Robert J. Myers
Robert J. Myers
|Soundclip from an interview between Mr. Myers and Professor Ed Berkowitz (not from the interview provided below). Mr. Myers discusses the original financing basis of the 1935 Social Security Act. [In RealAudio format]|
Junior Actuary, Committee on Economic Security
Statistician, Federal Emergency Relief Administration
Actuary, Railroad Retirement Board
Various Actuarial Positions, Social Security Board
Chief Actuary, SSA
Captain, U.S. Army (Office of the Surgeon General)
Legislative Aide, House Committee on Interstate & Foreign Commerce
President, International Fisheries Commissions Pension Society
Actuarial Consultant, Department of Defense
Actuarial Consultant, Commission on Railroad Retirement
Actuarial Consultant, Department of Justice
Actuarial Consultant, Senate Committee on Finance
Actuarial Advisory Committee, Railroad Retirement Board
Actuarial Consultant, House Committee on Ways & Means
Member, National Commission on Social Security
Actuarial Consultant, U.S. Tax Court
Deputy Commissioner, SSA
Executive Director, National Commission on Social Security Reform
Actuarial Consultant, Administrative Office of the U.S. Courts
Chairman, Railroad Unemployment Compensation Committee
Consultant, General Accounting Office
Minority Social Security Counsel, House Committee on Ways & Means
Member, Commission on the Social Security "Notch" Issue
Member, Prospective Payment Commission
Mr. Myers was the author of more than 900 articles and five books on the Social Security program. Holds a Guinness Book of Records world record for testifying before Congress 175 times, during his tenures as Social Security Chief Actuary from 1947-1970 and as Social Security Deputy Commissioner from 1981-1982. He was a founding member of the National Academy of Social Insurance. He was an acknowledged world-class expert on the Social Security program. Senator Daniel Patrick Moynihan (D-NY) once described Bob Myers as "a national treasure."
Myers Oral History
This is an interview in the SSA oral history series. The interviewee is Robert J. Myers; the interviewer is Larry DeWitt, SSA Historian. This interview took place in two sessions, the first on March 14, 1996 and the second on July 8, 1996. Both sessions were held at Mr. Myers' home in Silver Spring, Maryland. The interview was transcribed by Sharon Mohr, of SSA's Office of Library, Records & Reprographics. Mr. Myers made edits and corrections to the raw transcript. The questions and any editorial comments are shown in italics, to distinguish them from Mr. Myers' remarks.
Q: You began your career as a young Junior Actuary with the Committee on Economic Security, in 1934. Can you tell us how that happened, how you came to be there, how you came to start your career with Social Security. What were the circumstances?
Myers: Well, it was a matter, really, of great good luck--being in the right place at the right time. I had, in June of 1934, received my Masters Degree in Actuarial Science from the University of Iowa, which was one of only two schools in the country that at that time had actuarial courses. My professor, Henry Lewis Rietz, was a member of the Actuarial Advisory Committee to the Committee on Economic Security, which had been established to make studies looking forward to the development of the Social Security program. And when I graduated there were no jobs available, none of the people in my class had got jobs except those who had been sent there by their insurance company and the company took them back. So I was back home in Philadelphia looking for a job and one day I got a letter from Professor Rietz saying, very complimentarily, that I was his unemployed actuarial student who lived nearest to Washington--would I be interested in a 6-week temporary job as a Junior Actuary with the Committee on Economic Security? I didn't know what that was either, but I knew what a job was, and 6 weeks was fine. So my principal qualification, therefore, was geography, because most of the other students were from the Midwest.
So I came down and was interviewed for the job by Edwin Witte and got offered the job and took the job and the 6 weeks turned out to be much longer because --I came down about September 23, 1934--the work at the Committee on Economic Security extended on for a number of months, until the recommendations were made and then legislation was developed and Congress considered it. But the money available to the Committee on Economic Security expired on June 30, 1935 just before the Social Security Act was finally enacted.
During the first two or three months of this job I was working under two qualified actuaries who were there on loan, one from Travelers Insurance Company, W.R. Williamson, and one from AT&T, Otto Richter. And then when they left--I by that time got a bit of educational experience on how to make the cost estimates--I kept making cost estimates for the various proposals that were considered by the Committee on Economic Security and then on the legislation as it went through Congress.
On June 30, 1935, the job expired. I got a temporary job with the Works Progress Administration, as a statistician. As you know the Social Security Board, as it was then called, didn't get an appropriation for quite awhile because of a filibuster by Senator Huey Long. For some people--like Wilbur Cohen, and others--they found some money for them through the Labor Department to start the planning. The Social Security Board didn't really get money until sometime in 1936 and they didn't particularly need actuaries to start with. They needed people to plan the administration and that sort of thing and so then I got a temporary actuarial job with the Railroad Retirement Board which was here in Washington at the time.
Q: Before we go to that, can I ask you about your first meeting with Witte, and your first impression of him, and what he was like? At that first interview, did he make any impression on you of a particular kind?
Myers: No. I guess being a young college student I was scared to death. It was a short meeting. He didn't ask me much. He knew what my qualifications were from Professor Rietz, but he had to have a face-to-face meeting with me, I guess. I can't remember anything much at all about it.
Q: OK. During that time you worked at CES was he present during your work? Did you interact with him or did you work mostly with Richter?
Myers: Well, mostly with Richter who worked on the old-age side. Williamson worked on the unemployment side, and then I also worked with Doug Brown and Barbara Armstrong. I saw Witte occasionally. I don't recall any particular meetings.
Q: How about Altmeyer? He was the head of the technical staff which the folks you just mentioned were a part of.
Myers: Again, I don't recall.
Q: At that time he wasn't prominent in your day to day work?
Myers: Not at all.
Q: You did mention Barbara Armstrong, Douglas Brown, and, I think, Murray Latimer as the three people working on the old-age side. Did you work with them? Did you have many dealings with them? Can you tell us a little bit about them.
Myers: Essentially my dealings with them initially were just through Richter. Those people would get together and decide on a plan, who was to be covered and the benefit formulas, and Richter would set up the calculations and I would do them. So, although I saw the people, I wasn't in on any of the meetings and I can't say that I developed any of the recommendations, specifically. Then later, when Richter went back to AT&T, I'd be dealing with Latimer, Doug Brown and Barbara Armstrong to some extent. When they would say: "what would the program look like if it were framed in this and that way, what would it cost? What are the projections?"
Q: I believe you have some documents there concerning the actuarial estimates done for the CES. What are those documents, and what is their significance?
Myers: It's the actuarial worksheets underlying the original Social Security Act of 1935. I have copies of the worksheets. I gave them to your predecessor, Sid Leibowitz, and he made a photocopy, which I have here. It was transmitted to Leibowitz on March 7, 1985 so presumably it is somewhere in your files.
These worksheets are numbered R61A, R62A and R63A. The "R" standing for Richter (Otto Richter). Richter being the actuary who was in charge of the old-age pension side of the work of the Committee on Economic Security. Also, I'm giving you a note of July 6, 1996 which may explain these worksheets a little and indicating some things that are very important that might otherwise be abstruse, as well as a letter of April 15, 1985 that I wrote to Wilbur Cohen and Murray Latimer explaining the basis underlining these worksheets as I remembered it, and did they recall the same, and both of them agreed.
As you recall, when the House passed the bill in 1935 it did not include a retirement earnings test, not because the House didn't want to do this but they weren't quite sure how to write it and they left that up to the Senate. If benefits were paid to everybody beginning at age 65, whether they worked or not, the cost would be quite high. The question then was how to make the estimates for the Senate, which did put in a retirement earnings test of a general nature. In essence, the Senate provision prohibited paying benefits to a person who had any substantial gainful activity.
Q: At one point you were called in to work on providing some actuarial estimates that would account for a retirement test. Can you just describe what that was about?
Myers: Yes. This was with Murray Latimer when the Senate was going to put an actual retirement test in because I was told the House didn't know exactly how to write it so they just said: "Well, we'll leave that up to the Senate." But then there was to be the general principle that the plan was to be self-supporting, up through 1980, and the retirement test was in there, and what I did was to work backwards as to what assumption of the average retirement age would make the plan self-supporting. And so I made the estimate on that basis, the plan is going to be self-supporting, and then worked back to see what that assumption would involve as the average retirement age, which turned out to be 67 , which I didn't think was unreasonable. If it had taken something like age 70 I would have said "I can't stand in back of this estimate." But at that time--with no experience except what you knew about how long people worked and so forth, and the benefits weren't that big, that people were going to rush forth to retire just to get the benefits--the resulting figure of 67 seemed to me to be a reasonable assumption.
Q: If there had been no retirement test in the law, then it would have been more difficult for the program to be self-supporting, for it to be in actuarial balance.
Myers: Yes, because what you're saying in essence is that benefits are paid automatically at age 65 regardless of cessation of employment and obviously more benefits would be paid than if you assume that people retired (at 67 ), and the system would not have been self-supporting with the tax schedule that was in the proposal.
Q: I'm very interested in this issue of the retirement test because there's a very common, what I consider to be a myth, about the retirement test and I want to check if I'm right. It's now said by some people that the retirement test was put in the law in order to discourage older workers, to get them out of the labor force so that younger workers could take their place, and that was the intent of the retirement test. And then these people would argue we no longer need that sort of effect and, therefore, we don't need a retirement test any more. Is that an accurate description of what happened and how the retirement test came to be in the law or is that a myth that's evolved?
Myers: That's a myth that I've frequently pointed out. That was a by-product, perhaps, that people would retire, but my demonstration of why it's a myth is that the average benefit was going to be maybe $15 a month and the average wage was around $100 a month, so people weren't going to rush out, leave $100 jobs to get $15 benefits. And that wasn't going to remove very many people from the labor market.
At the same time, both the House and the Senate wanted a bill that was self-supporting. In other words, it would be financed solely by the payroll taxes and the interest earnings of the Reserve Account, that is, there would be no government subsidy from general revenues. The way the Committee on Economic Security left it the program did depend on general revenues and President Roosevelt more or less vetoed that idea. The House and Senate were going along with a self-supporting program with no effect on the general budget deficit of the government.
The problem then arose as to how you would actuarially take account of the retirement earnings test. Obviously this was going to reduce costs very considerably. There was no experience to draw on, we had to estimate the impact based on general reasoning about what we might expect. What was done was to develop various estimates, as explained in this note I have just written and as you'll see from these worksheets. I experimented with various reduction factors. In other words, reducing the benefits by multiplying by 84 percent, and by 85 percent and finally by 82 percent, and 82 percent worked out fine. The system was just self-supporting. It built up the famous $47 billion reserve at the end of 1980 and all the criteria were satisfied.
Now one thing though, this 17 percent reduction had to produce some sort of reasonable result. If it required an average retirement age of 75 that would have been obviously wrong. Now as I calculated, the 82 percent factor is equivalent to an average retirement age of 67 , which I didn't think was unreasonable. As it turned out, in actual experience, people are retiring earlier and of course, 65 is the earliest you can retire with full benefits, so 67 is on the high side and probably something like 66 or 66 might have been better. At any rate this was to express the general principle of self support.
Q: As you said, the proposal that originally came out of CES was for a program that wasn't fully self-supporting, there was going to be some general revenue subsidy in the program. President Roosevelt had given them guidance to not do that and Secretary of the Treasury Morgenthau was opposed to that, but the report as it came out still had those general revenue estimates in it and at the last minute, as the bill was being considered in Ways and Means, the CES had to go back and revise the actuarial projections and make it self-supporting. What was your role in all this? Were you involved in the policy debate, or just in doing the calculations.
Myers: In the calculations, not in the development of what the revisions were; and as much as I might have liked to, I didn't participate in the meetings when they said we're not going to have a government subsidy in the system and we've got to have a self-supporting system and that sort of thing.
Q: Did you have a strong view on that at that time?
Myers: I think so. I've always been opposed to government subsidies because I think that the cost should be out in the open. So, how strong I felt about it at that time, I really cannot say.
Q: During those early days, I believe you also met Wilbur Cohen, who was also a young staffer at the CES.
Myers: Yes. He was there about a week before I was.
Q: And did you know Wilbur? Did you meet him and work with him during that CES period?
Myers: Yes. We were about the same age and we were all around. It was a small office and I saw him, but I wouldn't say I worked directly with him, but a lot of times he'd come around and ask for information because he was, as you know, Witte's go-fer.
Q: The last thing about the CES period--can you just give us some idea of what the work environment was like? Was it hectic? Was it slow-paced? Just some idea of what it was like, if you can.
Myers: Well, it was my first job of that type. It didn't seem to me to be overly hectic. You worked along and you worked hard but there weren't lots of late hours, the way I've spent some with some legislation in the 50s and 60s and so forth. There wasn't any of that. People, I think, just worked hard, worked fairly normal hours. Some of us worked some at night, but it wasn't anything that I would say was hectic.
Q: Which is kind of surprising because you had such a short time period to do all the work.
Myers: That's true. Maybe the others did, and I just didn't notice it. Maybe I had other things on my mind.
Q: You mentioned that when the CES came to an end, that you briefly went to work for the Works Progress Administration. So let's pick back up with that if we can. What did you do there and what was that like? What was WPA like for that brief period that you were there?
Myers: I was just doing statistical work. I was only there about three or four months, and it was in the same building, and somebody I knew was there, and they had this job available, it was as a Junior Statistician. I was working on various characteristics of the relief population.
Like one thing was a very esoteric problem of what is the geographic center of the relief population, as there is the center of the total population. In other words, the center of population is the place, you know the concept, is that it's the point in the U.S.--which is somewhere west of the Mississippi, and then it's been moving west, over the years-- where the distance from that point to every person in the United States is a minimum as compared to if that point were somewhere else. I guess the Census Bureau still calculates the center of population, but it doesn't get publicity anymore. But anyhow, the guy that I was working for thought it would be interesting to see--since it had just come out for the 1930 census--what was the center of the relief population, which I suspected would be somewhat to the east of the center of the total population, and various statistical analyses like that.
But as soon as I got offered an actuarial job at the Railroad Retirement Board (RRB), I quit, because the Railroad Retirement Board was in the field that I had decided I was going into. They had an Actuary and they had three or four Junior Actuaries. I was made the second in command, but way below the Chief Actuary. The RRB was here in Washington at the time and so I took that and I was there close to a year, until SSA got some money for actuaries and brought Williamson back and he wanted me to come, so immediately I left.
Myers: 1946. Actually, the title then was Actuarial Consultant.
Q: Can you describe him a little to us and give us a little bit of an impression of him, his working style? What was that period like while you were working there as a Junior Actuary?
Myers: When I was working under Williamson, there were four or five actuaries doing various types of work. My assignment was the continuation of what I had been doing, making the cost estimates for the existing system, for proposals and so forth. Some of the others were working on things like coordination of private pensions with Social Security, because there was a lot of talk then about opting out--the Clark amendment was being considered and whether people should be able to opt out of Social Security, and some of the other actuaries were working on things like that. Birchard Wyatt, in fact, was in the actuarial division. The Actuarial Office had an actuarial section and a technical section. Wyatt was the head of the latter section, and they worked on various aspects of the program and, I suppose, considered some of the plans that were being made to change the program even before it got into operation, or just as it was getting into operation. Also, an Advisory Council was coming into existence.
So I worked, as it were, directly under Williamson, and we did have a Deputy Chief Actuary, Dorrance Bronson, but I worked fairly independently without any supervision.
Williamson was a well-qualified actuary. He had been at Traveler's Insurance for years. He was very much interested in group insurance and, of course, group insurance is closely related to social insurance, in many ways. And he was generally supportive of the program in the beginning but then he got less and less enamored of it. And, particularly, he was in favor of what he called "social budgeting," by that he meant he was in favor of universal flat benefits rather than earnings-related benefits. He had the view, which I think had merit, that it was unfair that all those who had retired before Social Security began got nothing, and those who were in Social Security for just a few years, just enough to qualify, got real actuarial bonanzas, and that wasn't equitable. And he tried to urge that they ought to change the system and that it ought to not be an earnings-related system. And the more he thought about it, the stronger he got that way, and he got into a lot of conflict with the Social Security Board, and eventually there was a parting of the ways.
He was a very talkative fellow, and sometimes he was hard to follow. He talked so much and in long sentences and things like that, and sometimes it was hard to understand just what he was driving at. I thought so and I think others thought so. But, essentially, there was this conflict and the rift grew and grew until he no longer could stay--they didn't fire him, he resigned.
He resigned, in part, also because another opportunity arose, because Wyatt went out and formed a pension consulting company and then died at a fairly early age, after maybe only two or three years there. Wyatt was not an actuary, but he had a number of actuaries--Dorrance Bronson went there. They needed somebody to hold the company together so they convinced Williamson to come and be the President. And as you probably know, the Wyatt Company, (they've changed the name now, to Watson-Wyatt) is one of the most prominent actuarial consulting firms in the country, so it was a good opportunity. As I say, with this growing conflict, it just seemed to be a good way to resolve the issue.
Q: Now you left SSA, the Social Security Board, for awhile when the war started and did a few other things.
Myers: Well, I left when the war started because Uncle Sam said, "You're drafted." It was not voluntary. So I was drafted and I got a three or four month deferment because I was running the second actuarial valuation--they were triennial, every three years--for the Railroad Retirement System, because the actuary for that program (Joseph Glenn) got fired. He was a capable guy, whom I worked for after I left the Committee on Economic Security. But he was also a very hard-headed, stubborn guy, like actuaries generally, I guess. And he told the Railroad Retirement Board that he wasn't going to do the second valuation because it wouldn't show anything different than the first. Well, I don't know where he got that view, because after all, the law said do it. So you do it even if it does show the same results. And he left and they needed someone to do it and the actuaries they had there were not fully-qualified the way I was, and I had the experience, so I was loaned to the Railroad Retirement Board, and my being drafted into the Army was deferred.
And then, after completing the valuation, I was drafted. After basic training I got pulled back to Washington to work in the Medical Statistics Division of the Surgeon General's Office because the guy who headed that up was a statistician that I knew and he got me and several other actuaries to work there. They previously had a bunch of doctors who weren't capable doctors running the Medical Statistics Division. They weren't capable statisticians either, so it was a terrible mess. So we straightened it out--it was just a straight statistical operation, statistical recording, not much analysis, and I was given a direct commission, so I fought and won most of the war here in Washington.
Q: And you came back to...?
Myers: The way I came back to the Social Security Administration was interesting. I don't know whether it was in my book or not, but when the war was over in Europe, and they were saying how you could get out of the Army--you had to have a certain number of points, and you didn't get many points if you had only been in the U.S. So it looked as though I was going to be in the Army forever. I got approached to get out of the Army and go to Germany as part of the reorganization and review of their Social Security system. So, reluctantly in some ways, because it meant leaving my family, I said "yes, I would go" and they told me to go home and stay at home until they cut the orders for me to go to Germany.
And that gave me some of the best luck in my life. I was sitting at home one day, and the phone rang and I picked it up and the fellow said "This is Congressman Wolverton"--he was a Republican from New Jersey and was at that time Chairman of the House Interstate and Foreign Commerce Committee. He said, "I'd like you to come and work for me. We're going to work on Railroad Retirement legislation, and I'd like to have you work with the Committee." I said "Fine, I'd be glad to do it, but there's one small problem--I'm in the Army at the moment." About three days later, I was out of the Army, and I worked for the Committee for several months and when that was finished, then I was free to go back to Social Security, and I went.
In the meantime, Bronson had left Social Security and gone with the Wyatt Company. He was going to stick around and wait until I got out of the Army, but he couldn't wait that long. So I went back, and Williamson was still there. Then, Williamson left, and the opening was there. After a number of months, they decided that maybe I could be the Chief Actuary, but they thought I was too young. They--meaning the Social Security Board and Altmeyer--inquired around among a number of actuaries as to whether I would be acceptable to the actuarial profession, and it turned out that I would. So I was named in 1947 as Chief Actuary (or, rather, Actuarial Consultant, as the position was then called).
Q: Let's talk a little bit about the profession of the actuary because in many respects, it's kind of unusual. Can you just explain a little bit about the profession of the actuary and how you qualify and how was it for example that you were qualified to become the Chief Actuary at this point in your career?
Myers: The actuarial profession is unlike any other that I know. The CPAs, of course, have exams, but they're given by the states. The actuarial exams are given entirely by what is now the Society of Actuaries. There used to be two "life" actuarial organizations. They merged. In essence they worked closely together so they were really one actuarial organization. There was also one in the casualty field, but let's just talk about the one in the life field, which is now the Society of Actuaries. They set these exams. Anybody can take them and they've always been non-sexist. Nobody knew from the papers who the person was that was taking the exam. If you passed them, you passed them. The number of exams has changed from time to time. Back when I was taking them, there were twelve. Now there's a very complicated system. But the exams start off with basic math that most any college student will have. They go through actuarial math (involving life insurance, pensions and annuities) and statistics and then go into various subjects, one of them being social insurance; the others are insurance law, insurance accounting, insurance underwriting and various aspects of the insurance business, from an actuarial standpoint. And when you pass all those exams, then you're a Fellow of the Society of Actuaries, and you are a qualified actuary.
Q: Now, when you came to SSA, when you assumed the job of Chief Actuary, what was the role of the actuary within SSA in terms of how you dealt with the policy makers, how you dealt with the Commissioner's office, what was your role in the organization as the Chief Actuary? How would you describe how the actuary worked?
Myers: Let's go back. Originally, the actuaries were all concentrated under Williamson. And there was this feud, as it were, between Williamson and the Social Security Board; they clipped his wings some and set up a separate actuarial unit in Baltimore.
Because, as you know, the actuarial office was in Washington, and all the records and other things were in Baltimore. They set up this short-range unit in Baltimore, with qualified actuaries, and the unit in Washington then just dealt with long-range matters--short-range meaning in the next few years. The Baltimore unit did things like estimating what the operations of the Trust Fund were going to be in the next few years, and also they did estimating as to the number of claims that would be filed in district offices and various other claims activity, that were needed for administrative planning. In the long-range unit, we looked at the long-range situation of the present plan and various proposed amendments--were they adequately financed, or how they should be financed and so forth.
And so there was this separation of functions. The two offices naturally talked to each other--the long-range estimates had to tie in with the short-range ones. In 1965, they put the two pieces back together and put it under my supervision. But I left the short-range unit to operate as it was. I paid some attention to what they did, but it seemed to be operating well, and I let it keep operating in this manner.
Q: Now, there's always been this kind of tradition of the actuaries being very objective and apart from policy and politics, can you talk a little bit about that tradition?
Myers: I feel very strongly about that. The Actuary, regardless of what he or she thinks of various proposals that are put forth, should make the best possible estimate for them. It may not be right, but it should be the best that you can make, regardless of whether it's a good proposal or a bad proposal. And the policy makers shouldn't influence you and say "we don't like this--put a high cost on it," or "this is our proposal, let's say it doesn't cost so much." And to the best of my knowledge, very rarely has anyone ever tried to breach that principle.
There was a very good write-up about the work of the Office of the Actuary over the years in the conference report on the Independent Agency bill, and I would refer you to that. I use that quite a bit because they talk in there about why they did not put in the bill that there should be a legislated position of Chief Actuary (although later this was done).
But nonetheless, the tradition of the past has been thus, and I would say, unfortunately, at the moment, it's being breached some.
For many years, we operated on the basis that Congress and Congressional staffers--either side--could come to us and ask for estimates, and we'd give them to them. This didn't have to be cleared with anybody else. I understand from some of the Hill staffers that it isn't that way anymore, and I think that's bad. Usually what was done was that my superiors would be told we had been asked for cost estimates for this or that or the other thing, but we would give the inquirers the figures first and just report what we told them. In other words, the facts were all out there. This, I think, has been one of the strengths of the program, that we don't have separate actuarial units in Congress and in the administration who might be fighting over whether the assumptions were right. In other words, everybody played the game on the same assumptions. As I say, maybe the assumptions turned out not to be good, but they were honestly and professionally made.
One other thing in this respect, too, that has changed--to some extent, but not greatly. At certain points, both the Senate Finance Committee and the House Ways and Means Committee, when I was Chief Actuary, asked for my services to be available to them on a confidential basis. And the powers that be, the Secretary or the Commissioner, agreed that I was to work for them, and I did not have to tell the administration what I was doing and what they were thinking. Because there were times when Congress and the Executive Branch had different ideas, when amendments were up--not drastically different like they are now, where some people want to destroy the system. They had different approaches, and I was given the authority so that I was not breaching confidentiality. I was given authority to work for them, and so I was on their staff. At the same time, I wouldn't tell them what the Administration was up to, or I wouldn't tell the Administration what Wilbur Mills was up to. This was out in the open, and there was no breach in confidence involved because the powers that be in the Department thought this was in the best interest of moving things along.
Q: That's an extraordinary degree of independence that the Actuary has enjoyed over the years.
Myers: It isn't that much any more, as I understand it.
Q: Now was that tradition already in place from the earliest days of the Social Security Board? Would you say that it always functioned that way or that it was something that happened when you were the Actuary?
Myers: No. It happened, but not because of me, but rather due to the timing, because there was no legislation after 1939 amendments for ten years. So when the 1950 amendments were started in 1949, this is when this started happening, whereas I became Chief Actuary in 1947. And this has been noted. There was a book, I think by Manley from the Brookings Institution, in which he wrote about the Ways and Means Committee and pointed out that this was a most unusual thing that somebody from the Executive Branch in essence worked simultaneously for Congress. And some of my printed actuarial reports--it's not this way anymore--were signed Robert J. Myers, Actuary to the Committee. Sometimes I'd be working both for the Republicans and the Democrats, and they would come to me as though I was a staffer of the Committee. They used to have these Actuarial Cost Estimate reports. This is one done in 1983 and it just says, "prepared for use of the committee by its staff," and if you look at an earlier one--here's one from 1971-- that says "by the Office of the Actuary."
Q: Very interesting. Now the other part of that tradition of no one asking you to shade the numbers and shade the estimates, I assume was there from the beginning, even before you began to work closely with the Congress.
Myers: I would say so. There was only one instance I ever knew, when, in 1952, the Republicans came in. Roswell Perkins was Assistant Secretary. As is frequently the case, and as is often justified, political figures were often suspicious of the career civil servants, and he said one or two things along these lines, and I gave him a lecture and that was the end of it--we got along fine.
Q: You talked in your book about the tradition of providing long-range forecasts--of the idea that we should project the operation of the program far into the future and make certain that it was in actuarial balance. And that seems to have been a feature of the actuarial estimates that you introduced--it was partly at your insistence. Could you describe what that issue was and how you introduced that tradition?
Myers: You said it well yourself. First of all, the idea of long-range estimates was not one that was widely accepted throughout the world, years and years ago. I know from going to international conferences of actuaries or ISSA (International Social Security Association) meetings. Many of the European countries did not believe in long-range projections, year by year figures--they said we'll just have to look ahead a few years or we'll use present value calculations. Do you know what I mean by present value?
Q: I've come across it a hundred times and I've never understood it yet.
Myers: It's very simple. If you're a certain age, and have a life annuity of $1 per year coming to you and have a life expectancy of 18 years, that's going to have a present value of $15 or something like that, on the basis of a specified interest rate. The reason being that, if you have $15 in a fund and you pay out $1 each year, and you get interest at whatever rate you assume, that fund will just run out when the last survivor dies--actually you don't use life expectancy because that says that everyone lives exactly 18 years and then drops dead, and that is inaccurate; it's close, but not right. Actually, one uses a life table. You start out with 100,000 people at a certain age, and they drop off until the last one dies. If you start with 100,000 at 65 the last one may die at 110, and by actuarial calculations you can figure out this present value of maybe $15.22.
In many social insurance systems, they did everything by present value, and private pension plans often do that. The present value of all the future benefits is determined for the duration of the last active employee--so they project out 80 or 90 years. The present value of the benefits is X million dollars, and they figure out what fixed contribution rate do we need, say 6.32 percent of payroll, the present value of all those contributions will equal the present value of the benefits.
The projection method was not widely used--I didn't invent it, but it was not widely used. The Europeans just didn't look ahead and I think that, over the years, there's been quite a change of opinion. More and more, the British did the projections and also the Canadians. And now others are doing this. If they'd done this, they would have seen, as we did, the effects of the baby boom. All this talk now about the baby boom has been no surprise to the actuaries of SSA, or to the policy makers of SSA who saw the work of the actuaries. You see these things by projections that you don't see in a present-value calculation.
Q: So the idea that we're so familiar with now, that appears in every Trustees Report every year--the long-range 75-year actuarial balance of the system and showing that projection year by year--that was really an innovation that was introduced while you were the Chief Actuary?
Myers: Yes. In fact, it used to be not a 75-year period, but perpetuity. Some people wonder how can you get a single finite figure for perpetuity when that's millions of years. Because of the discounting of interest, you can, and I'll give you a simple example. Suppose somebody agrees to give you and all your survivors $3 a year forever. The total amount that would pay is infinite, of course, but the present value of that is finite. The reason is, say interest is 3%, if you have $100, that will produce $3 every year forever, so the present value of that stream of infinite figures is $100. We used perpetuity as the basis for some years and assumed that after 75 years, everything stabilized. You can make the calculations, even though it's a perpetual calculation, through actuarial mathematics; it can be done quite simply, as I did that $100 bank deposit, and this was done until about 1965.
But some people said, "We don't understand this perpetuity, so why not just do it for 5 years or 10 years." I objected strongly to that because I saw the baby boom coming, and I said, you ought to at least encompass that effect. And so, 75 years seemed a reasonable period because that's about the maximum lifetime of the youngest worker in the system, a 20-year old worker, and so it was switched over to a 75-year period. It doesn't make that much difference between 75 years and infinity, but it does make some, and it made the cost of the program a little less, but this was all recognized at the time the change was made.
I'm still an "infinity" guy, because even if you have a 75 year period, every year you do a new valuation, you have some slippage. If conditions were exactly the same, the assumptions were not changed, and the experience was just like the assumptions, the evaluation made later would show, if it was in balance in Year One, by Year Two it would be out of balance by a tiny amount, say .05% of payroll.
Q: Due to what?
Myers: The way the present system is. It wouldn't be that situation if we had a truly pay-as-you-go program, but in the present system, that situation, with a level tax rate, in the last year of the 75-year valuation period, the cost is higher, while in the first year the cost is lower.
Q: One of the features of the 75-year estimates that we have now is that we are able to say in a fairly definitive way whether the system is actuarially in balance or not in balance, and that concept, that test of in balance or not in balance, has become the key political measure of the performance of the program, so it's a very important innovation, I would say.
Myers: I think it is and should be. Wilbur Mills, particularly, was very strongly in favor of this procedure. He wanted to be able to go to the floor of the Congress and say "this system is an actuarial balance after what we've done." The only problem, as I say, is with this creep.
Q: Which is sort of a technical problem?
Myers: Yes. And it wouldn't be there if the tax rates were on a pay-as-you-go basis. A level tax rate is too high in the beginning and too low in the end, and you get that creep.
Q: Now you alluded to the fact that some people, I think even among your actuarial staff, thought that we should just do short-term estimates.
Myers: Not the actuarial staff.
Q: Oh, okay.
Myers: Some of the policy people. They took this approach, I think, because they said, about looking at the long range, "this stops us from expanding the program because things look good right now--they look great for the next ten years." If we only looked ahead ten years, we'd say there's no problem; yet we know there are going to be problems because of the demographic situation.
Q: But you would say the responsible thing to do is to do long-range estimating?
Myers: Yes, definitely. And recognize that you're not going to be precise. You're not going to hit it, but it's going to give an indication of the trends that are inevitably there from demographic causes.
Q: Now there's another story of a policy issue that was introduced after you left as Chief Actuary. I think it was in 1972, and I wanted you to talk about that. As I understand it, prior to this change our estimates didn't factor in inflation. It assumed steady wage levels rather than inflating wage levels. Can you explain what that issue was and what the change meant?
Myers: I was always in favor of having what I call static estimates, when it was a static program. In other words, the plan didn't call for automatic increases.
Q: You're talking about the COLA (Cost of Living Allowance)?
Myers: The COLA, and raising the earnings base and the retirement test amounts. There were some in the policy-making side who said that you ought to make the estimates for a static plan, by assuming that the economic conditions are going to change. In other words, wages are going to increase. I argued against this. I said, when wages go up then we'll take it into account. And that's how a large part of some of the liberalizations or benefit increases in the 50s and 60s were enacted. When there were several years of wage increases, we'd take that into account, and the cost of the program would show to be lower because of the weighted benefit formula. I said "you shouldn't count your chickens until they're hatched," as it were. I think, again, that some people wanted to take these economic assumptions into account because it would make a static program look less expensive and, therefore, you could liberalize the benefits. That's not right--you're counting the chickens before they're hatched. So I stood strong against that.
Now, on the other hand, when automatic adjustments are introduced into a system, then it's fine to have dynamic economic assumptions. But the two had to go hand-in-hand.
Q: I want to clarify in my own mind a few things about the actuarial estimates. There are a couple of criticisms that people sometimes make about the actuarial estimates. One of them is that the actuarial estimates don't reflect economic cycles. A related contention is that they are not based on any kind of economic model. Can you explain for me what the issue is in these arguments.
Myers: Yes. I'll be glad to try. Well, first of all, as to why economic cycles are not built into the long-range estimates, it seems to me to be virtually impossible to know just when the cycles are going to occur and the point is you make economic assumptions that average out what the cycles do and as long as you have a sufficient fund on hand it can weather these economic cycles. Now with short-range estimates, in essence, economic cycles are built in. The high-cost estimate in effect assumes there is going to be bad economic conditions, and the low-cost estimates assume there is going to be good economic conditions. So economic cycles are built-in to the short-range estimates. But in the long-range, trying to predict 20 or 30 years from now that there's going to be an economic downturn or upturn just seems to be at the heights of impossibility.
As to econometric models, maybe I'm just an old fogy, but I think often that is a matter of window-dressing. It's just fashionable to say that we have a model, and it's some kind of secret black box that has more wisdom than mankind does. But in a sense what the Actuary has always done could be described as a model-- and what they're doing now is supposed to be much more refined than what we did in the early days, and even in the somewhat later days. But it is a model in that you build a method which you can describe in terms of its various steps and assumptions. Some of these are just actuarial studies that the Actuary puts out and in a sense they're models, but they aren't the kind that people would describe as an econometric model where you feed in a couple of assumptions and the computer grinds and grinds and out comes a nice answer. But rather, these type of models you can see step by step what's being done. In other words, you start off with the basic population of the country and in order to get the payroll taxes we assume what percentage of people of various age groups are going to be gainfully employed and what their average earnings are by various ages and so on. In a sense, I'd say it's a model. I'm not enough of an expert to really condemn econometric models that much, but that's my general impression.
Q: On a related point, you have said that the actuarial estimates are not forecasts of the future behavior of the program, and that people who try to use them as forecasts are making a conceptual error of some kind. Can you explain this point?
Myers: Yes. It's like a weather forecast. Forget what the weather is going to be tomorrow, if it's going to be hot and rainy or something like that, the farther out into the future you go, the less the weather forecaster will actually forecast. He or she will say: "at this time next year there's likely to be no snow or it's likely to be hot," but they won't give a precise answer. In the long-term, actuarial estimates we say, under these assumptions, this is what will happen. And we know certain things are bound to occur. For example, we knew that the baby boomers were going to result in a much larger retirement-age population than currently. We also knew that as mortality decreased or, in other words, longevity increased, there would be a greater proportion of the population who would be elderly and retired. A forecast would say specifically how many, but the projections would say, we think under these assumptions this will be the result, however, under other assumptions there would be this many more or this many less. The point of distinction between projection and forecast is that the Actuary is never one to say, "We know with certainty what's going to happen." And this viewpoint is taken not only out of the standpoint of intellectual honesty, but also a matter of personal safety because no matter what you did it was very likely that the future would be somewhat different and at least the estimates would portray the general trends. In other words, if we only looked ahead 5 years we might make what I would call a forecast, and particularly, if we just went a year ahead, we could forecast within 1 or 2 percent pretty well, but the farther out you go the more likely it is to be off. But if you stop at 5 years, you would be failing, for example, to portray what is certain to happen, as in this case with the baby boomers. We know they're here. We knew 20 years ago they were here and we know they're going to be living to 65 so there's going to be this general trend. And that's why we call them projections as against forecasts.
Q: Let me see if I understand this. So the point of the actuarial projections is not to predict, for example, whether the economy will be growing or contracting in a particular year, or whether there will be an up cycle here and a down cycle there. That really doesn't matter so much because the point is to depict the broad general trend in the performance of the Trust Funds over the estimating period, and whether we can have confidence that the Trust Funds will be in balance over the period, taken as a whole.
Myers: Exactly. It's the trend that you're announcing. And I think there's been some experimenting with adding business cycles on top of an existing estimate, and you end up in about the same place. If you have an economic downturn the trust fund balance falls below the trend line and when you have an economic upturn it rises above the trend line. In general the trend is what is important.
Also an important aspect of the cost estimates (the long-range cost estimates) is to use them as sort of a yard stick to evaluate proposed legislative changes. So, for example, when amendments are proposed to liberalize benefits, which used to happen much more than it does now, you have a standard to measure them. You are then in a position to say, if you do this it will increase the cost by, say, 13 percent. The necessary questions can then be asked as to how we propose to meet that cost, and if you're proposing this, that or the other thing, that the proposal will or will not meet the 13 percent. So even though the estimate won't be a forecast, it will be a good indication of what's likely to transpire if you change the system in certain ways.
Q: So now let me try to get a handle on the question of how policy makers should use the actuarial projections. The actuaries provide a range of forecasts, we now show an optimistic projection, a pessimistic projection, and an intermediate projection. Would it be correct to say that policymakers are making defensible choices as long as their assumptions fall somewhere within the range of estimates provided by the actuaries, and only if they use estimates outside the range provided would the actuaries say that the policy choices are not based on sound estimates.
Myers: Yes, that's right. I would go on to say, however, that over the years the policy makers have always said let's base our policy changes on the intermediate estimates. Now I think I would have objected if they said let's base it on the optimistic estimates, because if we used these estimates and they were off there would be a shortfall in the program's funding. And there are sometimes critics of the program who want to look only at the pessimistic estimates. The advantage of having the long-range estimates is to let people know that things might not turn out just the way we are thinking they will in the intermediate estimate. We aren't claiming to be seers and tell you absolutely what's going to happen. The system may have more money than it needs or it may have less, and so you should be aware of this and, particularly, don't take just the optimistic estimates because it may be that the financing will fall short if the assumptions in the optimistic estimate do not come to pass.
Now back in the days before--I guess it was in the late '60s, early '70s--the economic assumptions were always static. In other words, it was assumed that wages would not increase in the future, even though everybody knew that they undoubtedly would. But I always insisted this was the proper way to make cost estimates because the benefit structure was designed based on today's earnings levels without automatic adjustments. Once automatic adjustments were introduced then, fine, you can have dynamic assumptions. Now the way this turned out before automatic adjustments were introduced (it was in some sense nice for the actuaries) you made the estimates in a certain year on current wage rates and two years later wages had gone up. You then make a valuation and you show that the system has a surplus and Congress says, "Fine. You can increase benefits." And the increase was able to be supported. In effect it was just what a CPI COLA would have done, so you just work it out without automatic adjustments. In a sense it made everybody look good that they could do this and it didn't appear to cost anything--benefits could be increased without raising taxes. But I think it was the only way to proceed because you couldn't assume that wages were going to increase and the benefit formula would stay the same.
Q: Let me ask you about the estimates made in 1981. I think one of things that happened in 1981 is that for purposes of the short-range projections the Administration focused on the more pessimistic assumptions and for the long-range estimates they focused on the intermediate or "revised intermediate" assumptions. Some people have pointed to this as evidence of political manipulation of the estimates, saying that we pick and choose optimistic estimates when it suits us and pessimistic estimates when that suits us. Now if I understand correctly, that's a perfectly appropriate way to make public policy.
Myers: Yes, I think so, and especially when it's openly said.
Now if we can just step back to 1977. The 1977 amendments were supposed to fix the situation for the short and medium range. We didn't bite the bullet over the long-range situation. But the difficulty was that in the short-range the financing was on a very close basis, very little margin for safety. The tax rate was going to go up in the '80s and then in 1990 but shortly afterwards it was decided, well, let's not increase taxes too much and we can get by. Well, by the intermediate estimate you could have gotten by but unfortunately economic conditions in the late '70s and early '80s were bad. Wages didn't go up as fast as prices and with the automatic adjustment features the system ran into trouble. The trust funds would have been exhausted in '81,'82, or '83--certainly by the middle of '83. But if the system could have been kept going for a little longer it would have come out of it to a considerable extent, but that isn't the way the system could operate. There was no provision that the Trust Funds could borrow money and pay it back later, and a lot of people would have been skeptical about it, and that just wouldn't have been a good procedure.
The problem in '77 was that legislative action was taken when the system was approaching financial problems, the financing changes were made a little too late. So in the '81-'82 considerations, and in the '83 legislation, it was decided: "Look we don't want another crisis. In the short-range (the next 10 years--the 1980s) let's base the financing on high cost estimates and pessimistic assumptions. For the long-range estimates we will use the intermediate assumptions." With the short-range we intentionally assumed pessimistic conditions so that we would not have another crisis. And actually many people, even after the '83 amendments were passed, said "we'll have another crisis in 2 or 3 years. You can't trust the government. They said that in '77 and look what happened." Well it was a different situation. As I said, in '77 the financing was based on the intermediate assumptions for the short-range and intentionally in the '83 amendments we said let's be safe. And as you know we sure got through the '80s beautifully.
In my files I have some articles where even some responsible organizations said there's going to be another crisis in 2 or 3 years. The Committee for Economic Development, which is a business group, quite moderate and quite responsible. They thought we were going to have trouble. They didn't understand what the National Commission recommended and what the Congress did to be absolutely sure it would not happen. And now we have a $500 billion reserve fund.
Q: Now in 1981-82, when you were back at SSA as Deputy Commissioner, and the Chief Actuary reported to you, there was something introduced that was a little bit novel. Instead of having the three standard estimates that we usually have: optimistic, intermediate and pessimistic, there was one additional estimate. It was something that was a little bit more optimistic than the intermediate assumption but not quite as optimistic as the optimistic assumption, a kind of in-between. Now some people have talked about the introduction of this additional estimate as being evidence of some political manipulation by the Administration with the estimating process. I want you to describe to me how we came up with those four sets of assumptions and what their purpose was.
Myers: In the short-range estimates (the next 5 years) OMB did not like the assumptions that the actuaries developed for alternative II--the intermediate estimate. They said we're going to restore the economy and your assumptions are too pessimistic. Now I did not attempt to be Chief Actuary when I was Deputy Commissioner, but I sure wanted to back the actuaries up. So the actuaries, with my support and with Jack Svahn's support, said the OMB estimates were just too optimistic and we just could not support them. The compromise was to have two intermediate estimates. So the solution finally was to put in both a 2A and 2B set of assumptions. 2A being the optimistic intermediate and 2B being the true intermediate and what happened in practice was everybody just kept using 2B and after a few years of doing this finally the SSA actuaries and the Board of Trustees said this is silly, why confuse things with four estimates, so we dropped the 2A one.
Q: Was this unprecedented? Was this push by OMB to have an optimistic set of assumptions something that happened before, did you have those kind of conversations while you were Chief Actuary?
Myers: Back when I was there, before 1970, OMB kept its fingers out of things. But more and more, and not improperly, over the years the Trustees and the Departments of Labor and Treasury got more and more interested in the assumptions and the actuaries have had to discuss this with them. I think the actuaries have always taken the position that they'll listen to people and if people convince them they'll change, but they won't take orders. If they think certain assumptions are right, that's it. Now before 1970 there was no outside control over the process at all.
Q: But you would not describe this as improper political interference?
Myers: No. I don't think so except for that issue that you brought up about the 2A estimate, and that really didn't amount to too much anyhow because it was put in there and nobody used it.
Q: And even though other agencies are now involved, at the end of the day the actuaries get to make the call.
Myers: Yes, I think that's fair to say. The Chief Actuary signs the statement. It's put in at the end of the Trustees report and I think the Chief Actuary is pretty reasonable about it. They don't just take an inflexible stand: "Look this is what I think and this is it, I won't listen to you." I think their views can be modified and if they are reasonably convinced they are willing to change. Other people have views on these subjects so I think the actuaries have been reasonable and I think they've had adequate professional control without attempting to be dictators.
Q: During your tenure at SSA, during your 23 years as Chief Actuary, you worked with five different Commissioners: Arthur Altmeyer, William Mitchell, John Tramburg, Charles Schottland and then Bob Ball. I wonder if you could just take a moment and tell us about the Actuary's office during each of those tenures and whether there was anything different about the relationship between the Commissioner's office and the Actuary's office under any of those Commissioners.
Myers: I can't say that there was any great difference in the relationships except, as I said, in 1965 somebody decided, maybe just because the organizational chart would look better, to consolidate all the actuaries under me. I know at one point they wanted to move all the actuaries to one geographical location--Baltimore--and I objected to that. I wanted to stay in Washington because I wanted to be near the Hill because of the working relations that I had with people in Ways and Means and Senate Finance. If you're 5 minutes down the street, it's different than if you're 40 miles away. So I objected to that, and it wasn't done until after I left.
Q: So, as far as the role of the Office of Actuary, it didn't change under any of those Commissioners. It basically was the same during that entire period.
Myers: I think it's fair to say so. I got along reasonably well with all the Commissioners that you mentioned, except you know why I left.
Q: Alright, let's talk about that next. In 1970 you ended up resigning as Chief Actuary and leaving over differences that you had--largely, I think, with Commissioner Ball--but in general, on the issue that the Agency was politicalizing the program.
Myers: Well it's not quite that simple.
Q: Ok. Would you please describe what happened?
Myers: Bob Ball won't agree with some of the things I say, and he didn't like my book, and I can understand why. Maybe we come from different angles, but I believe that civil servants should be civil servants and that they should support whatever political administration is in, and if the administration is proposing to do things they don't like, they shouldn't work under cover to undercut them. I don't feel it quite the same as, let's say, if the Soviet Union invaded the United States and took the government over--as a civil servant I would undercut them. It's not quite that level of patriotism in dealing with Social Security, as I see it.
I assert that, during the Eisenhower administration, there was much undercutting of the Republican Administration--and I am a moderate Republican. But I think that civil servants, regardless of their own political or social views, should support the administration they're working for and should not work undercover with people on the Hill who may be of their political views. Much of that went on in SSA in the Eisenhower Administration. Speeches would be written for liberal Democratic Senators, or they would be told what the administration was planning, and that sort of thing. I couldn't prove it in a court of law, but I'm just fairly certain--I said it in my book and I'll say it again--because that's the kind of thing that was going on. And it became even more apparent when the Republican Administration went out in 1960, some people chortled with joy that the Democrats were back in, and that sort of thing.
I determined at that point that, if this ever happened again, I was going to blow the whistle. Some people have said that's because I wanted to be Commissioner, when the Republicans got back in. I say that wasn't the case, although every "little boy" wants to be President one day. I thought the job of Chief Actuary was the best job in the world. I would have been Commissioner if they would have offered it to me, but that certainly wasn't my primary purpose. My primary view was I just didn't think it was right. When the next Republican administration came in (in 1968), the same thing continued to happen--the speech writing, the passing on under-cover of what the administration was considering or going to do, helping people write speeches attacking it, and that sort of thing. So I started making speeches, which a civil servant shouldn't do, and capped it all by having an article in Reader's Digest, which you probably know about. Then I immediately resigned, because I knew that you shouldn't do that, but I guess my conscience said to do it. It hurt me to leave, but I felt I had to do it. Bob Ball doesn't see it that way, and he has written me about my book, where he disagrees with some of the things I said there. But that's the way I saw it, and that's the way I still see it.
Q: One way of looking at this would be to say that the people who formed SSA were sympathetic, politically speaking, to the Democrats and because during the early years of the program Democratic administrations were in charge, there was a harmony there and then when the Republican administrations came in there was a disharmony in the Agency and in the administration. First, is that sort of what you're saying?
Myers: Yes. That's what I am saying.
Q: I'd take it that your decision to leave in 1970 was a difficult decision to make. You had been there from the beginning.
Myers: Very difficult, but it had to be done. That's all there was to it.
Q: There's one other issue that came up after you left, and that was the check stuffer issue in 1972. There had been a custom of putting a stuffer in the check whenever there was a cost of living increase. In the past, these messages had been technical messages. Then in 1972, when President Nixon was campaigning for reelection, the White House wanted a message put in there that basically gave the President credit for that cost of living increase so that he could get some political mileage out of it. And your view was that this was an inappropriate procedure, and you criticized Mr. Ball in your book for not fighting that issue vigorously enough. Now I know that since your book has been published you have had some correspondence with Mr. Ball on this subject, and he represents that he did work against it but behind the scenes. And I'm wondering if your assessment of that incident is still the same or if it has changed at all.
Myers: I know that Bob Ball objected strongly to the way that I wrote that up, but that's the way that I saw it. But he ought to know. He was closer to it. I'm not saying that he was wrong. Maybe he did fight it, but I think he could have fought it more.
Q: Clearly, in your view, that was inappropriate for that check stuffer to be used in that way.
Myers: Yes, of course.
Q: Then you left SSA and you went on to lots and lots of work and a very busy career after government and then you came back briefly in 1981. You came back in March 1981 and stayed for not quite a year as a Deputy Commissioner at SSA, and I want to talk a little bit about that if we can. First, tell me: why did you come back?
Myers: The major incentive was that I wanted to come back because there was a financial crisis, and I thought I could do something about it. So I wanted to come back, and I wanted to be Commissioner. Naturally, every "little boy" wants to be President, and I guess every little girl too, but I didn't make it. Jack Svahn and I were the ones being considered. At a meeting I was told that I couldn't be Commissioner, but they would like me to be Deputy Commissioner. I still thought I could go back in that capacity and do something about the financing crisis.
Q: Who was the meeting with? Was it with the White House or the Department?
Myers: It was with the Secretary, Richard Schweiker. And I went back. Of course you know from my book that it wasn't for financial reasons, because I got paid 55 cents an hour net after considering my Civil Service Retirement annuity, but I did have a private car and driver.
Q: How did you find SSA when you came back after a decade of being away?
Myers: I don't know. I was so busy. There were many things that I would've liked to have done, but I was so busy worrying about the crisis. And also, I tried as hard as I could not to act as thought I was still Chief Actuary--not to meddle with actuaries any more than I'd like any other political figure to do. But of course, I came back with the advantage--as a political appointee--that the bureaucrats weren't going to pull anything over my eyes, because I was there before they were, so I had no problem that way. But there were many things that I would have liked to have done, if this was considered to be a permanent situation, but I really felt that I was there just to see what I could do about saving the system.
And that's the reason I left, because when the legislative situation got into a tangle, and they had to appoint the National Commission, I knew that's where the action was going to be. I wanted to be a Commission member, but I didn't make it. Instead, I got to be Executive Director, and some people would say I was in an even better position. But anyway, that's the way it was--that was the only game in town, so that's the way I played it.
Q: Ok. Let's move on to the Greenspan Commission. The first thing I wanted to know is what was your role as Executive Director of the National Commission on Social Security Reform, what did you do as Executive Director?
Myers: Could I go back just a little bit about why I left being Deputy Commissioner at SSA and why I resigned. Basically, as I may have said before, I wanted to be where the action was. I didn't go back for the money, as you know. I wanted to be where the action was. There was a serious financing problem facing Social Security and I wanted to be a part of the solution. I didn't expect to be the guy that did all the solutions, but I wanted to be in on it and I could see that the National Commission was where the solutions were going to be devised. I could play a role at SSA, and Jack Svahn was nice about it when I decided I was going, because there were going to be a lot of requests at SSA from the Commission. But I wanted to be where the action was and that was with the National Commission.
I had been working closely with the Republicans, particularly in the Senate, and they had three seats to appoint to the Commission. The Senate then was under a Republican majority, and they had three seats. In the House, which had a Democratic majority, they had two seats. I hoped to be one of the Senate members and I couldn't be if I was still at SSA. I had to resign and take my chances on it. But unfortunately the three Republicans appointees were all Senators, and naturally I couldn't compete with them. The three Senate appointees were Senators Dole, Armstrong and Heinz. But I did not know they would be the appointees, and I knew the only way I could possibly get on the Commission was not to be at SSA, so I resigned.
Now, perhaps unwisely, when I resigned I expressed a great regret for leaving and strong support for what the Reagan Administration was trying to do, but I couldn't resist taking a swipe at OMB. Now politically that wasn't a wise thing to do, but I'm not a politician. I just thought that had to come out because I thought the package of legislative proposals the Reagan Administration had put together under OMB's urging was just untenable, and I had to defend it before Congress. Two provisions especially concerned me. One was they reduced the minimum benefit for people on the rolls. Now I agreed the minimum benefit was too high and that not everybody who got the minimum benefit were poor people. There were a lot of civil servants who worked after retirement, or moonlighted, just enough to qualify for the minimum benefit and so got benefits intended for low-wage earners. But I thought that eliminating the minimum benefit for people on the rolls, we just shouldn't do. In fact that provision was in legislation that was passed in '81 and it was repealed before it went into effect. So that turned out alright.
The other thing that was so bad in the Administration's proposal was that benefits for people who retired early were to be reduced, not actuarially but arbitrarily. So instead of benefits actuarially reduced to 80 percent of the full benefit they would be reduced to only 55 percent. The argument for this was that people shouldn't retire early, and so you should penalize them. Well, I don't believe people should retire early, but on the other hand, I don't think you should unfairly penalize them. I also realized what nobody else was saying at the time, the worst criticism nobody thought of--mainly that this was penalizing the poor. A wealthy guy, a high income guy retiring at 62 would say, nuts to you. I'm not going to take a 55 percent benefit, I'll wait 3 years, I've got the money. And his or her pension plan likely would be adjusted, have sort of a bridge benefit, but the poor guy who had to retire on low income, had to have it to live on, was the guy that got hurt. So it was something that hurt the poor and the rich could avoid. That was a terrible provision. So I couldn't help but take a swipe at OMB over those two provisions, and it was a dumb thing to do politically. It probably killed my chances of being appointed a member of the Commission.
So I was hoping to be a member of the Senate majority on the Commission. However, that didn't happen. I got appointed Executive Director of the Commission. I supposed I pushed it some, but I didn't go all out because I thought the Administration was never going to appoint me after what I had just done, but they did. And I was appointed with the approval of the Democrats, because President Reagan and the Administration were trying to work with the with them and they tried to do it cooperatively. So they were searching for somebody that knew something about the subject and was agreeable to the Democrats as well as the Republicans. And nicely enough, despite our differences in some ways, Bob Ball, who was sort of a Democratic voice on the Commission, and Senator Moynihan, both agreed I would be good for the job, so that's apparently how it got through. I wasn't aware of any discussions of alternative people. It just came all of a sudden, "Do you want to be Executive Director?" It seemed like the second-best option, but when I thought about it, it seemed pretty good, and many people said I had it better than if I had been a member. That's what happened.
Q: Who offered you the job?
Myers: I was interviewed by Chairman Greenspan, whom I had not known before, and it was more or less a perfunctory interview since he was the Chairman and I was satisfactory to him. I may have talked to two or three of the other members. I don't have any piece of paper that says "Will you serve?" I think I just had a phone call and then a piece of paper came out, a press release from the White House, saying "Alan Greenspan announces the appointment of Robert J. Myers as Executive Director," and so on. Initially, I think it was just a phone call from an anonymous person saying, "We're thinking of appointing you. Are you willing?" "Yes, indeed," was my reply.
The job itself, I tried to do it on a professional nonpartisan basis and yet had sort of a split personality in the sense that I was appointed by the Republicans and I was a Republican, and as I say I supported in general what the Administration was trying to do. Yet I tried to be professional about it and be fair to the minority, because the Commission had 8 Republicans and 7 Democrats and 2 of the Democrats were very conservative Democrats. The 5 Democrats appointed by the Democrats in the House and Senate tended to be liberal Democrats like Bob Ball, and that's alright. I don't use liberal as a bad word. But the idea is that I would try to provide information services to them. I was told that I had a staff of roughly 15 people and that 3 of them would be appointed by the congressional Democratic members. I hired them, but it was like when I was hired by Alan Greenspan--mostly a formality. I knew most of these people, I interviewed them, and they had professional qualifications and so forth. They had different philosophies perhaps, but were certainly qualified for the job.
Q: These were politically appointed staff members?
Myers: Yes. There were definitely three Democratic political appointees. These were Betty Dushin, Merton Bernstein and Eric Kingson.
There were also two staffers appointed by the Republicans. Two people who, in essence, I was told to appoint unless I had strong objections, which I didn't, because they were qualified just like the three Democrats. One of those was Carolyn Weaver, who worked for Senator Dole. Another was a lower-level professional. And in a sense I was a Republican appointee.
Then I needed staffers and I got them all from SSA. SSA was very good about lending me anybody I wanted. I appointed people whom I had known at SSA--Renny DiPentima, Virginia Reno, Bruce Schobel. When I was at SSA I had a personal staff of three personal people, Bruce was the one, and Suzanne Dilk and Annette Coates, so I just brought them along. And Tim Kelley--he was a great guy as far as knowing legislation, benefit computations, and the like. And then there were a couple of stenographic employees and they were hired without any political consideration. Some of the SSA staffers were liberal, some conservative, but they were all civil servants.
The idea of the staff was to service the Commission, arrange the meetings, work with Alan Greenspan on the agenda, supply information, such as, what would it cost to do this; what would this package do? People developed these packages of proposals and we would evaluate them. Sometimes the congressional Democrats held separate meetings and they'd have their congressional staff there. They had certain things in confidence that I never knew. Other things would come forth with requests for cost estimates and we would get the actuaries to do calculations for us. It was the same way with the Republican members.
In general the staff got along well, although there was sometimes a little conflict politically, but in the end it worked reasonably well. What conflicts there were, I wouldn't name the person, it was one of the Democratic staffers. He looked on it as being a very political thing and years later he apologized to me for a couple of things he had done. It was nothing serious, but they all had their own positions staked out. There was no sabotage, or Watergate-type scandal, or poking through other peoples' desks to see what the other side was up to, or any of that.
So I was in the ambivalent role of trying to be neutral and at the same time being a Republican political appointee. But my main interest was in the program--it wasn't political. And I think in general it was the other people's main interest as well. For example, Carolyn Weaver tried to do what Dole wanted. She had her views, and Carolyn is a great good friend of mine, but I think that sometimes her views are a little more towards cutting back Social Security. But she worked for what the Commission was trying to do. And in the same way, so did Claude Pepper. Some of the things that we did he didn't like at all. He didn't like the idea of raising the retirement age. He didn't believe in any benefit cuts but he went along, to his credit, and he supported the bill even though he said personally he didn't like some of it. This was a deal they made. And the other people more or less viewed it the same way.
Q: How much influence did you have on the various policy issues that they considered, the positions that they took. Did the Republican members ask you for advice or suggestions, or did you mainly act to review suggestions the members made?
Myers: Well I tried to walk a tight rope and I think I was honest and had integrity. At least I always tried to be that way. I didn't go around trying to push my own ideas, but the Republican members frequently would ask me what I thought and I would say what I thought. When minor things came up I would sometimes try to push them. For example, like Social Security coverage of employee contributions to 401K plans, which is a minor matter from a policy standpoint. But this was something that was just opening up at that time and it was a big loophole. So the Commission did recommend that we require these contributions to count for Social Security even though they didn't for income tax purposes. So maybe technical things like that I might push, but I didn't try to push my own views. I know a lot of times I was shown these various packages and asked what to do you think of this, and I might say, well technically, it has this problem, and it will cost this much, and so on. So as I say, I tried to balance those things out.
Q: You have generously donated to the SSA History Archives a set of your numbered memoranda from your work on the Commission. Could you just explain what those memoranda were and what role they played in the Commission's deliberations?
Myers: I developed this procedure, numbered memoranda, and they dealt with all sorts of issues. For example, one suggestion was that the COLA, instead of being based on the CPI, would be based on the increase in wages minus, say, 2 percent. By basing it on wages, everything in the system would be based on wages and it would be more stable. I'm not sure who developed that idea, whether I developed it or who, but I wrote things up like this for the Commission, to see various possibilities. And in the same way I think there are memos in there on the retirement age and it included changes in mortality. If age 65 is the right age in the '30s, from the mortality standpoint, what would be the right age today. Now this would lead you to the conclusion to raise the retirement age. I wasn't indirectly trying to influence them, but you try to bring these facts before the public. And there were other memos that the Commission had--the more major ones I put in this series. And for any advisory commission I would suggest that this is a good device, it's a very handy reference, rather than just the date on the memo.
Q: As we look at these numbered memoranda there is a series of actuarial cost estimates provided by you and the professional staff. The numbers are revised several times, and the revisions get especially noticeable going into the Fall of 1982, as the members of the Commission began to divide politically. Some people have pointed to the changes in the cost estimates as evidence that the staff was politically shading the estimates to correspond to the political agenda of the majority on the Commission. How do you respond to this allegation?
Myers: I would say, categorically, that this just isn't true. If the estimates were changed it was because the actuaries believed they should be changed, as they do for the Trustees' report. I think I might add about these numbered memos, before they went out, the whole staff got to see them. In other words, the political appointees as well as the civil service people reviewed them so make sure, not only that they were accurate, but that they were not biased for or against any political point of view. It was all done on a very cooperative basis.
Q: Would you describe for us a little bit how the Commission worked? What was Chairman Greenspan's role? How did the members interact?
Myers: I think Alan Greenspan did a great job as Chairman. He was not a Social Security expert. His own views of what the system ought to be did not guide him so much. He wanted to fulfill the responsibility of the Commission and make a viable system as the President and the congressional leaders wanted. He ran the meetings on a very level-handed basis and gave all people a chance at it. In all the talks I had with him, there was never any effort to do things in a political manner.
In the beginning there was a bit of conflict between the members (as we might expect with such a varied membership). Some were very liberal. Some were very conservative. Some of the liberals, not Bob Ball who knew better, but some of the others, said this whole crisis was just not true--that the President was just trying to destroy Social Security, etc., etc. Well these were not the facts of the matter, and I well remember Pat Moynihan saying that everybody was entitled to their own opinions but not to their own facts. On that point, I made a number of presentations of the issues, of what the cost situation was and so forth. And I think that after a little while of proceeding in this deliberative manner, all the members of the Commission, being intelligent and fair people, came around to the fact that there was a problem and something had to be done about it. Now what you do about the problem--there are different ways. You could just raise taxes or you could just cut benefits, or you could have a mixture both. There were a little fireworks in the beginning with a couple of members. Later on everybody settled down and said that we've got a job to do and even though we appeared to be dead-locked in the fall of '82 it wasn't that this was being done for political reasons, it's just that the opinions were different.
Q: So you did dead-lock in the fall of '82 and President Reagan had to extend the life of the Commission past its original deadline and the members had to make another push to get a consensus recommendation.
Myers: Yes, and in a recent issue of the Congressional Record Senator Moynihan talked about his role in this and Senator Dole's role in this, and Bob Ball and others were involved. All of them played an important part to try to get the thing going again because there was that iceberg ahead and in 1983 if nothing had been done the OASI Trust Fund would have been exhausted. At that time you could make good estimates, which I did and as I recall, the August 1983 checks could not be covered--there would not have been enough money to send them out.
Q: Looking at this from the outside, there was considerable doubt that the Commission would be able to succeed. From your point of view inside the Commission, were you pessimistic at some point?
Myers: I was awfully pessimistic. I thought this was probably the most important thing I was ever in on and I hated to see it go down in failure. Not that I took all the responsibility, I was just one of the cogs in the wheel. Still, it was there and there was much dismay and discouragement among the staff. Then the Commission asked for more time and in the beginning of '83, as the story goes, Dole and Moynihan got to talking on the Senate floor and got the thing started again.
Q: What were you doing, what was the staff doing during the period when the deliberations appeared to be deadlocked?
Myers: People still were trying to develop packages that would work. Some of the staff were not full-time, they were full-time when needed. Some, like Virginia Reno and Tim Kelley, went back to SSA during this time. Oh, you asked about the Republicans on the staff and I forgot to mention the most important one, who was Nancy Altman. She was designated to be Alan Greenspan's personal assistant and again she was a very capable person, she worked in a very professional way.
Q: Now the final consensus came out of a small negotiating group. Were features of that consensus a surprise to you in any way or were they things that had already been under discussion and you had estimated and so on?
Myers: Oh yes, it had all been discussed. The exact package probably had never been put together in exactly that way, but parts of it were here and there in other packages and so it was just a matter of putting it all together.
Q: Let's talk about some of the provisions in that final consensus package. One of the big things in there, and that eventually became a part of the '83 amendments, was a move from pay-as-you-go financing to a partial reserve funding approach. Tell us about that.
Myers: Maybe you noticed that I winced a little as you said that, because it's not correct. But it has often been described in that way, so I am not being critical of you.
In the '72 amendments the system was changed to be on a pay-as-you-go basis. The '77 amendments changed this to some extent by providing for the building up of a sizable reserve, but not in the early years unfortunately. In the mid-'80s, and particularly in the 1990s, if everything had worked out, it would have built up a very large fund. So in practice, the pay-as-you-go result would have been there for the first 5 or 10 years but the underlying financing mechanism was to build up a reserve. Now over the long run, it would have been exhausted, but it would have built a large fund in the 1990s and early 2000s. Now what was done in '83 in essence was to continue this but to strengthen the early years so you weren't going to have another financial crisis and it was also going to hopefully balance out over the long run, unlike the '77 amendments. Ideally what would have happened, if the estimates had been right, the Trust Funds would build up a large fund of some $20 trillion and then at the end of the 75-year period that would have gone down to maybe 1-year's fund.
So it was what I call temporary partial reserve financing, which is a roller-coaster in some ways. Which is not a good idea and which I didn't think was a good idea at the time, but there wasn't time to do anything about it. What should have been done is not to have as big a tax increase in 1990 and have tax increases in later years. The whole air of crisis in early '83 was let's fix this system up for the next decade. Let's also say that we looked at the long run problem and on the average we handled it. But on average isn't so good. I mean it's a lot better than nothing. At least it was recognized, unlike the 1977 amendments. The thought in my mind, and I think in other peoples' minds, was there is going to be time, let's fix this up in the future. Let's not have this big fund build up and then be used up. Let's have more sensible financing. But there was also the attitude of let's not rock the boat now. We've got a consensus, let's take it and run. The consensus fixes the short-range and on the average it fixes the long-range, and that's a pretty good step.
Unfortunately in the early 1990s when Senator Moynihan made an attempt to do this he didn't get anywhere because of budget limitations, which I think were very artificial. But the Commission never really looked at the long range situation except wanting to be able to say we recognized it. We've raised the retirement age to help solve this problem and so forth. So in hindsight critics can say, "Hey, why didn't you guys do a more thorough job?" When a house is burning down you can't always take care of every problem. That was the situation. Obviously in an ideal world we would have done a better job. I would have done a better job, but it would have been silly for me to get up before the Commission in the closing days and say ,"Hey look guys. Sure you fixed up the short-range. Sure you recognized the long-range problem but you didn't really thoroughly study the long-range problem." They couldn't be bothered with that.
Q: Do you recall who's idea that was, who, if anybody, was pushing this financing approach?
Myers: It just developed. It wasn't planned. Nobody said let's do it this way. It was just the natural result of saying we'll fix up the long-range situation in 75 years on the average. We'll fix it up and we'll do this in part by having a high tax rate beginning in 1990. When you have a level tax rate and increasing benefit costs, then averaging out higher benefits later you're bound to build up a fund and you're bound to use it up.
Q: As we look at it today, some people rationalize the financing basis by saying that it's a way of partially having the baby boomers pay for their own retirement in advance. You're telling me now this was not the rationale. Nobody made that argument or adopted that rationale?
Myers: That's correct. The statement you made is widely quoted, it is widely used, but it just isn't true. It didn't happen that way, it was mostly happenstance that the Commission adopted this approach to financing Social Security. The way they thought about it was that in order to achieve long-range balance we have to have this high tax rate in 1990, instead of putting it in steps. We could have fixed it up with a series of steps, lower in 1990, about the same in 2010, higher in 2015, that could have fixed it up just as easily, but there wasn't time. It was not intentional. It has the effect of baby boomers paying for their own retirement, which in a sense is good, but it wasn't a controlling element and it was not talked about. The main thing that was talked about was how do we fix up the short-range problem. Are you sure we aren't going to have another crisis in 2 or 4 years? And can you say that we have looked at the long-range problem and have done something about it?
Q: In recent years you have argued that we should return to pay-as-you go financing.
Myers: And I still think so. I still think we should have done that in 1990 when Senator Moynihan was pushing it. The reason I think so is that in an ideal world I wouldn't object to having a large fund and have the investment income helping pay the cost of the benefits, like in a private pension plan. But we don't live in an ideal world. With a large fund, there's the problem of how to invest it and the problem of using it to hide budget deficits. And also another problem that I foresaw, and which still might arise. When we come to the year 2000 and we start increasing the retirement age, I envision people saying, "Hey why are they making me wait a couple months or 4 months or 6 months to get full benefits when you have all that money in the fund?" So that would just destroy the planned financing. I think it's safer to have a fund balance of 75-100 percent, which you need for business cycles, and then you don't to have worry about how to invest it, what's its effect on the economy. It produces some investment income, but not much. It's useful but it takes the focus away from the real issue of the benefit protection that is provided and gets people talking about how are we going to use all that money--it's stolen, its worthless IOUs, it's not going into productive enterprise, it hides the budget deficit, and so on. Some of which is true, some of which is not. If you don't have a big fund, you don't get into all that business.
Q: You mentioned the idea of raising the retirement age. I take it that you supported this part of the Commission's proposals.
Myers: I supported that idea long before it was done by the '83 Amendments. My view has long been that if you have a demographic problem, you solve it by demographic means. If people are living longer, they should work longer. Many of the political liberals strongly opposed this. They saw it as a back-door way of cutting benefits. But it really doesn't reduce life-time benefits because they're going to live longer.
Then the argument was "how do you know that just because people are going to live longer that they are going to work more. You know it's possible that the people who live longer will not be capable of working longer." I think various studies have shown that people's health has improved so they could keep working, but it's conceivable that people could live longer and not work. My answer is if this occurs I'll be one of the first to say don't raise the retirement age. The country's just going to have to pay more. But put it in the law now, give people advance notice. Then if it turns out that you shouldn't raise the retirement age you can easily change it. Nobody's going to object. But if we had waited to take action until, say, 1996 and then said that the retirement age is going to start increasing in 2,000, people would say this is unfair. But as it was done, they've got 17 years advance notice so I was all in favor of doing it then.
While we are on this subject, there is one quirk about raising the retirement age which you may have noticed and you may wonder why. The age now goes up 2 months a year until it gets to 66 and then it stays there for about 10 years and then it goes up to 67. Why? What's the logic? The answer is: there is no logic. The answer is that when the calculations were made to take it straight up to 67 it produced too much of a surplus in the long-range. Unfortunately, the assumptions turned out such that it would have been good to do it that way. In fact, in 1983, the age could easily have been raised to 68, eventually. There were people who gave that idea support. Jake Pickle had a bill in and he wanted it raised to 68, but apparently they didn't need to in order to obtain long-range balance. This is most unfortunate but sometimes the actuarial estimates are too optimistic, as they were then, and sometimes they're too pessimistic so it's unfortunate we didn't go to 68. My present position, considering the deficit, is, on the benefits side, raise the age to 70 and go straight up until you get to 70 by 2037.
Q: Or take out that pause?
Myers: And take out the pause. Right. Now a lot of people, even some who are politically liberal, when they're trying to put together a package to solve this problem, one of the things they do is take out that pause, since it had no logic other then this was the result of actuarial estimates.
Q: How did you get age 70?
Myers: It's arbitrary. It's about the figure you need to get balance. My proposal is very simple, very traditional--part benefits, part taxes. I'd raise the tax rate by 1.2 percent on employers and employees in steps of 0.3 percent each in 2015; another 0.3 percent in 2020, 2025 and 2030, so you have a total of 1.2 percent each. My argument is that out of increases in wages, people usually can deal with this. They won't notice it. And also, I would , as mentioned earlier, raise the retirement age to 70, and this just about does the job.
Q: Another thing that was introduced in the '83 amendments was taxation of Social Security benefits. Tell me what you thought about that and whether you think that's a good idea.
Myers: My own view has always been that it is proper to subject benefits to income taxation like any other retirement income. Take into account what people have contributed out of their after-tax income, not what the employer put in because that was exempt from income taxation, and tax it just like any other contributory pension. What was done in 1983 was just a step in that direction; with the present 85 percent, it's pretty close to the proper theoretical basis. I just thought that benefits should be subject to taxation just like anything else.
Now a lot of objection to it was that low income people would be affected. Well they aren't. Only 40 percent of the people would be affected by proper income taxation of benefits--and only 25 percent by the present provisions. But the opponents made it seem like everybody, including the poor, are going to have to pay income tax which just wasn't the case. But even if they had been taxed properly, 60 percent of the people wouldn't pay anything.
The only point I had against it was I didn't like that the proceeds from the income taxation went back to the Trust Funds. Now I dearly love the Trust Funds but I don't think they deserve the money. That's general revenue just like when a guy gets a pension from General Motors and that's subject to income tax, the General Motors pension fund doesn't get the money back. But it was like the saying about why Willie Sutton robbed banks--because that's where the money was. They needed money to get to balance in the program. I said I didn't like this, but I supported the whole package. And since then I never said this ought to be repealed.
Q: So your view is that we should have taxed benefits anyway, even if it were not needed as a revenue-raiser in the Commission's package?
Myers: Yes, benefits should have been subject to income tax from the beginning; it was just a historical fluke that they weren't. But as far as the package, I thought well, I support the package. I'm not going pick a piece out here that I don't like and try to get that changed, not that I had any power to do that but I wouldn't advocate it. When they raised the proportion subject to income tax in 1990 to 85 percent and then the additional money went to the HI trust fund, I opposed that. Some of that money ought to go to the general fund. But don't break this bargain made in 1983 to tax 50 percent of the benefits over the threshold.
Q: And did support for taxation of benefits breakdown along partisan lines or was it fairly evenly split?
Myers: It was fairly evenly split. I would guess somebody like Bob Dole would not be strongly opposed to it because he recognized the logic of it. Other people who are more partisan in nature, particularly Claude Pepper, didn't like it at all.
Q: There was another change introduced in the '83 Amendments. It was the coverage of new federal employees under Social Security beginning in 1984, and optional coverage for existing employees. I know that the labor representative, Lane Kirkland, opposed that. What was your view of that?
Myers: I think Kirkland had to take that position to support his constituents.
I was strongly in favor. I have always been in favor of universal coverage. I was always embarrassed that I spoke in favor of Social Security at times while I was there and I'd make speeches and people would ask the embarrassing question: "if this is such great program why aren't you in it?" And my answer honestly was "I think I should be, but that isn't the way the law is." As a matter of fact despite my 37 years of government employment, I've also had 32 years of Social Security coverage, some of it simultaneous, but most of it after I retired. But I was always in favor of it and as I said, I think it should have been done from the start. By the way, I think almost all of the members of the Commission were in favor of covering federal employees, and Bob Ball I'm certain supported it. It was a matter of principle, universal coverage. But Lane Kirkland had to take that position because his federal unions were strongly opposed.
Q: Another change that was introduced was this stabilizer provision. If I understand correctly, the idea is if the Trust Fund reserves get below a certain level relative to previous years, then this provision would kick in and reduce the COLA.
Myers: You have the right idea. The COLA would then be either the lesser of the wage increase or the price increase, so that what happened in the early '80s when prices went up more than wages, this would offset that and would be a sort of stabilizer. And that's again, described in one of the numbered memos. I don't know who originated the idea, maybe I did, maybe I didn't. Sometimes it's hard to say who originated a particular idea. But to me it's an ideal thing to do. Not necessarily to save the system, but it sure will help in unusual economic times and I think it's a fair thing to do. The only thing that is wrong in present law is that the trigger point is too low. When the Trust Fund gets that small, it may be going down hill too fast. I hope we never have this time in the country again when wages go up half as fast as prices. But if we do it ought to kick in at much higher fund ratio and stop the system from going down hill.
Q: Now we haven't actually used this provision?
Myers: Never been used. Because it kicks in when the Trust Fund is under a 20 percent fund ratio. We're at 150 percent now, and an ideal is 75 or 100 percent and that's what it ought to be kept at. But this is the only way it could be done. It has never been used. I can't see it being used. But if it were set at a higher ratio it could be a help.
Q: Were there any other policy changes in the Commission's package that you think are important?
Myers: I think the other things are more minor.
The other thing that I think was quite good was the windfall elimination provision. It stops people with pensions from non-covered employment from getting the advantages of the weighted benefit formula, and that I thought was a good idea. Actually the way it was done it has one problem, and it was partly my fault because I worked on this, particularly with the staff of the Ways and Means Committee. The principle was very good and it works out fine for high-paid government employees like you and me. But there are some cases where it works out very badly. Where a person has 10 or 12 years of Social Security employment and 10 or 12 years of government employment--it just makes too large a reduction. As you know, the maximum reduction in the benefit is 50 percent of the government pension. That's an awfully big reduction for a low wage earner who has minimal Social Security and a minimal non-covered pension. I have a couple of cases in my file of people in that situation.
I've been advocating that instead of 50 percent, it should have been a 20 percent or 15 percent reduction. If the maximum reduction were 15 percent that would still have that windfall taken away from high paid executives. I have had this proposal out for awhile. I tried to convince NARFE to support it, but they want the whole provision repealed. I keep telling them "look, something is better then nothing. You're not going to just get it repealed. So try to help out some of these low income people." But nobody wants to liberalize the system at all. Even when there's a great injustice.
Q: Now about the procedures of the Commission, is there anything else that you want to talk about? What happened after the consensus was arrived at in January of '83? Can you just tell me how it ended ?
Myers: Both sides got together and agreed on a compromise package, and then the Commission met one evening--I don't know the exact date--and 12 of the 15 members agreed to it. The three that didn't agree seemed to be some of the politically very conservative people, and they were not violently opposed, but they just couldn't go along with some of the recommendations. So 12 out of 15 is a pretty good majority. And then they called the press in and I had the privilege of explaining the package to the press. The place was just jammed. It was a relatively small house. But that was a most interesting session. That was it.
Q: You showed me when I came in this morning, your memento from the party you had. Tell me that story.
Myers: As you know, our offices were in a very elegant townhouse on Lafayette Square. In fact this particular house at a certain point in history was the White House. Theodore Roosevelt, I think it was, lived there for a while when the White House was being refurnished. This was a very elegant house with high ceilings, crystal chandeliers--hardly suited for an office building but we had desks all over the place. I was on the second floor and Alan Greenspan, since he didn't come in very much, said he would take an office on the 3rd floor so I didn't have to walk up three flights all the time. So we managed to operate with reasonable efficiency.
When the work of the Commission was done, my wife Rudy and I thought it would be nice to have a party to celebrate the successful completion of the work of the Commission. It hadn't been enacted by the Congress, but apparently, unlike many Commission reports, it was going to be acted on. So we decided to have a catered party, which for the record, did not come out of any government funds, although we did use government facilities. We checked to see if this was proper and it was. We invited all the members of the Commission, all the staff and the Commissioner of Social Security and a few people like that and we just had a very nice party. Not all members of the Commission came because some were out of town but a number of them did come and the members of the Commission (I don't know who instigated it) very kindly got together and bought me this crystal of the Sword of Excalibur and gave it to me saying I had accomplished the impossible by withdrawing the sword and getting the Commission to agree. This was generous. I was a help but I wasn't the guy who did it. No one person did it. So naturally it is a very pleasant memento which we treasure.
Q: Give me your overall assessment of the Greenspan Commission.
Myers: I am very happy with it. I feel very pleased about it. I have gotten an awful lot of credit for it, far more then I deserve. I played a role, but many other people played a role, Bob Ball, Senator Moynihan, Barber Conable, Robert Beck from Prudential, and people from the White House. And I think the results were great. They weren't perfect, as I indicated. Nothing could ever be done that everybody would think was perfect, but it sure has worked quite well. The system, from a cash flow standpoint, is in good shape, solutions are possible in the future and the Commission gave me a lot of satisfaction. Many people point to the Commission as an example of how commissions can and should operate. But again it was fortunate that people got together, as they ought to do nowadays, and compromised their differences. You can't have everything you want in this world.
Q: Alright. I just want to ask you about a couple of current issues and get your impression and we'll be close to the end here.
Q: As I'm sure you know, there's a Social Security Advisory Council that's about to issue its report, and according to the stories that are in the press, for the first time in history they are going to propose privatization of the program--partial privatization will be one of the proposals. I want to get your views about the recommendations of the Advisory Council and what you think about those three plans.
Myers: From what I know about the proposals, I'd start off saying that to me the translation of the word "privatization" is "destroyed." If it won't do it immediately, it will do it inevitably. So therefore I'm opposed, basically.
Now, as to the three plans, there are some parts of each of the plans that I like, but there's no plan that I am loudly in favor of. I suppose if I had to choose one, it would be the one which Bob Ball is supporting. The thing I don't like about that one is I don't like building up large assets and investing 3/8 of them in the stock market. I just think that the Social Security system is so big an economic impact, it should be economically neutral. I'm a strong advocate, as you probably know, of pay-as-you-go financing. And if you have pay-as-you-go financing, and if you have a fund of the present size or even a little smaller, it really doesn't make much difference what you invest it in. Then if you get more investment return, that's not a big deal, but if as in Bob Ball's proposal, you'd build up a huge fund, then the investment income would be significant in financing the program, and I just don't think that's they way to go.
However, if you invest even more of the fund in the stock market, you'd be committing a cardinal investment sin by buying when the market's high and selling when the market's low, because when you're in a depression there's less payroll tax coming in, and you have to use some of the fund, so you'd be selling the stocks when the market was low. And when times are good, you'd be buying when the market is high. Now, if only 3/8 is in equities, maybe you'd never touch the 3/8, but I just think that building up a big fund is a dangerous thing, politically. You can sanitize it now and say it's all in indexed funds, etc., but another administration can come in and say let's use the money for social investment. Now I'm not against doing social good, but I don't think it's up to the Social Security system to do it; the Congress should decide those things.
Q: Now, in your view, we have this problem now because of the funding changes that were introduced in the 1983 Amendments, right?
Myers: Which was not intentional, and we shouldn't have had it. We should have had pay-as-you-go financing, but the way that I thought it would happen is for about 10 years it wouldn't make any difference, but I had hoped that in the '90s things would change over to pay-as-you-go financing, the way Pat Moynihan recommended. I worked with him on that, but it didn't fly because it seems to unbalance the budget, whereas it really doesn't, but it seems to. I just don't believe in building up a big fund. Then, if this were done, I don't believe in putting it in the stock market. I can't believe that the supporters of this approach really think this is such a great idea, other than it will help them finance the system better, or in other words, fewer benefit cuts might be necessary.
My way of solving the problem is to raise the retirement age more than it is at present. Again, gradually and deferred. Also higher tax rates--those bad words-- nonetheless, higher tax rates, deferred and gradual, can be sustainable. Of course, Bob Ball has a higher tax rate ultimately, but I'd have it a little sooner.
The other two proposals, I think are very bad, because "oil and water don't mix." I'm all in favor of private sector investments. Middle income people, even some lower income people, and certainly higher income people, should be building on top of Social Security. Social Security never was intended to do the whole job, it shouldn't and it would be bad if it did. Again, that's the reason I quit in 1970, what I called the expansionists were out to expand the program. They did expand it some in the early '70s, but their intentions were to expand it much more, so that it would take care of all the economic needs of 90 percent of the population, and I didn't think that would be good for the character of the country. People should do something for themselves on top of this basic floor. By the same token, I don't think this basic floor should be destroyed by people opting out or privatizing out of it. Leave it alone, fix the system up, encourage private savings any way you want to. I'd even go for a compulsory IRA system where everybody had to contribute 2 or 3 or 5 percent of pay and put it into mutual funds or whatever, but leave Social Security alone as the base.
That's my thesis and so I don't like either of these proposals. What I particularly don't like isn't brought out much--that they're dead from the start. They can't be enacted because the other two proposals, Bob Ball's as well, will unbalance the budget, create huge budget deficits and yet we have the President and the Congress saying they're going to balance the budget in 7 years (and partly the reason they're balancing it is because Social Security is hiding the deficit), which I have often objected to, but anyhow it's a fact of life. This is the way they're measuring it and if the President and Congress agree to balance the budget through some plan or other (I don't know what it is or what it could be), but say they did, and then you enacted any of these Advisory Council proposals, it would throw the whole budget out of balance, and so it just won't work. The trouble with all of this publicity now is that it causes people to say something is wrong with Social Security and the principal effect is that it is further destroying confidence in the system.
Q: That's what I wanted to ask you about. That is my last question. What do you see as the future of the program, given that there is such a low level of confidence in the program now? How should we cope with that and what do you see as the future of the program?
Myers: What I would do, but I'm not President or Emperor yet, would be to fix the system up the way I said and then get out and sell it to the public and try to convince the public that government estimates are not biased. There were many people back in 1983 and 1984 who said the system's going to have another crisis in the next few years--you can't believe the government estimates, we will have a crisis every few years. We haven't had any crisis. The system's better financed now. The fund balance is $100-150 billion more than we estimated in 1983. There's the long-range problem, however. The assumptions were a little too optimistic and the disability experience turned sour. The long-range picture is not in balance the way it was set in 1983. But the sort-range problem was certainly solved by the 1983 amendments, you can't argue with that. The SSA should get out and convince the public that we have all this money here, we've got the situation under control to the best of our knowledge, although there very likely is a long-range problem. As President Reagan said, if things go wrong in the future, people of good will get together, and they can solve it. You're familiar, of course, with Reagan's statement on signing the 1983 amendments, which is a masterpiece; I use it all the time, particularly when I'm talking to conservative groups who are bent on destroying the system. I say "look what Reagan said." I don't know if he really felt that way or not, but he's on the record. Whoever wrote that speech did a masterpiece.
That's what I would do. Fix the present system up. If you want more private savings, this isn't really my area. I'm not too sure that we have too little savings in this country, but some people act as though if we put a lot of money into the private sector, this will spur all kinds of new investments. I can't see why that's going to happen. You put huge sums into the stock market, it will just drive the stock prices up. Then also, who's going to buy the government bonds which the Trust Funds are buying? Nobody talks about that.
I never liked the fact that the excess of income over outgo in the Trust Funds is used to mask the budget deficit. I've written about that, but that's the way they're counting it and that's the way they're going to balance the budget, partly on the back of Social Security. But if you do these Advisory Council things, you tear that all down. So what will happen is, if they ever really consider these things, when they got up to that point of the budgetary effect, they'd draw back in horror and say "we can't do this." So all you've done is stir the public up that the system's no good and ought to be revamped or eliminated and yet you're not going to do it.
One other thing I'd like to talk about--which I have just written a piece on--is money's worth. There are many people who complain about not getting their money's worth out of the system, especially younger workers, and it's becoming increasingly that way, and that old geezers like me get far more than their money's worth. Therefore, it is argued, you ought to do means testing of the benefits. I am utterly opposed to means testing.
Means testing is bad because it is degrading, it's administratively costly, it creates fraud and abuse, and it discourages savings. If you means test the benefits, even if you do it right, and then the middle income person says "you're going to take away part of my benefits if I have savings. I don't trust you politicians anyhow, you say part now, but when I reach retirement age, you're going to take it all away, so why should I have any savings? Why should I have a small pension from my employer?" The people who are millionaires won't be affected, of course. The average guy who earns $30,000 a year is going to have all these disadvantages to save.
Now back to money's worth. That's just the nature of any defined-benefit pension plan like Social Security, that the persons retiring in the early years get more than their money's worth, and that this money's worth goes down and down. Otherwise, had Social Security been on a money's worth basis, the benefits in the early decades wouldn't have been effective because the benefits would have been so small. Also, if you had a level tax rate instead of an increasing one, you would have this problem that I see of too much money in the Trust Funds. So what we did I think was right. We're not on a pay-as-you-go basis, but we've been near it, and in the next 10 years, we're going to build up too much money.
As to money's worth analyses-- even though Bruce Schobel and I did it--and the reason we did it was basically not because we thought that this was such a great concept, but because if it was going to be done, we wanted to do it right. It's an actuarial matter. Some of my friends, the economists, have done it and they hadn't done it right. So we said if it was going to be done, let's do it right.
So in money's worth, you get into this argument: does the employer share belong to the employee? People who don't like the program say "yes" and that makes the money's worth look terrible. Others like me, who like the program, say "if you're going to do it, look at just the employee's share." If you do that, it doesn't come out too bad; but even then the very high-paid younger people don't make out. But my answer to all that is "so what?" This is not supposed to be a money's worth program. It's not supposed to be an individual equity program--no more than, say, school taxes. It's much less than school taxes because school taxes, if you never get married, you're never getting anywhere near your money's worth, or if you're done having kids, you can't say I'm not going to pay any more school taxes. Or like many private benefit plans, defined-benefit pension plans, the same thing happens. Or under health benefit plans--if the employer pays 5 percent of payroll for health benefits that doesn't mean that each employee gets health benefits worth 5 percent.
Q: It's the nature of insurance, right?
Myers: Yes. It's a broad pooling of the risk. And the advocates of the money's worth principle don't want a broad pooling of the risk. They say "yes, we will pool," but they want people with identical characteristics. They're willing to take into account the probability of death. But they say "let's just take all young people"--and they'll maybe even take into account the probability of being married or not married, but they won't take into account the probability of being a low income or a high income person all of your life. You may start out high and end up low.
Anyway it's broad pooling as I see it. Money's worth just is not a prime consideration and shouldn't be given prime consideration. If you enter into the debate on these grounds, you've lost before you start because it was known from the beginning--any actuary could have said it in 1940--that this was going to happen. This is not due to any devious planning on the part of the greedy old geezers--this is the inevitable course of a plan that's going to provide reasonably adequate benefits regardless of length of coverage.
In my case, I get Social Security benefits because I've had over 30 years of coverage, and my basic benefits are a great actuarial bargain. But each year, the reverse happens. As to the earnings that I made last year for my consulting work--and paid the self-employment tax on--and even if I just look at the employee tax and not the extra part I pay as self-employed that I paid last year--as to the additional benefits I'm getting, even though they're relatively large because I'm before the Notch Babies, the actuarial value of that isn't as much as the taxes I paid.
So money's worth is an interesting concept but it's not significant or all pervasive.
Q: I've always thought that the reason that people get so confused around money's worth is because they fail to appreciate that this is after all an insurance program and that it operates on insurance principles to some degree.
Myers: Again, yes, but you have to use the word "insurance" right because many people use the word "insurance" as individual insurance that has individual equity in it. If you look at insurance as I would, very, very broadly, spreading the risk in society, then it's fine. But many people, consider insurance like individual insurance--two persons 25 years old go into an insurance company and buy a policy and they pay the same premium; if you're 45 you pay a different premium. But in Social Security there's a much broader spreading of the risk. We should just downplay this money's worth thing and say, " it's interesting--it does show that you get some individual equity in it but don't expect this to be the guiding principle of the system."
I just sent Joan Wainwright a letter in regards to an informational pamphlet which has just been issued (and they're generally excellent) but it contains statements that impel people to think that the money they're getting comes from what they and their employer paid, and that in the long run is counterproductive publicity.
Q: So are you optimistic about the future of the program, considering the assault that it is under these days?
Myers: Some days, yes, and some days, no.