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Newsletter   # 34          Summer 2004          









          The problem we’re leaving for the next generations is much more serious than we thought, as you’ll read in this newsletter.  As large as the national debt is, the promised entitlements for retirees are about nine times as large.

     This situation demands our attention and here’s what you can do: 

·           Get one new number.  Send in their membership and we’ll extend your membership for a year.

·               Communicate your concern.  This includes private conversations, calls to talk shows, and letters to the editor.

     If you need one or more extra newsletter copies, just let us know.  The Spring Newsletter covered excellent Personal Retirement Account plans.


When government economists predict a surplus there is a deficit and vice-a-versa.  We have the proof.


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     On June 17, 2004, President Barry Dorsch and I represented SAFE on the “Rick Jensen Show” (WDEL 1150, Wilmington, DE).  It was SAFE’s second appearance on Jensen’s program, the first being on November 26, 2003, when Barry and SAFE founder Bill Morris did the honors.

      In introducing us, Rick noted that he had also invited AARP representatives to participate in the program (a debate).  However, he said, they had declined.

     Citing facts and statistics from “The Coming Generational Storm”  (see the review in this newsletter) and other sources, Barry and I said that Social Security + Medicare will face a financial crisis within a few years.  The outlook will worsen, we added, if our political leaders keep sweeping the problem under the rug.

      To fix Social Security, we suggested three steps. Federal Reserve Chairman Alan Greenspan recently advocated the first two. Cato, the Alliance for Retirement Prosperity, and others support the third.

    ·           Raise the U.S. retirement age (currently scheduled to rise to 67 by 2027) to recognize the dramatic increases in human life expectancy that are resulting from advances in medical science.

·              Index Social Security benefits less generously for inflation.

   ·           Offer active workers the option of using payroll taxes they pay (employee portion) to fund private retirement accounts in lieu of traditional Social Security benefits.

      Time expired before we could offer our ideas for fixing Medicare.  Rick held out the possibility of inviting us back on his program in the Fall, however, so we may have another chance to address this area.


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     The Coming Generational Storm:  What You Need to Know About America’s Economic Future,  Lawrence J. Kotlikoff (Professor of Economics at Boston University) and Scott Burns (nationally syndicated personal financial columnist), MIT Press (2004).

      According to the authors (who base their findings on the work of Government analysts), the present value of unfunded future liabilities for Social Security and Medicare is at least $45 trillion (some nine times the size of our “National debt”).  This outlook, no surprise to SAFE members, reflects the lengthening of human life spans due to advances in medical science, the looming retirement of the baby boomers, and the disconnect between the consumption of medical services and the responsibility for paying for them.  We’re not alone; a similar crisis is brewing in Japan, France, Germany, etc.

      Drastic action would be required to close the gap.  Thus, the authors say, we could immediately increase federal income taxes by 69%, increase payroll taxes by 95%, cut federal purchases by 106%, or cut Social Security and Medicare benefits by 45%.  We could wait a few years, and then make even more drastic adjustments. Or, we could do nothing and let the U.S. economy go into a meltdown with double-digit inflation financed by the Government printing money.

     How are our political leaders reacting?  They are doing their level best to ignore the problem, and, as Kotlikoff and Burns explain, the fault is ours.  “The last thing we want is Uncle Sam telling us to save now for a tidal wave of obligations when the baby boomers retire.  So we make sure that doesn’t happen. We hire [elect?] politicians who tell us what we want to hear.”

      A plan for reform is presented, that among other things would impose a 12% Federal sales tax to finance the transition to a new Social Security regime and distribute health care vouchers to Seniors in amounts geared to the state of their health. However, this part of the book lacks conviction because the authors don’t expect their plan (or other reforms that could save the system) to be enacted. Accordingly, they end with advice as to how to look after yourself and your family if our politicians “miss this opportunity to save our ship of state.”

      Even if Kotlikoff and Burns don’t have all the answers (I think there are better approaches than their plan), they have diagnosed the problem very well.   Moreover, their book is entertainingly written and refreshingly nonpartisan (lambasting both Republicans and Democrats with vigor).  Don’t miss it.


      Bill Whipple

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     In 2001, we invited Maurice McTigue, a former New Zealand Cabinet Minister to Delaware.  He gave a talk to a large retired men’s luncheon club about restructuring New Zealand’s government and his current role in helping the U.S. implement the Government Performance and Results Act.  He received a standing ovation at the luncheon club, which hasn’t occurred before or since, at least in the last five years.

      As outlined in 2001 Newsletters, New Zealand was in such serious trouble they had to re-think government policies.  They did so and made drastic changes which resulted in a much smaller but more effective government.

      What about the Home Run?  McTigue gave a talk February 11th at Hillsdale College which is even better than the Delaware talk that earned him a standing ovation.

      If you are interested, we’ll be glad to send you a copy, on one condition.  After you read it, we ask you to send it with a cover note to your member of congress.

     Thanks to Alan Greenspan for reminding everyone of the Social Security problem. He has the advantage of getting headlines any time he likes. He made some worthwhile suggestions, but we think the best solution is Personal Retirement accounts.


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Here are two “Letters To The Editor”.  Please feel free to use any or all of them in your letter, if you wish.






     After reading all the letters published in AARP’s Bulletin from Seniors complaining that the Medicare Prescription Drug Program is not generous enough, I submitted a letter pointing out that it was too generous and too costly because it covered seniors other than the truly poor.  I said that after food, and lodging, nothing is as important as one’s health care expenditures, so even seniors with modest incomes who spend money on shopping sprees, dining out, vacation trips, indulging grandchildren, etc, should get their priorities in order and not expect the taxpayers to buy their medicine.

      Not surprisingly, my letter was not published, even though I added a note pleading that it be published because it was a message seniors needed to hear.  Obviously, AARP doesn’t want its members to read anything at odds with its agenda of encouraging seniors to be me first and greedy.

       Harry E. Kenton

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     When the baby boomers retire, there will be only two workers per retiree to pay Social Security, Medicare and Medicaid benefits.  Many, and maybe most Americans realize this is a serious problem. However, Congress is not taking it seriously. They have added to the problem by passing a huge prescription drug bill that covers millionaires and middle class Americans who can easily pay for all the prescription drugs they want.

      I certainly have been taking this problem seriously along with other members of Seniors Against Federal Extravagance (SAFE).  Our concern is for the future welfare of our children and grandchildren.

     It now appears that the problem is even more serious than we thought. Scott Burns and Laurence Kotlikoff have written “The Coming Generational Storm”, a very sobering book. They report that if the present pay-as-you-go system is continued, it will be extremely tough to solve the problem. The solution would require immediately increasing federal income tax by 69% or increasing payroll taxes by 95% or cutting Social Security and Medicare benefits by 45%.

      These numbers should not be dismissed – Kotlikoff is Professor of Economics at Boston University, and has been studying the intergenerational problem for many years.

      The authors are pessimistic.  They expect Congress to continue ignoring the problem until there is a financial meltdown.  Not a good prospect for the next generations.

      While the authors are pessimistic, they do offer proposed solutions which are beyond the scope of this letter.

      Members of SAFE have endorsed two solutions to the Social Security problem. Both involve use of part of the payroll tax to establish Personal Retirement Accounts, and are discussed in our latest newsletter (  We sincerely hope Congress takes the baby boomer problem seriously, for the sake of our children and grandchildren.


      William E. Morris

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     We’ll have a table at the September 19th Community Day celebration on the campus of the University of Delaware.  The theme for our table has not been decided, but we’ll be raising our large banner.

      If you’re in Delaware or nearby, please consider joining us for an hour or more at the table.  Call 475-7060 for information.

      I you’re farther away, perhaps similar outreach is feasible in your area.  If you want to consider it, give us a call.


     SAFE President Barry Dorsch was quoted in a feature article on the prescription drug benefit.  The article was in “Better Years” a publication for seniors, widely circulated in Delaware.  AARP Executive Director Bill Novelli received about 70% of the space and Barry got about 30%.  Not bad, when our membership is less than .001% of AARP’s.



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     The federal budget surplus for the year 2000 is $237 billion.  This will be used to pay off debt held by the public, decreasing it from bout $3.5 trillion to about $3.3 trillion.  Not enough improvement, considering the uncertainty of the future.

      Recent government projections show increasing surpluses each year for the next ten years. Predictably, members of Congress are considering ways to spend the projected surplus.

      The problem is that government projections are notoriously inaccurate.  Only four years ago the government was projecting a $405 billion deficit in 2006 as compared to a recent projection of a $325 billion surplus in 2006.  The estimates differ by more than $700 billion.

          We don’t know what government finances will be in the future. We don’t know what unpredictable and uncontrollable factors may come into play.  We do know that after the baby boomers retire, there will be only two workers for each retiree.

      The prudent course of action is to cut spending, pay off debt as rapidly as possible and reform Social Security.

      We need to clean up the mess and clear the decks to help our children and grandchildren be ready for whatever comes.


     We’re repeating our suggestion to prolong the life of your frozen food if the power goes off.  Fill one or more plastic bottles 2 to 5% with table salt and add water to 90-95% full.  Put in your freezer.  If power goes off, as temperature rises the salt water will melt below 32 degrees absorbing heat and delaying warm up.



     Thanks to Alan Greenspan for reminding everyone of the Social Security problem. He has the advantage of getting headlines any time he likes. He made some worthwhile suggestions, but we think the best solution is Personal Retirement accounts.

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     Barry Dorsch, Wilmington, DE

     (302) 478-0676



     Bill Whipple, Middletown, DE

     (302) 376-7036



     Ed Fasig, Wilmington, DE

     (302) 999-0611


Director 2004-2006

     Dick Reese

     Wilmington, DE

     (302) 478-4970


Director 2004-2005

     Jerry Martin, Wilmington, DE

     (302) 478-5064

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