Saturday, July 02, 2005

A Letter from my Congressman

Update: This post is an update to an earlier comment I made in my "Stamped or Metered" entry on May 19, 2005.

In addition to the letter from my homeowners association, I also received in the mail today a letter from one of my senators, Saxby Chambliss. I won't get into the Social Security discussion again right now, but I do want to talk a little bit about the response itself. I'm a little honored that he bothered to reply, but disappointed in that it is obviously a form letter that someone pulled out of the "Social Security" stack. I'll post the entire text of my letter and his response in this post's comments in case you're curious about the exact exchange, but in this post, I have to at least show you his signature:

Notice that it's in blue, as if signed in person with a felt-tip pen. It kind of makes me feel important that a big-time US senator thought about me for a few minutes in his busy day. However, if you look closely, notice that the bottom loop of the "y" in "Saxby" is broken by the typewritten "l" in "Chambliss." Hmmm...

I do wish that his staff person who read and processed my letter had at least modified the basic form letter by putting something like, "Thank you for your ideas," or "I will consider the suggestion you have made," or at least something that indicates that the letter wasn't just OCR'ed and tagged as "Standard Social Security response letter number three." Oh well, at least I did receive a response, and one jam-packed with information about Social Security, and it pretty much spells out what his position on the issue is.

I never received a reponse from John Linder, my other senator, so I'm guessing that he's actually still pondering the idea carefully and taking his time so that the response will be really important and insightful.


At 6:46 PM, Blogger Skippus said...

From me to Saxby Chambliss:

With the recent plans regarding Social Security being discussed in national politics, I have been thinking more about my retirement plans and the availability of government resources when I get older. As an average American (as much as there can be an “average American,” I suppose), I wanted to share some of my thoughts in the hopes that it may help provide insight and perhaps even some ideas on how to proceed in the somewhat controversial topic of Social Security reform.

I understand that Social Security is a very expensive program, and that is of great concern to me. As one of the largest government expenditure programs, I would like to see every effort made to curb the long-term costs of this program. This is a compelling reason to support a plan to privatize Social Security, since the more money people receive from their own investments, the less money they receive from the government. However, I have some concerns and suggested changes to the plan being offered by President Bush.

As you are probably painfully aware, most Americans think of Social Security not as the tax that it is, but as a savings account. They do not understand that the money they have paid into the system has been paid to the existing recipients of Social Security benefits, and they believe that it would be extraordinarily unfair should their benefits be cut or eliminated after paying so much money every year.

Also, I think that most people are aware that even the most conservative private investments have risks associated with them. If Social Security taxes are converted into private account investments, most people will earn positive returns above the rate of inflation, but there will inevitably be some who make bad investing decisions that, at the time, seem safe. I do not believe that these people should effectively be punished because of their lack of knowledge about financial investments.

I think I have a solution to address the latter concerns. It seems to me that there is no reason why the best of both worlds—privatization and security—cannot be provided. I believe that the best course of action would be to convert the Social Security tax into low-risk private investment accounts, but keep a minimal version of the Social Security plan intact to provide a guaranteed benefit in the event that the returns from the private account fall below the former Social Security payment amount.

Perhaps an example would help explain the idea. Imagine that under this plan, Aaron pays money into a low-risk private investment account, and when he turns 65, the account begins paying him back $750 per month, the amount that Social Security would have paid him before. (I am making up these numbers since I have, in fact, never received a Social Security payment and do not know what an average amount would be.) Aaron lives a full life and, when he passes away, there is still some money remaining in his private account, which can be distributed per his wishes since it is his money. Now imagine Bert, who also pays money into a low-risk private investment account. When he turns 65, however, his account has not had a very good rate of return and he only receives $500 per month. The reformed Social Security system would pay Bert the $250 difference between what he is receiving and what he would have received under the old Social Security system. The fundamental assumption is that there would be a lot more people in Aaron’s situation than Bert’s, thus reducing the money needed for Social Security to a minute fraction of what it is currently. In fact, this is a key assumption in President Bush’s plan to privatize Social Security, and frankly, one that seems reasonable to me. To pay the minimal costs of the new Social Security system, a tax could be collected either on money being contributed to the account or money being withdrawn from the account.

The benefit of this plan is that it gives both sides of the Social Security privatization debate what they want. There is a significant cost savings to the Social Security system, and individuals have the opportunity to own the money for their retirement. There is also a guaranteed payment that offers security to everyone, regardless of investment performance.

The only remaining issue, of course, would be how to make up the budget shortfall for paying existing benefits when the money currently being contributed to the Social Security system is redirected into private investment accounts. Obviously, since I do not want to increase the budget deficit, this is an issue that should be addressed, perhaps by allowing an incrementally larger amount of money every year to be redirected, thus having only a small program deficit each year. I see no reason why under a system such as this, eventually the entire system could be privatized. There would be no more deficits in this program, and in fact there would eventually be a surplus that could be used for other purposes. (Paying off the debt incurred by the deficits in the previous years would be my suggestion.) In other words, at some point in the near future, Social Security could actually be a revenue generating program instead of an expenditure!

I hope that this idea may prove useful in the Social Security debate, and I appreciate your time and attention.

At 6:53 PM, Blogger Skippus said...

From Saxby Chambliss's Printer:

Thank you for contacting my office regarding the Social Security program. I appreciate hearing from you.

While the Social Security program does not face an immediate crisis, in only a few years when the baby-boomers begin to retire, benefits paid out will begin to exceed funds flowing in. According to the 2005 Social Security Trustees' Report, beginning in 2017, there will not be enough money coming into the system to pay full benefits. Furthermore, the Social Security Administration's trustees project that by 2041, Social Security's trust funds will be depleted, and the program will not be able to pay all its promised benefits. According to the Social Security trustees, if no action were taken until the trust funds become exhausted in 2041, payroll taxes would have to be increased by nearly 35 percent above the current tax, or benefits would have to be reduced by 26 percent. In order to avoid these consequences, something needs to be done now to fix the system.

Social Security is, and has always been, an important program. Today, the Social Security program provides benefits to retired and disabled workers and to the survivors of deceased workers. Currently, nearly 48 million Americans are receiving some form of Social Security benefit. We must ensure that this program continues to provide benefits to the working Americans that deserve what they have earned.

As you know, the major source of funding for Social Security is the payroll tax paid by today's workers, including federal employees and members of Congress. In 1950, almost a decade after the Social Security program was created, 16 workers paid into Social Security to support one beneficiary. Today, there are about three workers for every retiree, and when workers entering the work force today retire, there will be only two.

Both Democrats and Republicans recognize the problem and the need to fix the program. In 1999, Senator Byron Dorgan (D-ND) said "Fixing Social Security is an urgent priority. It ought to be at the top of both parties' agendas." Senator Kent Conrad (D-ND), the ranking Democrat member on the Senate Budge Committee, recently reiterated Senator Dorgan's comments and said "It is time to address this problem. Social Security must be preserved and strengthened."

In 2001, a bipartisan presidential commission made three recommendations to improve the Social Security program. All three proposals included some form of voluntary personal retirement accounts that would allow younger generations to build their own retirement savings outside of Social Security, while at the same time protecting and preserving benefits for today's seniors and those near retirement.

As Congress begins the debate on how to address Social Security's pending financial problem, please know that I will not support any proposal that does not give a 100 percent guarantee that all current and future beneficiaries will receive their benefits. Furthermore, I will support a proposal that makes the current system solvent and allows younger workers to voluntarily build their own nest egg for their retirement security, which they would own and be able to pass on to their children and grandchildren. [Editor's note: This already exists. It's called a Roth IRA. Sorry, couldn't resist that one.]

Thank you again for taking the time to contact me. As always, I appreciate hearing from you. In the meantime, if you would like to receive timely e-mail alerts regarding the latest congressional actions an my weekly e-newsletter, please sign up via my web site at: [Editor's note: Yes, the site address was blue and underlined in the letter. Someone doesn't know how to turn off hyperlink formatting in Microsoft Word!]

Very truly yours,
Saxby Chambliss
United States Senate

At 6:55 PM, Blogger Skippus said...

In case you don't know how to turn off automatic hypertext formatting in Microsoft Word either, read the support article on Microsoft's site.

Remember kids, automatic hypertext formatting is evil!


Post a Comment

<< Home