Dean Baker and Mark Weisbrot [op-ed, Dec. 13] criticize the report of a panel of demographers, economists and actuaries charged with reviewing the methods and assumptions behind Social Security projections. The panel--appointed by the independent, bipartisan Social Security Advisory Board--represented a spectrum of opinion on Social Security. The chairman served both Republican and Democratic administrations. The panel's unanimous recommendations were based on careful analysis of economic and demographic data and trends.
The potential increase in the financing shortfall to which Mr. Baker and Mr. Weisbrot object was due primarily to the panel's recommendation for an increase in projections for improvements in life expectancy. For example, under current projections, U.S. females will wait until 2033 to reach the life expectancy of French women in 1995.
Mr. Baker and Mr. Weisbrot assert that the panel "lowered its estimate . . . for growth of wages and productivity." In fact, the panel recommended that the trustees increase their estimate. The writers compared the panel's recommendation with an estimate by a previous panel, not the trustees' estimates that were under review. Moreover, gains to solvency from wage growth are modest because benefit levels rise along with taxes when wages increase.
The purpose of the advisory board and of the panel was to provide objective analyses to advance the Social Security debate and lead to resolution of problems. Advocacy pieces such as that by Mr. Baker and Mr. Weisbrot are part of the political process but no substitute for the documented institutional processes by which Social Security trust funds are safeguarded and made transparent to the public.
STANFORD G. ROSS
Chair, Social Security Advisory Board
Chair, Social Security Technical Panel
Dean Baker and Mark Weisbrot claim that the Social Security crisis has been cooked up by doomsayers fiddling with the numbers, but they duck the core issue facing the program: Should Social Security continue to operate as an unfunded retirement program, as it essentially does now, or should it be converted into a funded retirement program?
An unfunded program lives on its current cash flow; a funded program derives an important share of its income from its investments. Perhaps Social Security's unfunded structure made sense when the nation's elderly were few, but it's becoming more fragile by the day.
Another flaw in the argument advanced by Mr. Baker and Mr. Weisbrot is their reliance on an asset-depletion model for projecting Social Security's future insolvency date. In their "things aren't so bad" scenario, the Social Security trust fund can be expected to top out in the early 2020s. Not long after, payments to beneficiaries will begin chewing away at principal. By 2040, or 2050 or 2060, depending on the assumptions used, the trust fund will have been zeroed out by withdrawals, and Social Security will be insolvent.
That's not a smart way to run a retirement program. Solvency for tomorrow's Social Security program needs to be calculated using an asset-stability forecasting model, not an asset-depletion model.
STEVEN H. JOHNSON
The assumption in the Social Security advisory report--that longevity will carry with it a high price for maintaining a solvent Social Security system--could be erroneous [news story, Dec. 7].
People who live longer are generally in better health longer, work longer and often live full lives. And just in time. Labor markets are envisioned to become tight in the early decades of the next century.
An increase in older workers will enable the economy to avert a labor shortage. Retiring at 75 or 80 and paying Social Security taxes until then could lessen the burden upon the system and ensure adequate, if not higher, benefits later.
FREDERICK S. GURZELER
White Plains, N.Y.