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^ Ifamfc PuraonaX a ad Conf3Ld»PtjlnI Honorable Hg&ry tforgenthttti, J> , iBgton, D. C. Dear In ijiMlliiBiH •Itii Uw aoii?ur@atloji I huA wltli om 8atur<A«y, I ass •aelasliiw kMMPHith B &VMMHF xo be of! to the ftrostdoiit a«tttug forth ;:<^ viows oa ih« to tlia old • § • IWMXWMM pro. T . gjH tiie l e t t e r in abort«r th??.n tlia •••MraadH I L i f t with you oi* BMiuNfaqfc n^© Mitft^nce i s the s^m© with tha except tori of UMI 1 A « I p«M -r-oii. Yours sincerely. F S)W March SO, 1959, The President, The White House. Deer Mr, President: In my capacity U • member of the Fiscal and Monetary Advisory Board I bm carefully considered the three Main proposals mnflt by the Social Security Board in compaction with MMttteuElfl to the old *$i insurance prrngTM. viz., coas«nciag benefit payments in 1940, liberali.-in- benefit provisions, m l permitting the scheduled tax increase in 1940 to go into effect, I tm in favor of MNMBMAag benefit payments at the earliest possible moment, and of liberalising, to the fullest extent feasible, benefit provisions. I sm opposed to the scheduled increase in payroll taxes. For three years tfet collection of payroll taxes in excess of benefits, with the resulting accumulation of a raeerve fund, has imposed a serious drag on recovery and has necessitated increasedfluimIMtfil expenditures elsewhere. On both unemployment ».ad old age insurance account the deduction from consumer buying power (jmounts to one billion dollars t je&r for the years 1937-39. This deduction Mill be even gr—t—' in 1940 unless increased benefits? axeeed inereased twt colloctions. Actually, it appears -that the tax increase will yield froa $250 million to #30G million additional, while the cont'^aplated increase in benefits trill c^nount only to between #100 million sad $200 nillion. It appears an oppoi'tune tins to raise the stela question of the financing of olr! a e insurejnee. The trend in all other countries, and in expert svAi popular opinion in this country, has been. — u j fi^om. the reserve fund principle. Even if the tax incr<3?:isa is postponed, the reserve fund will continue to accumulate through 1942. If tfc« tux ie increased, this will tend to extend still further the tisriod over which the fund will The President* -- In view of the gravity of our major ecoDomic problam of -deficient consumer buying power relative to our productive capacity, I urge th«t so further increase in the payroll tax rat* take place next year. The economic reP^Tmissions fsmtltlng from a contiiaied excess of tax collections over benefits will do more, in ay judgment, to jeopardise the contributory system than would postponing the scheduled tax increase. I S M confining my recormiendationa to the specific proposals placed before tlie Advisory Board* I caunot refroln fros adding, however, that in ray judgment the proposals of the ooei 1 Security Board do not meet tfct AwmaA in this country at tiiie time for an sdequet^ nstionRl old *,:;;e ^ecurivy Respectfully, 1L S. Secies LBCteia
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