What Would You Be Willing to Do to Save SS?
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Anonymous
If you increase it to 200k that would be more than 5k additional, it would be double that. Which considering the cap on return, in other words, it very likely wouldn't give that individual any additional benefits under SS. The reason I point this out is because the employer doesn't really pay. The cost of an employee isn't what you pay them an hour, but rather what you pay them hourly, or in salary, is determined by the overall cost to the employer. Then again, Medicare taxes don't translate into any additional benefit. In fact, not only does the higher earner pay more tax for the same benefit if the income is still higher they will also pay a higher premium for Part B. As to inequity. Someone in California or New York shouldn't be paying the same for Medicare as someone in Mississippi but they do. |
Anonymous
Hi OP, I'll try to put something together tomorrow afternoon (I need to get some sleep now  ). It's a little complicated because the solvency impacts depend on the phase-in periods, whether you pay more benefits or not on the new contributions over the current limit, and so on. You might want a few more provisions if you don't want the contribution limit or the retirement age to go too high.
In the meantime, here's a nifty online SS solvency game from the American Academy of Actuaries: http://socialsecuritygame.actuary.org/#gradually-increase-full-retirement-age Here are some other helpful sources: http://crr.bc.edu/wp-content/uploads/2011/08/SS-Fixit_9.4.14_WEB.pdf Bhttp://www.aarp.org/work/social-security/info-05-2012/future-of-social-security-proposals.html |
Anonymous
pp, you're showing your lack of knowledge and your bias toward people with money is blinding you to reality. How about doing some reading about what benefits are available to lower incomes within the poverty line (hint, they get Medicaid and Medicare along with subsidized prescription programs) and how that someone of modest/middle income has access to great health care and virtually no out of pocket expenses in getting same. BTW, please cite the studies that show working class is dying quicker. |
Anonymous
Actually many proposals would pay additional benefits to people who pay higher taxes over the current contribution limit. The reason is exactly what we've been talking about, the worry that SS will start to look like welfare if the rich are stiffed on their benefits vs their contributions. |
Anonymous
Not that PP, but anything by Hillary Waldron, for starters. Her papers are pretty much the gold standard, although others have done research confirming her findings. There's really nobody debating this any more. |
Anonymous
Thanks so much. I'll look for whatever you can put together tomorrow - and I'll also take a look at your sources. (Tomorrow for me, too....time to go to sleep here too.) |
Anonymous
No. You don't seem to be very intelligent. How could population growth explain an increase in cost as a percentage of GDP? Lack of population growth has been the problem. Fertility rate has dropped 46 percent since 1960, which eventually translates into fewer workers (even after accounting for immigration) as a percentage of total population. Fewer workers are now supporting more beneficiaries, and hence, cost as a percentage of GDP has increased. This is an inherent flaw in the program in that if demographic trends end up not coming to fruition in a negative manner, the program will be woefully underfunded. And since politicians will always price social programs based on the most optimistic projections in order to hold costs down (and keep taxes at a minimum), it is almost certain that SS will never be poorly funded. Eventually, the continuously escalating probability of systemic failure due to this inherent flaw will turn into actual failure. Ida May Fuller, the very first SS beneficiary paid less than $23 into system and received $22k in lifetime benefits. This thing has been unsustainable from the start and hence you have to keep dipping into the pockets of the American people to try to make it work. Rather than admit your inability to get this thing right, this one time we'll actually fix SS with a tax increase, right? The definition of insanity is.... |
Anonymous
Pp is factually inaccurate. |
Anonymous
Oh my gosh. Your insults and belligerence combined with your lack of understanding of the most basic concepts don't reflect well on you at all. We've had to educate you about the definition of "progressive taxes," your laughable claim that a president can "renegotiate" government debt in the absence of Congressional assent and premised on financial markets simply agreeing to lend to us on more generous terms (ha ha ha ha ha), and on how the Social Security benefit structure works. You cite Economist articles you're clearly incapable of understanding. Yet you make all your ignorant claims in a tone of persistently aggressive belligerence with ad hominems. You straight up lie about what other posters have written, like on the supposed "welfare" issue. So gross. Population aging is a key problem that was stated very clearly in the post you're referring to. I've highlighted it in the post above to help you out. The "dependency ratio" is the standard term and it's the ratio of retirees to workers. The numerator, retirees, is obviously driven by population aging. Low fertility contributes to the denominator, but the reason I didn't mention it is because, frankly, I didn't think you were capable of holding all this in your head. I'm totally serious: after your performance so far, I concluded that you're both ignorant and not very bright, and I wanted to help you out by simplifying. However, I'm not sure how you can deny the issue of population aging (deliberately or because of reading comprehension issues?). Seoerately, population growth explains the growth in absolute dollars spent on the program, which is a different type of measure. You're also referring to the fact that the first Congresses gave very generous benefits to the earliest beneficiaries. That's a debt that generations today are still paying. But what's your solution, short of throwing all current beneficiaries into the street? Because financing the transition to another system requires continuing to pay benefits to current retirees (unless you cut them off, which nobody but nobody is proposing to do) even as you divert revenues out of the system by letting people opt out or otherwise shutting down new contributions. This transition would cost billions of dollars and obviously requires a sound budget--which we don't have. All the debate in the early 2000s about private accounts was in the context of the budget surpluses at that time, which Bush proposed to use to finance the SS transitions costs to a new system of private accounts. But then he squandered the budget surplus on his wars and tax cuts for the rich, and all talk of Social Security reform ended. This cold, hard, fact, rather than any change in ideology, is why your buddies at Heritage, Cato and AEI no longer talk much about private accounts. You may still hear about it from ranters on Fox, but they either don't understand or are deliberately ignoring the huge financial barriers. The fact that you're still ranting on about it shows how out of touch you are with true conservative thinkers. To move this discussion onto more current and interesting ground, here's how many think this will play out. SS will pay full benefits until 2034 or so. After 2034, SS can pay 75% of benefits from FICA taxes, which translated means SS will be pay-as-you-go for 75% of benefits. There will be political action that will probably increase pay-as-you-go funding to somewhere between 75-100% of current benefit levels, maybe even more than 100%, but it's impossible for anybody here to predict exactly how things will play out in 2034. The difference will be made up by mandatory savings via auto-Iras (or similar accounts) through your employer, which about half of the states are already looking into, and Congress will probably catch up on in order to avoid a patchwork of state systems (there are some legal issues with federal action, which Congress would have to fix first, but there is already at least one bill in Congress). The key thing here is that the new savings accounts are "add on" rather than "carve out", i.e. they don't allow people to pull out of the current system and divert money away from it. SS remains a base of income that's inflation-adjusted and free from investment risk, within a multi-tiered system that has a component of mandatory personal savings. |
Anonymous
The spouse gets 50% of the worker's benefit and can claim it as early as age 62. Widow(er)s get 100% of the worker's benefit and can claim it as early as age 60. In both cases benefits are reduced if you claim them before your retirement age. The spouse or widow gets these benefits even if he/she has never worked. If he/she has worked at least 10 years and has credits of his/her own, they get their own benefit in lieu of part or all of the spouse/widow benefit. Minor children of retirees get benefits, I think it's 75% of the worker's benefit. If the worker dies and leaves a young family, the widow(er) and children get benefits until the children reach 18, subject to income limits and caps on total benefits received by the family. |
Anonymous
What the hell are you ranting about? I've only made two posts in this thread and you quoted both of them. Nice job ranting at me for things I didn't post. 1. Population aging is a filunction of low population growth. The poster I was responding to was clearly suggesting that population growth in absolute terms created the SS mess, not that lack of population growth created the mess. 2. Let me get this straight: That SS will continue to pay out 75% of benefits is a positive? The program will cost five (perhaps six) times what it was originally projected to cost and will deliver only 75% of its benefits. Only a leftist would hold this out as a success or positive. That's a hell of a consolation prize. 3. You claim that SS is free of investment risk and will remain an inflation adjusted source of income. First, those are some pretty incredible claims to make in the same post in which you acknowledge that SS will soon only be capable of paying out 75% of its obligations. You're really arguing that a quasi-retirement program that needs ever escalating amounts of money confiscated through state power and that continuously faces near term shortfalls is free of investment risk? Second, SS is only free of investment risk and a good guard against inflation if you assume the federal government is incapable of default and if you believe that the dollar will remain a reserve currency forever. I wouldn't bet a mortgage payment on either of those assumptions, let alone 5-6% of the national GDP. Your claims are borderline irrational at this point. 4. The real problem is that the political left simply doesn't have the will to accurately price entitlements (e.g., Obamacare, nationalization of student loan program). As a result, entitlement programs virtually always cost more than originally projected and deliver fewer benefits than were originally promised. While myRAs are a decent concept in the abstract, what do you think is going to happen to short term economic growth when employees have fewer discretionary dollars to spend? Do you really believe hat state and federal governmwnts are going to be able to restrain themselves from trying to funnel myRAs toward government debt (increasing systemic risk in the process). Sure, in 30-40 years things should balance out if governments don't default in heir debts, but there will be short term pain. 5. SS will be significantly restructured at some point in time and some cohort of beneficiaries will feel significant financial pain from it. The only relevant questions are when will it happen and how bad will it hurt. 6. Your solution is to simply do the same thing that has been done for 75 years: throw more money at the problem through higher taxes and additionally reduce discretionary income through myRA plans. This time things will be different, right? |
Anonymous
Hi Op, this is the PP from last night. Your questions are good ones. The answers will feed into any political compromise about Social Security, including the one I mentioned earlier this am about deciding at what level to set benefit levels under Social Security as a pay-as-you-go first-tier benefit. There seems to be a growing consensus around that one. Two guys from Heritage (very right) and Brookings (middle-of-the-road/left) collaborated on inventing the auto-IRA (personal savings) tier. Obviously conservatives would like a lower first tier SS system, but at this point I only know of a few conservatives, and these guys are really out there on the right, who are still saying publicly that it's a good idea to do away with a first-tier guaranteed, inflation-indexed SS benefit completely. Most conservatives get that asking their housekeepers to save the necessary 15% out of their incomes just isn't going to happen, politically or realistically, and so we need SS's progressive structure to give low-income workers a solid base for retirement. Liberals are happily working away on the 2nd tier personal savings (auto-IRA) part. Really there does seem to be room for consensus here. So yes, your questions will be important in establishing a solid first tier of SS benefits. Here are some thoughts. I have to run off soon, but this should get you started. 1. You're correct that a balance of benefit cuts and tax increases would be more politically realistic. In fact, balance between tax increases and benefit cuts was the stated goal of Reagan's Greenspan commission in the early 1980s. 2. You're correct that raising the retirement age is effectively a benefit cut. As you probably know, but others may not, there's a reduction to monthly benefit amounts if you claim your benefits before your early retirement age. If you raise everybody's retirement age, then somebody who still claims at a given age (62, 63 or whenever) gets an even bigger cut than they do today. 3. An issue with raising the retirement age, as some have mentioned, is that some workers who do hard labor can't keep working past 62. It's not going to work to ask people to do construction work or lift heavy things at age 63. So you need a plan to protect these people, and that's going to cost money. So far nobody has come up with a good solution for identifying who needs to be protected or how to help them. 4. Re raising the income cap, many shy away from completely eliminating the cap, for political reasons. Instead, most proposals would raise the cap to cover 90% of national aggregate wages (long story, but historically the cap covered 90% but growing income inequality has changed that). Or, some proposals would do a donut as somebody mentioned. Or, some proposals would tax all wages/salaries above the current cap, but they'd only tax the higher wages/salaries at 3%. As an aside, I didn't totally follow the response that said the increase would be more than $5K, but to the extent that person said that workers generally absorb any payroll tax increases in the form of lower wages, that's true. 5. Also re raising the income cap, many proposals would pay more benefits to those who have to contribute more because they're above the current cap. It's a tough call. Do we want to pay Bill Gates more benefits? On the other hand, for a lot of people earning somewhat less above $118,000, paying more benefits seems a reasonable compromise. Some of the links I gave you go through these issues in more detail. OK, on to solvency estimates. That will be my next post. |
Anonymous
Oh FFS. Grow up and act like an adult, and argue like one. Your uninformed ranting doesn't deserve a lengthy response. 1. If you can't understand the dependency ratio, I can't help you. However, you've basically admitted that I'm right about population aging, even if you tried to twist my argument around. 2. Social Security continues to keep 1/3 of older Americans out of poverty, and yes, that's a huge success. If you're one of those conservatives who thinks the elderly need to go back to living off cat food, again, I can't help you. 3. You're confusing investment risk with political risk--I was very careful to choose my terms but you obviously can't see the distinction. Again, I can't help you become smarter. 4. You're confusing Obama's myRAs with state autoIRA proposals, but these are two very different things. Also, you seem unaware that auto-IRA proposals would rely on private investment managers, so the state or federal governments involved would not handle the funds. Even if the government did handle the auto-IRA funds (which it won't), you also missed the post above about how government bonds as investments are backed by the full faith and credit of the US government and would take Congressional action to change--reading comprehension really doesn't seem to be your strong suit. For the rest, yes I agree there will be restructuring. But even Trump doesn't think SS should go away completely. Trump has actually said that he wants to preserve Social Security in its present form, all of it. You're out of step with most of your conservative buddies. There's much more likelihood than you want to think that there will be a compromise that preserves a solid first tier benefit, and one that will help the poor in particular. (And huh? You say I quoted both of your two posts, and so you're mad that I'm talking to you? Huh?) |
Anonymous
PS, re #3, if you think Congress will stop funding Social Security to their constituents, you don't understand Congress. Social Security was the piece that led to resolution in the past several budget and debt ceiling crises. That's right, Congress acted only when the debt ceiling reached the point where it would be impossible to pay Social Security benefits. Congress is deathly scared that their constitutents' checks won't arrive on time. |
Anonymous
| PPS. How does reducing discretionary income through myRAs or autoIRAs compare to having an elderly population who can't afford to buy basic necessities or spend on recreation? I'm an economist, but you tell me. |