Many of Dartmouth's professors are nationally known, but few have a chance to see their research turn into a national policy.
Assistant Professor of Economics Andrew Samwick, however, has a much more significant impact on policy issues -- his Social Security research forms the blueprint for President Bush's proposed reforms to the system.
"It's something I've always been intellectually curious about," said Samwick of the Social Security issue.
Historically, Social Security has been evaluated on a five-year cycle. In 1994, the same year that Samwick came to the College, the report showed that in the coming years the number of beneficiaries would be 50 percent higher compared to those paying into the system.
The report further indicated that the current payroll tax of 12 percent would have to be raised to 18 percent to maintain the current level of benefits.
It was finding a solution to the problem of funding the system that motivated Samwick's research. His findings evolved from a senior thesis at Harvard to a published paper and, finally, into the blueprint for Bush's Social Security plan.
Central to Samwick's research is the fact that the goal of Social Security has changed over the years.
"Social Security started to keep old people from starving," Samwick said, but has since "gone from poverty alleviation to income replacement."
Under a poverty alleviation scheme, the best system would simply involve giving every elderly person enough money to raise them to the poverty line, he explained.
However, the system has evolved into a mechanism for replacing earnings, meaning that in some ways how much a person gets out of the system is proportional to how much they paid into it. In addition, Social Security also makes disability payments and provides a small amount of life insurance.
Once he understood this change in the system, Samwick set about finding the most efficient way to achieve what he understood to be Social Security's new objective, income replacement.
Social Security now works by having workers pay taxes which then go to current retirees. Under Samwick's plan, each individual's money would be invested and go to pay for their own benefits, not other people's.
Social programs have historically ignored risk and have therefore not provided great returns, he said. However, by assuming more risk, an investor can get a greater return for a given investment, he added.
Samwick proposes that by assuming risk, such as by investing in the capital markets, Social Security could achieve a greater return and fund the system in a way "commensurate with its income replacement goal."
Samwick began researching this topic with his former advisor, Professor Martin Feldstein of Harvard University. Through their work, the team came up with specific figures, something that nobody had done before.
The plan, which focuses on individual investor accounts invested in capital markets, such as stocks and futures, has provided a template for policy debate, and the Bush administration has used his research in planning his solution to the Social Security problem.
There are other proposals that work with the current system such as raising the maximum retirement age or raising the maximum taxed earnings.
Samwick doesn't expect to see reform passed anytime soon, however. He predicts that, because of the current surplus and emphasis on tax cuts, it will more likely occur during the second two years of Bush's term.
Samwick said he doesn't plan to get more involved on the policy side of the issue, expressing his love of Hanover and teaching. However, through his research, he is trying to get ideas across and maintain interest in a pressing economics issue.
