Dear Editor:

Although polls have shown that 70% of voters are against privatization of Social Security, President Bush is resurrecting his attempt to pass that terrible scheme. Privatization of 4% of the 12 ½% withholding tax would destroy Social Security.  It is a safety net, not a savings plan. We have plenty of advantageous  government savings plans: IRAs, Roth IRAs, 401Ks etc.

Many Republican Senators and Representatives vigorously supported Bush’s plan until polls showed that voters were against privatization when they became informed. They then softened their stand. Now that the election is near they say that they want to strength Social Security.

How Social Security works: Each month money from withholding tax not required for benefits is loaned to the general  fund in return for non -negotiable bonds which earn interest at the rate of  10-year government bonds, now about  4%. It is very unlikely, but if ever there is a need for more money to go out  as benefits than is coming in from withholding tax, these bond would be redeemed. 

The Social Security Fund will be solvent until the middle of the century. The Republican’s prediction that it will “go broke by 2018 or 2022” is based on seven unrealistically pessimist assumptions , such as  the economy will grow at a rate of 1% per year. Since 1970 it has grown at an average rate of 3.16% per year. If the Fund ever did get low, as it did in 1980, minor adjustments  such as  raising the retirement age one year, raising the minimum wage, having those who have an income higher than $90,000 pay withholding tax on all of their income or reducing retirement benefits slightly. Disability and death benefits, which account for 40% of the money paid out of the Fund should never be cut.

Albert A. Gabel
Professor Emeritus
Ohio State University