worthless burdensome laws and regulations that place great burdens on the states with no redeeming value to the states and very little to the federal government, such as the Cash Management Improvement Act and arbitrage regulations.
CMIA Public Law 101-453
The Cash Management Improvement Act was proposed in 1984 or 1985 and passed in 1990. This law requires the payment of interest on funds transferred between the states and the federal government for program purposes.
When the law was proposed, the federal government estimated it would gain $50 million in interest payments from the state (this estimate was made when interest rates were 12% to 14%). Now, interest rates are below 3% (for short-term money).
This law is so onerous, burdensome and cumbersome that the effective date had to be extended to July 1993.
When all the calculations are made (causing a substantial increased work load) and all the auditing is done (also causing a substantial increased work load), I suspect the amount due back and forth will be a wash.
The expense of this law will far exceed any benefit derived from it. This law is a worthless and expensive exercise in futility.
I strongly urge it be repealed now.
Raise the retirement age for full benefits to age 72 over a 14-year period, beginning in 2006 and moving a half-year up in age each year to 2020 at which time the retirement age for full benefits would be 72.
Raise the threshold age for reduced benefits to age 65 over six years beginning 2008.
Also, consideration should be given to splitting the system into two parts.
Part one would provide some basic aid for low-income citizens of old age. This part of the system would be funded from general tax revenue.
Part two would provide income to those persons who contributed to the system through payroll deductions, and benefits would be based on contributions.
Another action Congress should take that would diminish political pressure on the system would be to restore the individual retirement account to its original status.
Admittedly, such action would cost the Treasury some revenue. On the other hand, people would realize after 10 to 20 years that they can save and provide for their own retirement. Over a period of time, people would be less dependent on Social Security.
Additionally, such action would increase substantially savings in this country.
If some action is not taken to adjust the long-range obligations of the Social Security system, maintaining the current level of benefits would require a 20% increase in both employer and employee payroll tax rates by 2000. In two decades beyond 2000, the rate would double today's rate of 7.65%.