I read your Cover Story ("Economic growth: A proposal," July 8) with interest, and I agree with your broad points. Regarding taxes, however, I believe that we have huge amounts of savings locked up in capital gains that could be released to invest anew with a simple tax fix: index capital gains to inflation. A surprising amount of money would come out of the woodwork.

Bruce King

Florence, S.C.

I can think of nothing better for Social Security than to have a portion of it privately funded. As people worry about their taxes, their jobs, and their 401(k) plans, they tend to take Social Security for granted--until it's time to receive it. If it were in part privately funded and their own responsibility, that would force better management and hence a better return on their money.

Eugene P. Beard

New York

Privatizing Social Security to increase saving would not only wreck an irreplaceable government program for fear of "breakdown"--a phony issue--but would also gamble that increased saving will lower interest rates and trigger an investment surge. This is economic faith parading as policy.

Richard B. DuBoff

Professor of Economics

Bryn Mawr College

Bryn Mawr, Pa.

Your proposal to pay for Social Security's transition to a funded system should avoid issuing additional debt. It is irresponsible to pay for today's consumption through obligations on tomorrow's children. Instead, the transition should be paid for by current workers and retirees through either cuts in government spending or higher taxes. The economic benefits from increased savings and lower interest rates will more than balance these sacrifices.

Maya C. MacGuineas

Cambridge, Mass.

Your program should include the rapid phaseout of taxation of dividends. This tax is a pernicious drain on the rewards of saving and investment that you advocate. It is a second tax on investment earnings already taxed once at the corporate level.

Arthur J. Bryant

Vernon, Conn.

I am not convinced that faster growth will be much help in solving America's economic and social problems. How can it help those with no health insurance? What will it do to improve job skills? Will it make workers worry less about layoffs? Is it going to get the homeless off our streets? Will it reduce pregnancies among unwed teenagers? Will it clean up our streets? Will it rebuild our deteriorated public infrastructure? Will it lead to more equitable distribution of income?

Growth in output will give us more material goods, but that does not necessarily lead to wisdom in solving our economic and social problems.

Ted Sielaff

San Jose, Calif.

You seem to have fallen into this year's fashionable trap: Balance the budget and lessen the tax burden, and all will be well.

There are a number of fallacies in your argument: First, reducing the federal deficit may not raise national saving. Economists know very little about the determinants of personal saving.

Next: Is personal saving really the constraint on investment spending that you, and a multitude of others, seem to imply? Most standard econometric analyses look at a variety of factors: corporate profits, demand, and the cost of capital.

Finally, will the stock market really soar if some of the Social Security funds are invested in equities? Your conclusion implies that price-earnings ratios will rise significantly if individuals redirect their savings into the stock market, without any change in the fundamentals that determine stock prices.

Your emphasis on raising the rate of long-term growth is commendable. I don't think the policies you advocate are correct.

Arnold Pearlman

Sandy Hook, Conn.

It is clear that Social Security must be fixed. Let's start by abolishing the automatic cost-of-living increases. Make Congress pass all increases and specify how they will be funded. Knowing how Congress works, we will see increases each election period!

David C. Steinberg

Plainsboro, N.J.

Your article was a welcome example of intelligent exposition during a time of uninspiring campaign rhetoric devoid of any genuine long-term solutions to the problems you raise.

Neel Doshi

New York

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