United States Senate
February 10, 1999
1737 21st Street, N.W.
Washington, D.C. 20009
Dear Dean and Mark:
I have received your letter of February 9, and I must confess that the amazement is mine. There is no "refusal to disclose" anything concerning my proposal. The National Commission on Retirement Policy at all times used the projections provided by the Social Security actuaries regarding returns on stock. These are detailed on page 171 of the Report of the Social Security Advisory Council, Volume 1. If you believe that the level of detail in these assumptions is inadequate, then this is a matter of dispute between you and the Social Security administration, not with me. All of the assumptions used for our proposal are in the public domain, having been generated and published by the Social Security Actuaries. If you have made a request for more specific information to the actuaries about these assumptions, and it has not been met, then by all means I would be pleased to forward your request for information to SSA so that it can be answered adequately. It is rather inconsistent for you to contrast the level of detail in the assumptions in our plan with the ones made by the Social Security Trustees, when after all, they are one and the same.
My response to you was and is to make a fundamental point, which is that you are making an issue of details that are already publicly available concerning our plan when you yourself have offered a plan that purports to achieve solvency, but leaves financing holes of literally trillions of dollars, even on an annual basis. Sanctimony about details of stock returns is sorely misplaced from those who are representing that the Social Security program can be financed with the means that you suggest. If you wish to turn the careful eye to the policy details that you imply, a good starting place to do so would be the trillions of dollars in annual financing gaps in your own plan.
Perhaps the most important question regarding the financing of Social Security is the relationship between annual outlays and benefits in future years, and what will be the source of revenue to fill in any large gaps between these figures. These questions can only be answered by specifying the annual cash-flow figures for the program, and are not illuminated by references to actuarial solvency alone.
For example, under current law, the Social Security program is deemed by the Social Security actuaries to be "solvent" through 2032. However, in the year 2030 alone, they project an imbalance of fully $684 billion between the program's outlays and its revenues. This is the equivalent of roughly 4.66 percent of national taxable payroll in that year, meaning that benefits can only be paid if general taxes are raised (or other spending cut) to that extent to provide the requisite payments from general revenues to the Social Security Trust Fund.
The reason that I bring up this important point is that a first look at your proposal suggests that the basic cash-flow problem within Social Security would not be improved by it. You have offered three steps to "fix" Social Security. One would implement modifications to CPI, which would indeed have real budgetary effects. The other two, however, do not appear to address the program's basic fiscal problems. Those would be the proposal to lift the cap on taxable wages and to transfer near-term on-budget surpluses.
Both of these measures would merely have the effect of swelling the size of the Social Security Trust Fund, but would not improve the balance between outlays and revenues during the years that the program experiences a shortfall. It is conceivable that the proposal to lift the taxable wage cap could actually worsen the fiscal problem, because if new benefits are paid on the basis of extra taxation, more revenue would be credited when Social Security is already in surplus, and increase the size of the Trust Fund that must thereafter be redeemed, possibly even exacerbating the projected gaps between outlays and revenues in such years as the 2030s, 2040s, and beyond.
I am sure you have noted the recent analyses by GAO and others that have demonstrated that the President's proposal to transfer general revenues to the Social Security program does literally nothing to lessen the problem of unfunded liabilities, but merely changes the distribution of those future financing burdens between payroll taxes and general taxes. If general tax burdens are likewise significant under your plan, as defined by the gap between Social Security outlays and revenues in every year of the valuation period, the plan would not be complete unless those tax increases have been specified and quantified. Telling future taxpayers that they must find a way to finance multi-trillion dollar outlay payments from general revenues is not a solution.
Under the proposal that I have co-authored with Senator Breaux, we eliminate the vast majority of this problem, bringing annual outlays and revenues of the Social Security program into an approximate, tenable balance throughout the valuation period. The plan of Senators Moynihan and Kerrey also does so, although it achieves this by gradually raising payroll taxes. Every other plan that I have seen leaves this largest of fiscal questions unanswered, and therefore cannot be said to be a completed plan. I cannot know for sure whether your plan would resolve this question until you provide me with the cash-flow analysis as well as a specification of how any annual deficits are to be filled in. It is this information that I would consider to be most valuable to circulate to other Senators.
I would close by suggesting that you are doing a grave disservice to the cause of Social Security reform if you continue to make representations that anyone who does not buy into your own favored solutions has a sinister motive or has something to hide. The assumptions behind my proposals were all made by the Social Security Actuaries, and they have been detailed in publicly released documents, including the Advisory Council Report. To the extent that you find them to be inadequate, I would be happy to forward to SSA a request for any further details. But I would suggest that the sanctimony you exhibit in trumpeting your superior desire to disclose information to the public might be best justified if you were similarly, willing to disclose the cost of your own plan in general revenue outlays, an item that appears nowhere in your own analysis. If you are not so interested in participating in such an honest and all-disclosing debate, then your complaints about inadequate policy details will continue to be regarded as hypocritical by those who have offered comprehensive reform proposals.