Page images
PDF
EPUB

a mechanism for exchanging credits with State governments for agricultural people.

Of course, the State government employees are on joint FederalState funding arrangements in agriculture, but we have the same type of person in education, over in the public welfare programs, and many other elements of government, and there is no possibility of interchange, although there has been legislation introduced to permit crediting.

Finally, the gist of my remarks today, or the underlying theme that I would like to leave, is that we talked about private systems and public systems, the private and public sector.

At bottom, however, all of these decisions are public decisions. All these decisions are governmental decisions. The shape of private pension funds is due to the law, and the regulation of the Internal Revenue Service.

As Dr. Fichtner suggested, these things could be transformed overnight. All we have to do is change the qualification, the requirements for a plan qualifying under the Internal Revenue Code, and you will see a tremendous transformation in the benefits that are payable.

If we want private pension plans to have their benefits keyed to changes in the Consumer Price Index, that is a very simple matter. That just takes an amendment of the code.

I realize an amendment of the code is not a simple matter, but there are no tremendous barriers here. All of these decisions are fundamentally governmental decisions.

The private pension system in this country, and the proliferation of private pension plans, started in 1942 with a governmental decision, and although wages were frozen, fringe benefits were not, and that is when we began to see private pension plans burgeon.

It was made profitable for employers to offer them, and when we make it profitable for employers to improve them, they will be improved.

Mr. ORIOL. Thank you. Mrs. Mathiasen.

MRS. MATHIASEN

Mrs. MATHIASEN. I should also like to suggest the possibility of costing out some alternatives in improvements in the social security system.

Dorothy McCamman will remember a committee that she staffed a few years ago, an NCOA committee, that tried to put together alternatives and the relative desirability of alternatives.

You heard this morning a very good example of the reason for that attempt. People here applauded the proposal to amend Medicare provisions to include prescription drugs. Somebody else prefers to include dentures and eyeglasses, and somebody else feels that the best thing is to get rid of the retirement test and make Social Security into a regular annuity. I am always amazed at the intelligent people who think that that would be a very desirable thing, perhaps the most desirable thing to do.

Miss MCCAMMAN. Or, may I interject, who applaud an automatic cost-of-living increase tied to a very inadequate benefit; it is the sheer magic of the automatic cost of living adjustment.

Mrs. MATHIASEN. There are all these various proposals to improve Social Security. I have never seen them costed out and presented together so that there is a possibility of rational comparison if, as I assume, we shall have to make some choices for the near foreseeable future.

I think that there is another reason for this costing out bit. It is that we have to get used to big figures. If, as was suggested by Mr. Schuchat this morning, the Secretary of Health, Education, and Welfare is somewhat impressed by the amount of money that is now being spent on social security, I think we ought to tell him how much it would cost to provide an adequate retirement income through social security. As I have said before, I get terribly upset about how much it costs to build a mile of road or a battleship, but many people, including Members of Congress, have been throwing around these big figures for such a long time that they no longer sound formidable.

I don't think we have done the same thing in the area of retirement income to say this is what we want, and this is how much we are going to have to pay to get it-so that all of us can get accustomed to a new set of big figures We could then begin to get some concept of the size of the job to be done and some possibility of a rational choice when we have alternatives to choose.

Mr. ORIOL. Would you say that this costing out perhaps on several different bases should be one of the fundamental objectives of the White House Conference if not before?

Mrs. MATHIASEN. Well, you know, I have been saying this ever since the White House Conference was first talked about-that is, getting some concept of providing a minimum of income, goods, and services for everybody. Rather than dealing with the problem in little bits that affect a few people here and there, let's put it all together and see what kind of a package we have. I don't think we have any idea. We should probably scare ourselves to death as to the cost of what we would like to see.

Mr. ORIOL. Thank you very much. Mr. Burk.

MR. BURK

Mr. BURK. I think you were primarily asking for subjects that the committee might be discussing.

Primarily the thing that I think perhaps we ought to consider as a basic subject is the problem of this minimum living cost for our older people.

Since I am primarily concerned with those who have retired from civil service rather than those on social security, I think this should be a joint discussion, because certainly we who retired from civil service, those in our group who retired 15 and 20 years ago, have the same problems as those who retired on social security, so the problem is in the level of age, not the system from which they retired.

If it is good for a minimum annuity on social security to be $100 a month, or $200 a month, or $250 a month, it is equally as good for it to be true for civil service retirees, and I think something about the minimum annuity, and how do we raise these incomes for people who worked a lifetime on low wages and therefore draw low annuities?

32-346-69-pt. 1-7

You cannot do it by a percentage increase. How are we going to get them up to a decent level, where an automatic cost of living or any other automatic percentage increase might give them an adequate standard of living?

That is the only thing I would suggest.

Mr. ORIOL. Thank you, Mr. Burk.

Mrs. Brewster, you know that in the area of health costs and its effects on the economics of aging, this is such a deep subject that we hope to have a separate hearing on it, so we are looking forward to your recommendations in this area very much.

Mrs. BREWSTER. I have been deliberately avoiding that, Mr. Oriol, thinking carefully of the subjects here today, and if I may, would like to cover those points.

It seems to me that we are hampered by a lack of knowledge of private pension plans, and I am wondering if legislative wise something like the health and welfare disclosure legislation might not be indicated, so that we would have some facts here.

Another alternate possibility might be some questions, if it is not too late, in the 1970 census, for the aged as to their resources from pensions.

Mr. ORIOL. May I ask Mr. Brotman here now whether it is too late? Mr. BROTMAN. It is too late to get additional information. We did get from the Bureau of the Census agreements to breakdown sources of income, but I don't remember whether we will be able to break out private pension plans. I think it is combined with one other category of source of income.

Mrs. BREWSTER. In my first suggestion I was thinking of the employer having to report, just as a health and welfare collective-bargaining plan has to report under that other legislation.

Mr. SCHUCHAT. If I may contribute to this, I think that the survey that the Social Security Administration is currently making of retired people, questioning them as to their source of retirement income, source and amount, is quite a large survey; they having interviewed 30,000 people in the first year, people of all ages approaching and in retirement. I believe that this survey will give us some idea of the sources of retirement income from private pensions.

Mrs. BREWSTER. It seems to me that we were groping for the growth aggregate here to compare the public and private sectors, as we moved ahead, and decided which direction to go.

I want to second the pursuit of the civil servant aspect, and would like very much to have us have someone from the Tennessee Valley Authority report on their pension plan, which does have a variable annuity built into it. Here is one Federal program that does.

Throughout the day, I have been wondering, when I have heard people talking about the 50 percent that a pension should equal, whether this statement, which appears on page 20 of our report

The average value of social security benefits was estimated to increase by 12 percent when account is taken of the addition of Medicare.

whether we might not pursue that a little bit, and see if that is indeed the case, because I kept wondering whether in the statements that were being made, that kind of adjustment has been made for the change since 1966.

I will come up with the questions I have been holding at a later time. It seems too late in the day to ask them now.

Mr. ORIOL. Yes, indeed. Dr. Sheppard.

DR. SHEPPARD

Dr. SHEPPARD. I am in the fortunate-unfortunate position of being next to last, and a lot of people have said things that I can now say I would have said, but they have also created some other thoughts.

I think I would like to repeat a sentiment felt for some of the discussion. We talked about incentives, how we want to add incentives and/or penalties that will achieve the social purpose of private pensions, not just incentives, but penalties if they are not, say, vested or funded, or what-have-you.

First, I am concerned about how we very often make a scapegoat out of the inflation phenomenon.

It seems that every time there is a depression or high-unemployment rate, we say we cannot afford to raise the retirement income of the elderly. Then, when we get the opposite of a depression and highunemployment rates, the opposite being typically associated with inflation, we say that it is dangerous to raise the retirement income of the elderly.

It is like that old hole in the roof. When it is raining, you cannot go out now because it is raining. When it does not rain, no rain is coming through, so don't bother fixing the hole, which leads me to believe that the road to hell is frequently paved with good anti-inflation intentions.

Secondly, this is not directly a technical point, but I think it is a way of goading the public and our decisionmakers and the establishment into thinking more about this, and it has to do with the philosophy of preventive social science, that I believe there is an iceberg phenomenon going on.

The aged do get revenge. They manifest their discontent in ways perhaps different from students at Harvard and other campuses these days. They do it by the way they vote on local issues, which then aggravate other local problems, and programs, and I think we have the responsibility as opinion leaders not just trend followers to point this out to our enlightened policymakers.

Third, I am concerned about the sort of subtle if not overt trend toward earlier retirement as a contributor to our future poverty problem.

I have read about a certain Government document, a Budget Bureau memo, that sort of dismissed even the problems of the 55- to 64-yearold worker with some kind of statement to the effect that this is not an employment problem, it is a transfer payments problem.

Even the Budget Bureau seems to be reducing the age of the employable group, and raising the numbers of people who will be subject to inadequate transfer payments.

I think we have to take a direct look at the longrun and shortrun implications of the philosophy of early retirement and talk about this in a report, that sooner or later there is going to be a reversal of this trend toward earlier retirement.

The fourth point, and a more general one, is that I believe the Government has failed to educate the general public on why they should finance the retirement lives of adult persons who are no longer required by our economy to remain in production, at least under our present policies, failed to educate the public, and failed to educate itself.

In that connection, I think it might be a nice, novel idea, if not a gimmick, to provide for some attendance by under-35-year-old people at the White House Conference on Aging, through some approach that we believe in participatory democracy.

I think that any policy proposal, or many policy proposals in our country, if put in moral terms, the American people will respond, even the younger workers who are expected through transfer payments to support the elderly of today.

And finally I want to cross swords with Dorothy a little bit. I don't want to be scared away from the idea of automatic cost-of-living increases. I believe if we can get that passed, we then can get on to the battle of adequacy of retirement income, and using these various programs to guarantee a sharing of abundance in the American productive economy.

Mr. ORIOL. Would you say we should have some elderly at the White House Conference on Youth in 1970?

Dr. SHEPPARD. Why not?

Mr. ORIOL. Dr. Kreps.

DR. KREPS

Dr. KREPS. J am impressed with Bill Greenough's statement that the most important gcal of our economy is a high rate of economic growth. In line with this goal, it ought to be our function in youth to invest in human capital, that is, education.

It ought to be our function at middle age to be so productive that we can pay the transfer costs of supporting youth in school and old age in retirement.

But our problem seems to be not only a failure to generate a high enough rate of growth, but also a failure to be explicit about the distribution of the fruits of growth. I raise the question again, of who is to share in the growth and on what basis.

Returning to Geneva Mathiasen's statement that she would like to see the various alternative schemes costed out, because only in that way could we establish some order of priority, I would remind you of one of the first statements made this morning: we should try to estimate the costs of achieving the range of goals that we set, and within the budget constraints we have to face, then establish the necessary priorities.

Specifically, it seems to me that we have to push ahead on the question of relating retirement income to the growth of the economy, by suggesting that the committee have some models developed which would indicate the dimensions of such a program. We need a model which would indicate the dimensions of providing retirement income at different income levels, where the initial level is tied to the rate of productivity change or the rise in the wage level. These costs can then be translated into percent of payroll, or aggregate dollar amounts.

« PreviousContinue »