Social Security's been in the news a bit lately and I've been the beneficiary with a few TV spots. Here's one that focuses on the problems facing the program.
Monday, February 8, 2010
Me talking about Social Security on Fox, Part 1
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5 comments:
The reporter/commentator said SS "has been taking out far more than it pays out for decades".
Simply false.
I think he may have meant that Social Security has been taking IN more than it pays out for decades. If not, the fact that Social Security may take in less than it pays out this year wouldn't be meaningful.
I think he may have meant that Social Security has been taking IN more than it pays out for decades. If not, the fact that Social Security may take in less than it pays out this year wouldn't be meaningful.
Sorry, I was thinking ahead of typing. It was "has been taking in far more than it pays out for decades". The accumulated surplus is huge, so it may seem like "far more", but in context it seemed to imply that the surplus was more than was paid out.
Since the surplus is 3 or 4 years worth of benefits, "far more" is not really a good desription.
From 1956 to 1965 and 1971 to 1982 Social Security took out less than it took in from contributions. The temporary return to a negative cash flow position that has been characteristic of Social Security in many more years than not is a feature and not a bug of Social Security design.
An ideally functioning Trust Fund, one that achieves and maintains Long Term Actuarial Balance, will require a permanent small (in comparison to program size) transfer from the General Fund to keep interest on the TF from outpacing the amount needed to grow the TF to match Cost increases and so keep TF Ratio steady.
If the real issue is sustainable solvency over the Infinite Future then short term reduction to TF balance is something to celebrate. Whereas benefit cuts simply increase total Public Debt in Intragovernmental Holdings and so increase Intergenerational Inequity. Unless of course you rule that the lessening in rate of depletion to the TF balance and so increase in resultant future debt service doesn't score as an TF asset.
Oddly reducing total transfer from the GF to the SSA Trust Funds can be accomplished by adopting a "pay me now or pay me later" strategy that would drive TF Ratio DOWN to it's statutory minimum. At which point it would mathematically make sense to cut benefits to keep the TF Ratio steady. But cutting benefits now just doesn't add up.
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