Letters Social Security, the surplus and tax cuts

Posted: August 30, 2001

The surplus is falling! The surplus is falling! Well, thank goodness for that fall. It may help to avert a deepening deflation, with related recession or depression (Commentary, Aug. 23).

To treat a misdiagnosed perception of inflation, starting in 1999, the Fed raised interest rates too high for too long. It recently has been slashing them - seven times since January, bringing them to the lowest short-term levels seen in seven years. Yet deflation, initiated by a combination of high interest rates and big budget surpluses, is deepening, with sinking corporate profits (and related general tax revenue), a slumping stock market, accelerating large-scale layoffs, and rapidly rising unemployment (heralding reduced payroll tax revenue for Social Security). Fed chairman Alan Greenspan still sees a risk of "more economic weakness in the foreseeable future."

Other than a few Chicken Little partisan politicians trying to scare us about Social Security, is there any informed voter out there who really believes we need an even bigger deflationary budget surplus at this time to further burden a faltering economy? M. Robert Paglee

Moorestown

Women need Social Security - and more of it - precisely because they earn only 74 percent of what men earn and live an average of seven years longer (Commentary, Aug. 23). Privatization could make things worse for women: based on low incomes, their "individual accounts" will accumulate more slowly than those of other income earners, most of them men. Such women, and their financial advisers, might be inclined to take greater investment risks to get those small accounts to grow faster - exactly the opposite of what they should be doing.

It is laughable to claim that small-dollar, privatized accounts will "give access to capital markets that many women previously lacked." The money involved would be wholly inadequate to provide any substantial flow of income.

The Social Security system already provides benefits in a progressive manner, by paying retirement pensions that represent a higher proportion of the lifetime earnings of lower-income workers than for those who earn more. Its weighted-benefit formula also favors those with "intermittent" (in and out of the labor force) wage records, disproportionate numbers of whom also are women. And it already is "structured to provide guaranteed inflation protection and insurance against outliving one's assets."

Richard B. Du Boff

Haverford

When the Social Security tax revenues no longer can pay the full cost of the program, and this is estimated to occur in 2016, the federal government will need to repay all the money it borrowed, for decades, from Social Security revenues (Commentary, Aug. 23). This was the rationale behind the Social Security tax hike in the 1980s: to build up surpluses for the pressures that will occur when the large baby boom generation retires.

After decades of bipartisan abuse, Democrats and Republicans formed a consensus. They pledged to use all Social Security surpluses to pay down the national debt, so that when the trust fund bonds come due, the government will be able to honor them without raising taxes or cutting benefits.

If the debt is paid down now and further deficits avoided, trillions of dollars that would be paid in interest will be available for Social Security, and the general economy will be in better fiscal condition.

By squandering the surplus, using Social Security funds to pay for income tax cuts and general spending, and by trying to cover up their broken promise with accounting tricks, Republican leaders and those Democratic congressmen who supported them have betrayed their promise to millions of Americans who can look forward to being told they will not receive their promised benefits.

Michael Sells

The decline in the projected surplus was greeted with alarm (Commentary, Aug. 23), as if a financial disaster were happening. Actually, it is just the opposite. When the economy goes into a slowdown, tax revenues fall off and the budget surplus declines (or the deficit increases). The decline in tax revenues helps to maintain after-tax, spendable income and consumer spending, thus cushioning the recession. (Remember that a recession is a fall-off in spending.) Economists call this tax revenue decline an "automatic stabilizer." Economics 101 students learn that cutting taxes or increasing government spending are tools for stimulating a week economy. Trying to protect the surplus under current economic conditions is stupid.

The debate over the budget is complicated by the rule, espoused by both Republicans and Democrats, that the surplus from Social Security taxes must go into a "lockbox." This rule rests on the fallacy that the Social Security surplus goes into a fund to pay future benefits. There is no such fund, only an IOU on the government's books. Social Security revenue in excess of current benefits simply is used to reduce the national debt. That is much less important at this time than getting the economy moving again.

Unfortunately, political warfare is overwhelming economic logic in the budget debate.

A. Gilbert Hasbner

St. Davids

I was thrilled to see that Richard Parsons, the wealthy chief operating officer of AOL-Time-Warner and co-chair of the President's Commission to Strengthen Social Security, says that benefit cuts have not been ruled out (Inquirer, Aug. 23). This means that while the wealthy are out spending all the money George W. Bush's tax cuts will give them, people like my 87-year-old mother, widowed for 38 years and getting by on a small pension and Social Security, may have to get by on less.

We certainly can see the effects of that compassionate conservatism. May God help the average American; the Republicans sure won't.

Edwin C. Tyrrell Jr.

Willow Grove

train2965@home.com

In your own household budget, would you send money out when things were getting a little tight at work? No, of course not. Then how practical was it of President Bush to spend money that now may put Social Security in jeopardy? It's an absolute travesty of his responsibility to the people of this country to accomplish squandering the only surplus we've had in years in only his first six months in office. Dare we wonder what the budget deficit will be in four years? And they say Democrats are the big spenders.

J. Sweeney

Philadelphia

Sweje65@aol.com

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