November 11, 1971
Page 40698
PROPOSED REFORM IN THE ACTUARIAL CALCULATION
Mr. MUSKIE. Mr. President, I wish to express my support for the reforms in the actuarial assumptions and purposes recommended by an eminent panel of actuaries and economists appointed by the Advisory Council on Social Security to evaluate the reasonableness of the assumption and methodology of the long range actuarial calculations. These reforms are badly needed to prevent unnecessary imposition of social security taxes and the accumulation of large and unneeded surpluses in the trust funds.
These reforms are embodied in S. 2656 which the Senator from Minnesota (Mr. MONDALE) and I introduced on October 5. Those reforms would result in the trust funds with reserve funds equal to approximately 1 year's reserve rather than trying to accumulate huge surpluses to pay benefits in the next century. Putting social security on a pay-as-you-go basis recognizes a basic truth about the system – the currently retired population is supported by the currently working population. It is a basic economic fact in our economy, and it is a moral and ethical right of our senior citizens. Before the social security system was started, children supported their elderly parents. The social security system has institutionalized an existing situation, assuring that everyone share the burden and that the beneficiaries were treated equitably.
A basic element of the recommended reforms was to change the assumption about the course of future wages. In the past, the actuarial calculation has assumed wages would not rise for the next 75 years.
The level wage assumption underestimates both future expenditures and future revenues, but it tends to understate the revenues by more than the expenditures. This has resulted in tax rate schedules that are in excess of what were required to finance benefits. S. 2656 incorporated the recommendation that the "level wage" assumption be replaced with reasonable assumptions concerning the future growth in average covered wages.
Everyone recognizes the right of our elderly population to a decent level of living. But there is no point in taxing the working population in excess of the amount needed to support the elderly. S. 2656 not only proposes reform of the actuarial calculations that are direly needed, but also proposes a more equitable distribution of the existing burden. S. 2656 would remove the wage ceiling on wages subject to tax and convert what is currently a regressive tax falling most heavily on the middle-income families into a proportional tax on all earned income. Credit would be given for future retirement benefits for earnings up to $20,000. Personal exemptions and a low-income allowance would be introduced to reduce the burden on the low and middle-income groups.
The recommended actuarial reforms could be used to delay scheduled increases in tax rate until the year 2010 and still finance the present program along with the automatic cost-of-living increase. But it would be necessary to successively raise the wage ceiling. It is the wage ceiling, however, that makes the social security tax regressive. Removing the wage ceiling as proposed by S. 2656 would make the tax more progressive.
I heartily endorse and hope the actuarial reform will be accepted. It is a first step in the right direction. The other provisions of S. 2656 are a much needed second step.