My Letter in April 2nd Finanical Times

Urge higher-paid to opt out of Social Security system

Published: April 2 2008 03:00 | Last updated: April 2 2008 03:00

From Mr Marc Joffe.

Sir, John Shilling's analysis of the Social Security system ("Time to honour
America's debt to the retired", March 28) centres on the fiscal state of the
programme's trust fund. Unfortunately, this fund is nothing more than a
piece of legerdemain, as Mr Shilling seems to recognise.

For all intents and purposes, Social Security revenues and expenses are part
of the overall federal budget. Just as the system's current surpluses are
used to make the overall deficit appear smaller now, future trust fund
deficits will be offset by general revenues - the AARP (formerly the
American Association of Retired Persons) of 2030 (bulked up by retired baby
boomers) will see to that.

Rather than focus on the trust fund, policymakers should instead concern
themselves with preventing unsustainable deficits when the entire baby boom
cohort is receiving benefits. This will not be efficiently accomplished by
raising the income cap now; there is every reason to believe that
incremental revenues received in the short term will simply be squandered.

A better solution is to reduce Social Security liabilities in the future,
when America's fiscal situation will be more precarious. This can be done by
providing incentives for higher-income earners to opt out of the system.

Specifically, these individuals could be offered a lower Social Security tax
rate now in exchange for receiving the minimum benefit - or no benefit - at
retirement. Under this option, no one's benefit is involuntarily reduced and
no new programme of personal accounts is required.

Marc Joffe,

Albany, CA 94706, US

Good job....very well said.