David Stockman: Republicans Have Abandonded Their Principles and Crippled the Economy

Re: David Stockman: Republicans Have Abandonded Their Principles and Crippled the Eco

Reagan saved Social Security. That's the biggest part of what's doing us in.

 

Re: David Stockman: Republicans Have Abandonded Their Principles and Crippled the Eco

http://www.ssa.gov/history/reaganstmts.html#letter

Dear :-------:

Over the past several weeks, all Americans have been proud of the bipartisan spirit that we have created in working on the nation's economic recovery. Today I am writing to you to ask that we now bring that same spirit to bear on another issue threatening our public welfare.

As you know, the Social Security System is teetering on the edge of bankruptcy. Over the next five years, the Social Security trust fund could encounter deficits of up to $111 billion, and in the decades ahead its unfunded obligations could run well into the trillions. Unless we in government are willing to act, a sword of Damocles will soon hang over the welfare of millions of our citizens.

Last week, Secretary Richard Schweiker presented a series of Administration proposals that we believe are sound, sensible solutions, both in the short and long term. We recognize that Members of Congress on both sides of the aisle have alternative answers. This diversity is healthy--so long as it leads to constructive debate and then to an honest legislative response.

As Secretary Schweiker has pointed out on several occasions, we believe that all of us owe an obligation to our senior citizens to work together on this issue. This Administration is not wedded to any single solution; this Administration welcomes the opportunity to consult with Congress and with private groups on this matter. Our sole commitment--and it is a commitment we will steadfastly maintain--is to three basic principles:

--First, this nation must preserve the integrity of the Social Security trust fund and the basic benefit structure that protects older Americans.

--Second, we must hold down the tax burden on the workers who support Social Security.

--Finally, we must eliminate all abuses in the system that can rob the elderly of their rightful legacy.

It is clear that the half-actions of the past are no longer sufficient for the future. It is equally clear that we must not let partisan differences or political posturing prevent us from working together.

Therefore, I have today asked Secretary Schweiker to meet with you and other leaders of the Congress as soon as possible to launch a bipartisan effort to save Social Security. I have also asked him to make the full resources of his department available for this undertaking. And of course, you can count on my active support of this effort.

None of us can afford to underestimate the seriousness of the problems facing Social Security. For generations of Americans, the future literally rests upon our actions. This should be a time for statesmanship of the highest order, and I know that no one shares that desire more strongly than you.

With every good wish,

Sincerely,

Ronald Reagan

 

Re: David Stockman: Republicans Have Abandonded Their Principles and Crippled the Eco

Address to the Nation on the Program for Economic Recovery, September 24, 1981
Now, if you'll permit me, I'd like to turn to another subject which I know has many of you very concerned and even frightened. This is an issue apart from the economic reform package that we've just been discussing, but I feel I must clear the air. There has been a great deal of misinformation and, for that matter, pure demagoguery on the subject of social security.

During the campaign, I called attention to the fact that social security had both a short and a long-range fiscal problem. I pledged my best to restore it to fiscal responsibility without in any way reducing or eliminating existing benefits for those now dependent on it.

To all of you listening, and particularly those of you now receiving social security, I ask you to listen very carefully: first to what threatens the integrity of social security, and then to a possible solution.

Some 30 years ago, there were 16 people working and paying the social security payroll tax for every 1 retiree. Today that ratio has changed to only 3.2 workers paying in for each beneficiary. For many years, we've known that an actuarial imbalance existed and that the program faced an unfunded liability of several trillion dollars.

Now, the short-range problem is much closer than that. The social security retirement fund has been paying out billions of dollars more each year than it takes in, and it could run out of money before the end of 1982 unless something is done. Some of our critics claim new figures reveal a cushion of several billions of dollars which will carry the program beyond 1982. I'm sure it's only a coincidence that 1982 is an election year.

The cushion they speak of is borrowing from the Medicare fund and the disability fund. Of course, doing this would only postpone the day of reckoning. Alice Rivlin of the Congressional Budget Office told a congressional committee, day before yesterday, that such borrowing might carry us to 1990, but then we'd face the same problem. And as she put it, we'd have to cut benefits or raise the payroll tax. Well, we're not going to cut benefits, and the payroll tax is already being raised.

In 1977 Congress passed the largest tax increase in our history. It called for a payroll tax increase in January of 1982, another in 1985, and again in 1986 and in 1990. When that law was passed we were told it made social security safe until the year 2030. But we're running out of money 48 years short of 2030.

For the nation's work force, the social security tax is already the biggest tax they pay. In 1935 we were told the tax would never be greater than 2 percent of the first $3,000 of earnings. It is presently 13.3 percent of the first $29,700, and the scheduled increases will take it to 15.3 percent of the first $60,600. And that's when Mrs. Rivlin says we would need an additional increase.

Some have suggested reducing benefits. Others propose an income tax on benefits, or that the retirement age should be moved back to age 68. And there are some who would simply fund social security out of general tax ilunds, as welfare is funded. I believe there are better solutions.

I am asking the Congress to restore the minimum benefit for current beneficiaries with low incomes. It was never our intention to take this support away from those who truly need it. There is, however, a sizable percentage of recipients who are adequately provided for by pensions or other income and should not be added to the financial burden of social security.

The same situation prevails with regard to disability payments. No one will deny our obligation to those with legitimate claims, but there's widespread abuse of the system which should not be allowed to continue.

Since 1962 early retirement has been allowed at age 62 with 80 percent of full benefits. In our proposal we ask that early retirees in the future receive 55 percent of the total benefit, but-and this is most important-those early retirees would only have to work an additional 20 months to be eligible for the 80-percent payment. I don't believe very many of you were aware of that part of our proposal.

The only change we proposed for those already receiving social security had to do with the annual cost-of-living adjustment. Now, those adjustments are made on July 1st each year, a hangover from the days when the fiscal year began in July. We proposed a one-time delay in making that adjustment, postponing it for 3 months until October 1st. From then on it would continue to be made every 12 months. That onetime delay would not lower your existing benefits but would, on the average, reduce your increase by about $86 one time next year.

By making these few changes, we would have solved the short- and long-range problems of social security funding once and for all. In addition, we could have canceled the increases in the payroll tax by 1985. To a young person just starting in the work force, the savings from canceling those increases would, on the average, amount to $33,000 by the time he or she reached retirement, and compound interest, add that, and it makes a tidy nest egg to add to the social security benefits.

However, let me point out, our feet were never imbedded in concrete on this proposal. We hoped it could be a starting point for a bipartisan solution to the problem. We were ready to listen to alternatives and other ideas which might improve on or replace our proposals. But, the majority leadership in the House of Representatives has refused to join in any such cooperative effort.

I therefore am asking, as I said, for restoration of the minimum benefit and for inter-fund borrowing as a temporary measure to give us time to seek a permanent solution. To remove social security once and for all from politics, I am also asking Speaker Tip O'Neill of the House of Representatives and Majority Leader in the Senate Howard Baker to each appoint five members, and I will appoint five, to a task force which will review all the options and come up with a plan that assures the fiscal integrity of social security and that social security recipients will continue to receive their full benefits.

I cannot and will not stand by and see financial hardship imposed on the more than 36 million senior citizens who have worked and served this Nation throughout their lives. They deserve better from us.

Well now, in conclusion, let me return to the principal purpose of this message, the budget and the imperative need for all of us to ask less of government, to help to return to spending no more than we take in, to end the deficits, and bring down interest rates that otherwise can destroy what we've been building here for two centuries. . . .