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Newsletter  # 36    Winter 2004-2005



     As you probably see in the newspaper and otherwise, Social Security reform is a big issue. That’s the focus of this newsletter.

      SAFE has endorsed “The 6.2% solution” as discussed in our Spring 2004 issue. If you are outside of Delaware, we urge you to at least call your U.S. Representative, if you haven’t already done so. Members in Delaware, please call local officers of Biden (573-6345), Carper (573-6291), and Mike Castle (428-1902) in support of Personal Retirement Accounts.

       Information in this newsletter can supplement what you already have. So please, Delawareans, make those three calls and do it now, for the next generations.

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Bill Whipple

      Several members of SAFE have commented that we put out a good newsletter, they agree with our stand on the issues, etc., but SAFE must reach beyond its own membership to have an impact.

      We’re trying to follow this advice. For the past several years, we’ve hosted a booth at Newark Community Day. Several directors have appeared on the Rick Jensen Show (WDEL, 1150 AM) and on WHYY-TV. Our letters have appeared in the Wilmington, DE News Journal and other local publications. The SAFE Website can be accessed by anyone who is interested and has a computer, and we’re handing out pens with the Internet address on it. If you haven’t looked at the Website lately, we invite you to see what we’ve done with it.

       Our latest project is contacting the Delaware congressional delegations about Social Security reform, a subject that President Bush has put at the top of his domestic agenda. We had an in-depth discussion with Congressman Castle during holidays, have an appointment scheduled in Washington with Senator Carper’s staff, and hope to meet with Senator Biden.  Also, we sent a request to out-of-state members urging them to follow up with the Congressional delegations of their states.

       Will our efforts pay off? Hopefully so, because action is urgently needed and this is the best window of opportunity for Social Security reform since SAFE was founded almost a decade ago. Make no mistake, however, that the opposition is going to be tenacious and the proponents of reform will need all the help they can get.

        If you would like to participate in this campaign or have suggestions as to things the Board should be doing, we would like to hear from you.

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     In addition to election of officers, we discussed action to take to promote adoption of Personal Retirement Accounts.  We decided to push for personal meetings with Senators Biden and Carper and Congressman Castle. (See “Reaching out”)

    We decided to push for the Cato Institute “6.2% Solution” approach and oppose small measures such as use of only 2 or 3% of payroll taxes. In addition, we decided to send letters to all members outside of Delaware, asking them to express their support of Personal Retirement  Accounts to their members of Congress. This has been done.

    We elected 2005-2007 officers. See Contact us.

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      Bill Whipple moved from President-Elect to President.  Bill quickly became an activist President.  He has familiarized himself with the complex problems of Social Security and Medicare.  He has taken over supervision of our website, working with webmaster Charles Kaszytski.  The website now has a more professional look, and better content.   We hope you will recommend the site to acquaintances. Barry Dorsch is “Immediate Past-President” in accordance with our Constitution. We do not list that office, but Barry remains active. He and Bill Whipple are in the process of meeting with the Delaware Congressional delegation to discuss our support of Personal Retirement Accounts.

     Welcome back to 2004 Directors John Boughton and  Ed Fasig who were reelected for a 2005-2007 term. We appreciate their continued commitment to the goals of SAFE.

      Since 1997, when SAFE was incorporated, 12 Directors have completed their terms and been replaced by “new blood.” During this period, Bill Morris, our founder and first President, has remained active.  Because he expects to be active for several more years, he decided to seek office as Director. He was elected (no surprise) as Director 2005-2006. 

     We are pleased that new Director Steve McClain has agreed to serve the SAFE Board. Steve hails from West Virginia, where he obtained a MA in Education at West Virginia University.  During the Vietnam War he flew cargo planes from Delaware Air Force Base. Then, in Delaware, he taught mathematics, and was a Middle School Principal, and obtained a Doctor of Education degree. Steve and his wife Jean live in Spring Valley outside of Wilmington, DE. Daughter Michelle is a Veterinarian, and daughter Sarah is a graduate student.

      Steve enjoys snow and water skiing and flying light planes. He and Jean spend time improving wild life habitat and a timber stand on their West Virginia farm.

      Dick Reese has resigned as Director and Art Director of this newsletter. Thanks to his work, the look of this newsletter is considerably improved. He has moved to a new house on the New Jersey shore.  Thanks again, Dick.

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      AARP’s long standing opposition to Personal Retirement Accounts (PRA’s) is coming to a boil.  There were free breakfasts for AARP members, where AARP officials and the author of a book opposing PRA’s gave talks.  They are mailing a one-page “AARP Grassroots Update” mostly opposing PRA’s.  The drumbeat continues in each issue of the AARP bulletin.  The January bulletin has a 3-page article, “Don’t Mess with Success”. 

    This not about retirees, because we will receive our full benefits.  That is a political reality. It is about giving young workers a choice between the present system and PRA’s.  

    We retirees do have an indirect interest in PRA’s because they will be good for our children and grandchildren.  Fairness requires that we solve this problem now, rather than patching and taxing to maintain Social Security forever.

   It looks like the Washington, D.C. AARPers hate the idea of phasing out a big government program, even if it isn’t completed until they have been dead for many years.

    In addition to rallying the troops, they have a full page advertisement (Wilmington, DE News Journal, 1/9/05) with the heading “If we feel like gambling we’ll play the slots”.

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      Argentina, Australia, Bolivia, Britain, Chile, Colombia, Denmark, El Salvador, Hungary, Kazakhstan, Mexico, Peru, Poland, Sweden, Switzerland, Uruguay, (source:  Ferrara, “A Progressive Proposal for Social Security Personal Accounts” Institute for Policy Innovation, Policy Report 176, June 2003).


For a free copy of information on “The 6.2% Solution”, send an e-mail to  If you don’t have e-mail, ask a friend who does.

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     In full page advertisements, AARP opposes Personal Retirement Accounts because of risks while implying that Social Security is without risk. 

     Young workers disagree, and many doubt whether Social Security will be there for them. 

    If Social Security is not reformed, retirement benefits for today’s young workers will pay less than 2% on their payroll taxes.

    Proposals to reform Social Security include the choice to remain with traditional Social Security or to receive lower traditional benefits plus a Personal Retirement Account.

    Reform proposals include a safety net to cover the unlikely possibility that Personal Retirement Accounts do not provide some sufficient return.  

    Stocks have little risk over the long term.  Since 1926 there never has been a 15-year period when returns were negative, and never been a 30-year period in which stocks did worse than 2.6% annually corrected for inflation.  The average real return since 1871 has been 7.2%.

      Members of Seniors Against Federal  Extravagance  support Personal Retirement Accounts for our children and grandchildren.  We deplore the misleading advertisement provided by the Washington, D.C. Office of AARP.

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     We and others have proposed cutting spending, starting with corporate subsidies, to help pay the cost of transition to Personal Retirement Accounts.  Lists of other spending cuts are available from Cato Institute, Citizens Against Government Waste and National Taxpayers Union.

      Sale of government assets has been suggested as a source of money to help in the transition, and we agree.  What better time to cash in on excess assets than when it can help put Social Security on a sound basis?  How about military bases that the military doesn’t want?

     We haven’t seen a proposal to decrease government regulations, but believe it should be put on the table to contribute toward the transition cost.  Federal regulatory costs were $497 billion in 2000, according to a 2001 study by the Small Business Administration.  Compliance costs were about $7,000 per employee per year for firms with fewer than 20 employees and about $4,500 for larger firms. 

    Easing unnecessary or counterproductive regulations, especially for small businesses, would facilitate growth of the economy.  This, in turn, would increase government income and diminish the need for borrowing to cover the transition cost.

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Saving Social Security:

A Balanced Approach, Peter A.

Diamond and Peter R. Orzag, The Brookings Institution (2004)

     Messrs, Diamond and Orzag describe the status quo for Social security and offer their recommendations.  Congress should cover the projected deficit by gradually trimming benefits and raising payroll taxes, they say, as it did when Social Security was restructured in the early 1980s. 

      The authors assume that Congress can safely raise taxes for Social Security without addressing projected deficits for Medicare and Medicaid, which they acknowledge to be “much larger” than the projected deficit for Social Security. Given that the present value of our government’s unfunded future liabilities totals about $50 trillion, this seems like a cavalier assumption.

      Also, PRAs offer benefits over Social Security.  If a worker’s PRA earns average market returns, it should grow at say 6% per year in nominal dollars.  Over 30 or 40 years, that should make a welcome contribution to the worker’s retirement nest egg.

      If you don’t like the Diamond-Orzag plan, don’t worry.  According to columnist David Wessel, it has “few advocates in Congress.”  Wall Street Journal, 12/30/04.  “Saving Social Security” provides a useful preview, however, of some of the arguments that we can expect against PRAs.


     In time, Personal Retirement Accounts will remove the burden on workers to support retirees.  Retirees will be self-supporting.  Not only that, retirees can expect significantly higher income than traditional Social Security would provide.

      The advantage of having self-supporting retirees may be accentuated if life expectancies increase greatly – a real possibility.


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