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Publications of Interest
August 9, 2000
The Concord Coalition published
"Another
Free Lunch on the Menu," a critique of Bush advisor Martin Feldstein's proposals
for Social Security reform based upon personal retirement accounts. Authors Neil
Howe and Richard Jackson argue that, "There are just two ways to close Social
Security's financing gap without burdening tomorrow's workers and taxpayers: Reduce
Social Security's long-term cost, or make the cost more bearable by increasing
national savings and hence the size of the economy. In the real world, a workable
plan must do both." Neither the Feldstein plan nor that of Vice President Gore
would satisfy the first criterion: both pledge full benefits to future retirees.
On the second count, the Feldstein plan is superior to Gore's, since personal
accounts are more likely to wall off funds from the government than an open-ended
pledge to run budget surpluses. Even then, however, the authors contend that
Feldstein overestimates the increase in national savings that will result, as
well as overestimating the increase in corporate tax revenues that would come
from that increased savings. For more information on Feldstein's plan, see "Allocating
Payroll Tax Revenue To Personal Retirement Accounts," the subject of the
Concord Coalition's criticism. Also see Feldstein's Cato study, "Privatizing
Social Security: The $10 Trillion Opportunity."
The Urban Institute released "Looking
at Social Security Reform Through a Socioeconomic Lens," by Eugene Steuerle
and Christopher Spiro. Instead of putting forward a reform plan and then analyzing
how it would affect different income groups, the authors turn the question around
by examining which types of reform low-, middle- and high-income workers would
prefer. "High-income individuals," they say, "will almost inevitably pay for
a significant share of Social Security reform. [Hence,] this group would probably
prefer a reform that cuts benefits to one that increases their taxes." Keeping
low-income retirees out of poverty is the main goal of Social Security; but
will other income groups resist sacrifices needed to keep the safety net intact?
Middle-income workers are the key: "Unlike rich retirees, middle-class retirees
are less prepared for their own retirement; unlike poor retirees, they can afford
to do more to prepare. Because most retirees fall into this socioeconomic group,
the success of Social Security reform rests on their willingness and ability
to make adjustments in their approach to retirement. [U]nless most middle-class
retirees work and save more, their children will have to support them through
higher taxes."
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