Tuesday, June 29, 2010

New articles from the Journal of Pension Economics and Finance

Unfortunately these are behind a firewall, but you can access the abstracts to see what you're missing.

JOURNAL OF PENSION ECONOMICS AND FINANCE

Volume 9 - Issue 03 - July 2010

PDF version of this Table of Contents

Articles

Does it pay to be SMarT?* T. SCOTT FINDLEY, FRANK N. CALIENDO

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 321 - 344

[ abstract ]

Cost, performance and portfolio composition of small pension funds in Australia WILSON SY

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 345 - 368

[ abstract ]

Work histories and the access to contributory pensions: the case of Uruguay MARISA BUCHELI, ALVARO FORTEZA, IANINA ROSSI

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 369 - 391

[ abstract ]

The impact of changing demographics and pensions on the demand for housing and financial assets ALEŠ ČERNÝ, DAVID MILES, L'UBOMÍR SCHMIDT

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 393 - 420

[ abstract ]

Market design for the provision of social insurance: the case of disability and survivors insurance in Chile GONZALO REYES

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 421 - 444

[ abstract ]

Old age support in kind KAZUTOSHI MIYAZAWA

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 445 - 472

[ abstract ]


 

Book Reviews

Privatizing Pensions: The Transnational Campaign for Social Security Reform. Mitchell Orenstein. Princeton University Press, 2008, ISBN 978-0-69113-697-4, 218 pages. Bruce Kogut

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 473 - 474

[ abstract ]

Ageing Labour Forces: Promises and Prospects. Philip Taylor, ed. Edward Elgar Publishing, 2008, ISBN 978-1-84844-020-3, 240 pages. Elizabeth T. Powers

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 474 - 476

[ abstract ]

When I'm Sixty-Four: The Plot against Pensions and the Plan to Save Them. Teresa Ghilarducci. Princeton University Press, 2008, ISBN 978-0-691-11431-6, 374 pages. Jack Towarnicky

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 476 - 478

[ abstract ]

The Rise of Mutual Funds: An Insider's View. Matthew Fink. Oxford University Press, 2008, ISBN 978-0-19533-645-0, 320 pages. Donald C. Willeke

Journal of Pension Economics and Finance, Volume 9, Issue 03, July 2010, pp 478 - 479

[ abstract ]

Read more!

Monday, June 28, 2010

Upcoming event, with date change: Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?

Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?


 

On Tuesday, June 29, the Savings and Retirement Forum will be held at the Urban Institute (2100 M Street, N.W. Washington, DC 20037)  [Directions to UI], at 8:30am.

International Monetary Fund technical assistance adviser Mauricio Soto and Urban Institute senior research associate Barbara A. Butrica will present their paper "Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?," which is available here.

If you plan on coming please RSVP. Coffee, juice, and pastries will be served. Please feel free to pass this along to others who you feel might be interested in attending.

The purpose of the Forum is to bring together academics, interested industry professionals, policy wonks, and government staffers who work on issues related to Social Security, pensions, savings, and general retirement issues for a monthly seminar and an annual half-day conference. More information is available at savingsandretirement.org.

Read more!

Friday, June 25, 2010

NASI’s Social Security Academy for Interns

Demystifying Social Security: Academy for Interns

July 22, 2010, 8:30 am — 3:30 pm

» Register Now

Location

Kaiser Family Foundation
Barbara Jordan Conference Center
1330 G Street, NW
Washington, DC 20005
United States

Contact

Deric Joyner

Calling All Interns and Students!

Do you know what Social Security is or how it works? Have you ever wondered why, whenever there is a discussion about the nation's debt and deficits Social Security becomes a part of the conversation? Would you like to know if/how/or when Social Security might run out of money? (The answer may surprise you.) Can we improve Social Security benefits for the vulnerable individuals who need it most?

For answers to these questions and more, the National Academy of Social Insurance (NASI) offers interns, students, and others an opportunity to discuss and debate the future of social insurance programs such as Social Security at Demystifying Social Security: Academy for Interns.

Attendees will gain a better understanding of the challenges facing the President and Congress as they work to modify Social Security. The free, day-long event features prominent guest speakers, expert panels, and interactive activities, plus opportunities for networking. Lunch will be provided and door prizes will be awarded at the end of the day. So join us on July 22, 2010 for a discussion of the present and future of Social Security at Demystifying Social Security.

A light breakfast and lunch will be served and door prizes and giveaways will be awarded at the end of the day.

Read more!

Should We Raise Taxes on the Middle Class? We Already Are.

My thoughts on House Majority Leader Steny Hoyer's call to consider tax increases for the middle class. Over at The American, AEI's online magazine.

Read more!

Reid vs Angle on Social Security

From AEI's Enterprise Blog:

Best I can tell, Nevada Republican Senate candidate Sharon Angle wants to shift pretty far toward supporting personal accounts for Social Security, having talked about allowing young and middle-aged workers to "opt out" of the program, of "phasing out" Social Security and so on. I don't have a lot of problems with that, so long as a strong safety net is kept in place for lower-income retirees. Yet, as entitlement spending rises, the need to protect low earners remains; however, paying high Social Security benefits to high earners shouldn't be the program or the government's highest priority.

That said, I'm not under any illusions that my views are where the median voter is or that my views couldn't easily be distorted in an election campaign.

What's surprising is that, even given views on Social Security, which aren't exactly tailor-made for election in senior-heavy Nevada, Angle's Democratic opponent—Senate Majority Leader Harry Reid—is still stretching the truth in his ads attacking Angle on the issue.

The Las Vegas Review Journal
reports on a new Reid ad claiming that Angle called Social Security "welfare." Yet, as the Review Journal makes clear, in the Angle interview cited by the ad, she makes clear that it was her father who refused to take benefits because he saw them as welfare. Angle herself didn't say it.

Likewise, the Review Journal says, "Reid, in the new 30-second spot and in a previous negative ad, has been trying to scare seniors into thinking Angle would cut off their Social Security checks." But, in the interview that Reid's ad cites, Angle said that the program must "fulfill our obligations to our seniors. They paid into the system. They're counting on that." That doesn't exactly sound like she's looking to throw Granny out on the street.

Angle needs to be clearer about where she stands on Social Security: how she views the system today, where she wants it to go, and how she would get it there. The last part, in particular, is tricky for supporters of personal accounts.

Reid can attack Angle's ideas but he's never had his own fixes to defend. In fact, Reid has done little to fix Social Security other than to initially denounce spending trust fund surpluses on other projects, while for two decades voting to do precisely that. In 1990, Reid asked,

Are we as a country violating a trust by spending Social Security trust fund moneys for some purpose other than for which they were intended? The obvious answer is yes.

Reid assured us that someone doing this outside of government would be prosecuted. Yet in almost every year since then, the entire trust fund surplus has been swallowed up by deficits elsewhere in the budget—deficits that Reid effectively supported. So while Angle has some policy work to do, Reid has a deficit of honesty he needs to make up.

Read more!

Thursday, June 24, 2010

New papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Aging Asia's Looming Pension Crisis" Asian Development Bank Economics Working Paper Series No. 165

DONGHYUN PARK, Asian Development Bank - Economic Research
Email: dpark@adb.org

Due to population aging, weakening of family-based support, and other factors, old-age income support is becoming an issue of growing importance throughout Asia. This is especially true in East Asia and Southeast Asia where the demographic transition is already well under way. This paper provides a broad overview of the current state of the pension systems in People's Republic of China, Indonesia, Republic of Korea, Malaysia, Philippines, Singapore, Thailand, and Viet Nam; diagnoses the pension systems; and identifies their major structural weaknesses. Key systemic failures were found to be low coverage, inadequate benefits, lack of financial sustainability, and insufficient support for the elderly poor. The paper concludes with some specific policy directions for pension reform to strengthen the capacity of Asian pension systems in delivering economic security for the looming large and growing army of the elderly in the region.

"When can Insurers Offer Products that Dominate Delayed Old-Age Pension Benefit Claiming?" Netspar Discussion Paper No. 04/2010-011

LISANNE SANDERS, Tilburg University - CentER for Economic Research, Netspar
Email: L.Sanders@tilburguniversity.nl
ANJA DE WAEGENAERE, Tilburg University - Center for Economic Research (CentER)
Email: A.M.B.deWaegenaere@uvt.nl
THEO NIJMAN, Tilburg University - Center and Faculty of Economics and Business Administration
Email: Nyman@uvt.nl

It is common practice for public pension schemes to offer individuals the option to delay benefit claiming until after the normal retirement age and adjust the annual benefit level as a result. This adjustment is often not actuarially neutral with respect to the age at which benefits are claimed. The degree of actuarial nonequivalence varies by interest rates as well as individual characteristics such as gender and age. In this paper we show that actuarial nonequivalence can imply that deferring benefit claiming is suboptimal, irrespective of the preferences of the individual. Specifically, we derive preference-free conditions under which delaying benefit claiming is dominated by claiming benefits early, and using them to buy super-replicating annuity products from an insurance company. We find that the degree of actuarial nonequivalence in public pension schemes is such that such dominating strategies can exist even when the purchase of annuities would be significantly more costly than what is currently observed. If individuals choose to strategically exploit these dominating strategies, this will affect benefit claiming behavior, which in turn affects long run program costs.

"What Incentives to Retirement Does Social Security Provide? The Uruguayan Case (Qué Incentivos al Retiro Genera la Seguridad Social? El Caso Uruguayo) (Spanish)" Universidad de la Republica Department of Economics Working Paper No. 23/09

IGNACIO ALVAREZ, affiliation not provided to SSRN
Email: nachalca@gmail.com
NATALIA DA SILVA, affiliation not provided to SSRN
Email: natydasilva@gmail.com
ALVARO FORTEZA, Facultad de Ciencias Socilaes, Universidad de la República, Uruguay
Email: alvarof@decon.edu.uy
IANINA ROSSI, Universidad de la Republica - Departamento de Economía (dECON)
Email: ianina@decon.edu.uy

The activity rate of mature men has increased in Uruguay in recent decades. This trend is remarkably different from what has been observed in most developed and Latin American countries. We analyze in this paper the incentives to retire implicit in the main social security program of Uruguay. We find that mature men tend to experience significant social security wealth losses if they postpone retirement. These losses tend to represent a greater share of workers wages in Uruguay than in developed countries. The 1996 social security reform reduced the losses significantly and, in some cases, turned them into gains, providing incentives to postpone retirement. It is unclear yet what effects these changes will have on retirement. So far, only in the case of women a clear increase in the retirement age has been observed and it seems to have been caused by the increase in the minimum retirement age, rather than in changes in social security wealth.

"Income of the Elderly Population Age 65 and Over, 2008" EBRI Notes, Vol. 31, No. 6, June 2010

KENNETH J. MCDONNELL, Employee Benefit Research Institute (EBRI)
Email: MCDONNELL@EBRI.ORG

The U.S. retirement income system - including employment-based retirement plans, Social Security, individual savings, and post-retirement employment - can be assessed in part by examining the income of the current elderly population (age 65 and older). This paper reviews the latest available data on the older population's income (from the U.S. Census Bureau's March 2009 Current Population Survey) and how it has changed over time, as well as how the elderly's reliance on these sources varies across demographic characteristics. In 2008, Social Security was the largest source of income for those currently age 65 and older, accounting for 39.8 percent of their income on average. Pension and annuities income was 19.7 percent, income from assets 13.0 percent, and income from earnings was 25.6 percent. Nearly all individuals (89.2 percent) age 65 and over were receiving income from Social Security in 2008, while 55.3 percent received income from assets, 35.4 percent received income from pensions and annuities, and 20.4 percent received income from earnings.

The PDF for the above title, published in the June 2010 issue of EBRI Notes, also contains the fulltext of another June 2010 EBRI Notes article abstracted on SSRN: "Examination of the Short-term Impact of the COBRA Premium Subsidy and Characteristics of the COBRA Population."

"Comparative Costs and Risks for Sponsors of Traditional Defined Benefit, Defined Contribution, and Hybrid Plans" 

GAOBO PANG, Towers Watson
Email: gaobo.pang@towerswatson.com
MARK J. WARSHAWSKY, Towers Watson
Email: mark.warshawsky@watsonwyatt.com

This stochastic simulation analysis quantifies the range of possible funding costs and volatilities for private sponsors of traditional defined benefit, defined contribution, and hybrid (cash balance) plans. Plan provisions of comparable benefit generosity are considered, as are current funding requirements and practice. The model simulations include a comprehensive view of the uncertainties in asset and labor markets. The results show that costs and risks for sponsors vary significantly with plan type, funding strategy and participant demographics. Throughout the scenarios, the hybrid plan exhibits good features of cost efficiency and risk reduction to the plan sponsor.

Read more!

Wednesday, June 23, 2010

Orszag calls for Social Security reform

Outgoing OMB director Peter Orszag, himself the author of a book on Social Security reform, is urging policymakers to take on the challenge, according to Dow Jones:

"Despite the fact it is not the most substantial contributor to our long-term fiscal gap, we also need to restore solvency to Social Security," he said at an event on the topic at the National Press Club.

"Not only will putting Social Security on sound footing help to some degree with our overall long-term budget picture, making adjustments sooner rather than later...will provide greater certainty to future Social Security beneficiaries and also allow us to make adjustments that are both gradual and fair."

For those interested, the provisions of Orszag's proposal, co-authored with economist Peter Diamond (currently headed to the Federal Reserve Board), are available here. While the proposal contains a number of benefit reductions, principally for higher earners, most of the leg-work toward solvency is done on the tax end, both in terms of raising the payroll tax rate, the tax ceiling and imposing a surtax on earnings above the ceiling.

The chart below shows system costs relative to GDP for the Diamond-Orszag proposal relative to current law.

While there are cost reductions toward the end of the period – and, importantly, Diamond-Orszag differs from current law in that it can actually afford to pay what it promises – my own view is that we need to restrain Social Security costs given the other pressures on the budget. An extra couple of percent of GDP might not be a huge deal if it were the only costs we were looking at. But Medicare and Medicaid don't look as if they're going to be fixed anytime soon, and it's much harder to substitute individual saving for those kinds of benefits relative to Social Security, where a modest benefit reduction could be compensated for by a modest increase in 401(k) contributions.


Read more!

Tuesday, June 22, 2010

New paper: Valuing Liabilities in State and Local Plans

The Center for Retirement Research at Boston College has released a new Issues in Brief, "Valuing Liabilities in State and Local Plans," by Alicia H. Munnell, Richard W. Kopcke, Jean-Pierre Aubry, and Laura Quinby.

Here's the abstract:

To measure the liability of a pension plan requires discounting a stream of promised future benefits to the present.  For public sector plans, what discount rate to use in this calculation is a subject of great debate.  State and local plans generally follow an actuarial model and discount their liabilities by the long-term yield on the assets held in the pension fund, roughly 8 percent.  Most economists contend that the discount rate should reflect the risk associated with the liabilities, and given that benefits are guaranteed under most state laws, the appropriate discount factor is a riskless rate, roughly 5 percent, as discussed below.  Thus, the economists' model would produce much higher liabilities than those currently reported on the books of states and localities.  The intensity of the debate is fueled by the assumption that the magnitude of the liabilities dictates the size of the funding contribution and even how the pension fund assets should be invested. 

This brief attempts to separate the question of valuing liabilities from the questions of funding and investment.  As background, it explains the current approach to valuing liabilities in the private and public sectors.  Second, it discusses why, given their guaranteed status, state and local pension liabilities should be discounted at a riskless rate and shows how much measured liabilities would increase by applying such a rate.  Third, it argues that valuing liabilities is only one factor entering the funding calculation, and that using a riskless discount rate does not necessarily mean that contributions should increase immediately.

Click here to read the full brief

Read more!

Savings and Retirement Forum: Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?”

Event: Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?"

On Thursday, June 24, 2010 the Savings and Retirement Forum will be held at the Urban Institute (2100 M Street, N.W. Washington, DC 20037)  [Directions to UI], at 8:30am.

International Monetary Fund technical assistance adviser Mauricio Soto and Urban Institute senior research associate Barbara A. Butrica will present their paper "Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?," which is available here.

If you plan on coming please RSVP. Coffee, juice, and pastries will be served. Please feel free to pass this along to others who you feel might be interested in attending.

The purpose of the Forum is to bring together academics, interested industry professionals, policy wonks, and government staffers who work on issues related to Social Security, pensions, savings, and general retirement issues for a monthly seminar and an annual half-day conference. More information is available at savingsandretirement.org.

Read more!

Wednesday, June 16, 2010

What’s wrong with replacement rates?

I've written several papers on the use of replacement rates in retirement planning and, more specifically, in judging the adequacy of retirement income. This paper written with Glenn Springstead of SSA looked at different ways of defining replacement rates, and pointed out that private sector financial planner define replacement rates differently than the SSA does. (In the private sector the replacement rate is generally retirement income/income immediately preceding retirement; for SSA, it's retirement income/the wage-indexed average of lifetime earnings). So statements like,

While Social Security replaces about 40 percent of the average worker's pre-retirement earnings, most financial advisors say that you will need 70 percent or more of pre-retirement earnings to live comfortably.

just don't work, as they're calculated using different denominators.

This second paper looks at how adjusting replacement rates for household size and the presence of children affects how we measure retirement income adequacy. While these adjustments can shift replacement rates up or down, depending on circumstances, the paper found that the typical Social Security replacement rate rose from 49 to 63 percent when adjusted for household composition, while the typical Social Security-plus-pension replacement rate rose from 75 to 92 percent. (These figures for members of the 1940 birth cohort.) The takeaway is that a) household circumstances matter a lot, and b) current retirees may not be as badly off as we sometimes hear.

All of this is a prelude to an interview with University of Wisconsin economist John Karl Scholtz, who with his co-authors has looked closely at how we measure retirement income adequacy and how replacement rates measure up as a financial planning tool. Excerpts of the interview, in the current ProManage newsletter, follow:

Chuck Miller: What has been the replacement ratio "rule of thumb" and is the rule grounded in real research?

John Karl Scholz: As mentioned, a common financial planning rule of thumb is that households need to replace between 70 to 85 percent of preretirement income to be financially secure.

The replacement rate rule of thumb has some apparent logic to it. Target replacement rates are thought to be less than 100 percent for three main reasons. First, upon retirement, households typically face lower taxes than they face during their working years, if for no other reason than Social Security is more lightly taxed than wages and salaries. Second, households typically save less in retirement than they do during their working years, so saving is a smaller claim on available income. Third, work-related expenses generally fall in retirement.** Accounting for these diminished income needs, conventional financial planning advice suggests that people need to replace at least 70 percent of pre-retirement income in retirement to maintain accustomed living standards.

In fact, when we calculate the median replacement rate that arises from our lifecycle model, applied to a sample of households born before 1954, it is 0.68 – very close to the 70 percent rule-of-thumb. The problem, however, is that the range of "optimal" replacement rates is much larger than the 70 to 85 percent range commonly discussed. Some households should be saving more. Many can comfortably save less.

CM: Where does the rule come up short? What are some of the factors the rule fails to consider?

JKS: A large number of factors will affect optimal target replacement rates. Optimal rates will be larger for couples than for singles. The evolution of average tax rates will have a substantial effect on optimal replacement rates. The reduction in average tax rates over the period we study, particularly for affluent households, implies that replacement rates for high-income households are lower than they otherwise would be absent the tax changes. Of course, if taxes increase in the future, replacement rates will need to reflect tax increases that will be borne by high-income households. Earnings shocks, particularly those incurred after children have left the household will also have substantial effects on optimal target replacement rates. Shocks to earnings are common and persistent, which makes durable rules of thumb difficult to formulate.

Perhaps the biggest and most straightforward-to-understand limitation arises because of children. Financial planning rules of thumb do not vary with the number of children in a family. But the resources needed to equate the discounted marginal utility of consumption in retirement for parents (assuming an intact married couple) is smaller if household resources during the pre-retirement period were devoted, in part, to raising four children than if the couple was childless.

Put differently, an otherwise equivalent household with many children will have a smaller optimal replacement rate than their childless counterpart. Conceptually, the ages when children are born, due to the interactions of credit constraints and optimal consumption profiles, and the timing of income realizations, will also affect target replacement rates.

Check out the whole interview. Several of Scholtz's papers are available on his website. Here's a link to a paper specifically on replacement rates.

Read more!

Social Security, Medicare Trustees Reports Further Delayed

News is going around Capitol Hill that the Social Security and Medicare Trustees Reports, which are usually released in March or April but had been scheduled to be released June 30 will now be further delayed until early August. The initial delay was to incorporate the effects of recent health care legislation on Medicare and Social Security, but it appears to be taking longer than initially expected.

Some questions:

  • Will the Medicare report show an improvement to the program's finances through cascading benefit cuts that can't be politically sustained?
  • Will scheduled reductions in medical compensation rates be so severe that some providers might leave the market? If so, how should the Report treat this?

One upshot of the new health reform legislation is that the Medicare Trustees Report, in particular, will become harder to interpret. It's one thing to understand unsustainable financing, which the Medicare and Social Security Trustees Reports have shown for years. It's another to understand financing that might look more sustainable, but really isn't.

Read more!

Monday, June 14, 2010

CAPITOL HILL FORUM ON YOUTH FINANCIAL SECURITY

Join young adults as they consider their financial security and  examine where their generation's interests lie in the debate over entitlement reform.

  Tuesday, June 15

Congressional Hearing Room

1310 Longworth House Office Building

Washington, D.C

(Breakfast Refreshments Served)

9:00-9:10 AM      Opening Remarks and Q& A with House Majority Leader, Rep. Steny Hoyer (D-MD)

 9:30-10:00AM    Remarks and Q & A with

                         Congressman John Spratt (D-SC), Chairman, House Budget Committee

10:00-10:30AM   Discussion on Financial Security

                         Congressman Paul Ryan (R-WI), Ranking Member; House Budget Committee

 Moderated by Thierry Dongala, Vice President, AGE 

11:00-11:30AM   Remarks  by Gov. Mitch Daniels, Former Director White House Office of Management and Budget

11:35-12:35PM   Panel Discussion - Ensuring Financial Security For Young Americans 

Young adults disproportionately lack the financial education necessary to make  informed decisions about major financial issues, particularly their retirement savings. The lack of financial literacy is compounded by high levels of debt. Together, these patterns are especially worrisome given that the decline of defined benefit pensions has left the responsibility for retirement security largely in the hands of individual workers.

Zach Kolodin,Roosevelt Institute, Project Director for the Future Preparedness Initiative, and Founder of Young People First.

Vanessa Patterson, Chairwoman, Monarch Wealth Strategies

Ken Porter, American Benefits Institute

RSVP or Inquire at info@age-usa.org

Sponsored by Americans for Generational Equity (AGE) In Partnership with American Benefits Institute

Read more!

Upcoming event: Social Security at 75: The Legacy and Vision

Bloggers note: Good thing they have Doug Holtz-Eakin on one panel; I think otherwise they would have been legally required to call this a rally rather than a forum. An event marking Social Security's 75th is a great idea, but a bit more balance would make it a better event.

Social Security at 75: The Legacy and Vision

June 22, 2010, 9:00 am — 4:30 pm

» Register Now

Location

National Press Club
529 14th Street, NW
13th Floor Ballroom
Washington, DC 20045
United States

Contact

Benjamin Veghte

A forum sponsored by the National Academy of Social Insurance in collaboration with the Insight Center for Community Economic Development, Closing the Racial Wealth Gap Initiative

Event Chair: Lisa Mensah, Executive Director, Initiative on Financial Security, The Aspen Institute

Social Security helped pave a humane path out of the Great Depression in 1935 as part of President Franklin D. Roosevelt's broad agenda that lifted the poor and fostered the growth of a strong middle class. In today's Great Recession, pundits question whether we can still afford Social Security's promise to empower the vulnerable and sustain a vibrant middle class for tomorrow's working families. This forum explores lessons from history that shed light on the future.

8:30am   Coffee and Light Breakfast

9:00am   Welcome
Lisa Mensah (Event Chair), The Aspen Institute

9:15am   Social Security at 75: History, Impact, Vision
Moderator: Lori Montgomery, Economic Policy reporter, Washington Post
Nancy Altman, Co-director, Social Security Works
Kilolo Kijakazi, Program Officer, Economic Development, The Ford Foundation
Eric Rodriguez, National Council of La Raza

10:30am   Break

10:45am   Social Security, Economic Growth and the Middle Class
Moderator: Janice Gregory, President, National Academy of Social Insurance
William Rodgers, Professor of Economics, Rutgers University Social Security, the Middle Class, and the Wealth Gap
Jill Quadagno, Professor of Sociology, Florida State University

11:45am   Break

12:15pm   Luncheon Keynote

1:15pm   Break

1:30pm   A Debate: Can We Afford Social Security in the 21st Century?
Moderator: Lisa Mensah, The Aspen Institute
Dean Baker, Center for Economic and Policy Research
Douglas Holtz-Eakin, American Action Forum

2:15pm   Engaging Communities in Shaping the Vision
Moderator: Susan Daniels, Daniels and Associates
Hilary Doe, Roosevelt Institute Campus Network
Ashley Carson, OWL – The Voice of Midlife and Older Women
Alexander Hertel-Fernandez, Economic Policy Institute
Donna Butts, Generations United

3:15pm   American Values and the Social Security Debate
Moderator: David Wessel, Economics Editor, The Wall Street Journal
Michael Graetz, Professor of Law, Columbia Law School
Janice Gregory, President, National Academy of Social Insurance
William Arnone, consultant, former partner in Human Capital practice, Ernst & Young

4:00pm   The Future of Social Insurance in a Diverse America
Rep. Xavier Becerra, Congressman from California's 31st District, introduced by John Rother, Executive Vice President of Policy and Strategy, AARP

Read more!

Friday, June 11, 2010

Alice Rivlin video on Social Security reform

From CNBC, an interview with the Brookings Institution's Alice Rivlin, a member of President Obama's fiscal responsibility commission, where she discusses rising entitlement costs and possible solutions.













Rivlin points to Social Security reform as the most promising avenue for the commission, discussing specifically raising the retirement age, reducing benefits for high earners and potentially raising taxes. Read more!

New Social Security papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Universal Minimum Old Age Pensions: Impact on Poverty and Fiscal Cost in 18 Latin American Countries" World Bank Policy Research Working Paper No. 5292

JEAN-JACQUES DETHIER, World Bank
Email: jdethier@worldbank.org
PIERRE PESTIEAU, University of Liege - Research Center on Public and Population Economics, Centre for Economic Policy Research (CEPR), CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: p.pestieau@ulg.ac.be
RABIA ALI, World Bank
Email: rali1@worldbank.org

Alleviating poverty for the elderly requires a different approach from other age groups, and a minimum pension is likely to be the only viable option. This paper examines the impact on old age poverty and the fiscal cost of universal minimum old age pensions in 18 Latin American countries using recent household survey data. First the authors measure old age poverty rates for these countries. Then they discuss the design of minimum pensions schemes -- means-tested or not -- as well as the disincentives they introduce for the economic and social behavior of households including labor supply, saving and family solidarity. Finally, the authors use household survey data to simulate the fiscal cost and the impact on poverty rates of alternative minimum pension schemes in the 18 countries. They show that a universal minimum pension would substantially reduce poverty among the elderly (except in Argentina, Brazil, Chile and Uruguay where minimum pension systems already exist and poverty rates are low). Such schemes have much to be commended in terms of incentives, spillover effects and administrative simplicity, but they have a high fiscal cost. The latter is a function of the age at which benefits are awarded, the prevailing longevity, the generosity of benefits, the efficacy of means testing, and the fiscal capacity of the country.

"Back to the Future: A Long Term Solution to the Occupational Pensions Crisis" CHARLES SUTCLIFFE, University of Reading - ICMA Centre
Email: C.M.S.Sutcliffe@rdg.ac.uk

In the UK and elsewhere, defined benefit (DB) schemes are being replaced by defined contribution (DC) schemes. However DC schemes have some substantial weaknesses, and a continuation of current policies will probably lead to another pensions crisis in a few decades. There is an alternative which avoids the major defects of DC schemes. It is proposed that, if UK employers wish to replace their DB schemes, they should do so with something that looks like a career average revalued earnings (CARE) DB scheme to the members, but is funded by single premium deferred annuities (SPDAs) and looks like a DC scheme to the employer. Pension provision is outsourced to specialist providers (insurance companies), with the risk (and the decisions that must be made by members of a DC scheme) managed by insurers, not the employer or members.

"Through the Doughnut Hole: Reimagining the Social Security Contribution and Benefit Base Limit" Administrative Law Review, Vol. 62, No. 2, p. 367, 2010

PATRICIA DILLEY, University of Florida Levin College of Law, National Academy of Social Insurance (NASI)
Email: dilley@law.ufl.edu

The Obama campaign proposal to address Social Security's future financing shortfalls by increasing the Social Security tax base limit only for those making more than $250,000 per year raises the broader question of the function of the base limit from a Social Security program perspective. The public supports increasing the wage base above all other possible avenues for solving long term financing issues, but the problems with the Obama "doughnut hole" proposal are substantial from several perspectives. In this article, the author suggests that the function of the base limit be reconsidered, and the benefit accrual function of the earnings base be considered separately from the revenue function of the tax base. The little recognized fact that Social Security benefits are based on earnings, not on taxes, should be the central organizing principle in a reconsideration of the base limit and of options for future revenue sources for Social Security.

"Used and Foregone Health Services among a Cohort of 87,134 Adult Open University Students Residing throughout Thailand" Southeast Asian Journal of Tropical, Medical, Public Health, Vol. 40, No. 6, pp. 1347-58, 2009

VASOONTARA YIENGPRUGSAWAN, Australian National University (ANU)
Email: vasoontara.yieng@anu.edu.au
LYNETTE L.-Y. LIM, Australian National University (ANU)
SAM-ANG SEUBSMAN, Australian National University (ANU)
ADRIAN SLEIGH, Australian National University (ANU)

There are limited data on the frequency of foregone health service use in defined populations. Here we describe Thai patterns of health service use, types of health insurance used and reports of foregone health services according to geo-demographic and socioeconomic characteristics. Data on those who considered they had needed but not received health care over the previous year were obtained from a national cohort of 87,134 students from the Sukhothai Thammathirat Open University (STOU). The cohort was enrolled in 2005 and was largely made up of young and middleage adults living throughout Thailand. Among respondents, 21.0% reported use of health services during the past year. Provincial/governmental hospitals (33.4%) were the most attended health facilities in general, followed by private clinics (24.1%) and private hospitals (20.1%). Health centers and community hospitals were sought after in rural areas. The recently available government operated Universal Coverage Scheme (UCS) was popular among the lower income groups (13.6%), especially in rural areas.

When asked, 42.1% reported having foregone health service use in the past year. Professionals and office workers frequently reported 'long waiting time' (17.1%) and 'could not get time off work' (13.7%) as reasons, whereas manual workers frequently noted it was 'difficult to travel' (11.6%). This information points to non-financial opportunity cost barriers common to a wide array of Thai adults who need to use health services. This issue is relevant for health and workplace policymakers and managers concerned about equitable access to health services.

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Friday, June 4, 2010

What do Kareem Abdul-Jabbar, Dave Barry, Tom Clancy, Hillary Clinton, Glenn Close, Larry David, Stephen King, David Letterman and Arnold Schwarzenegger have in common? All will be hit by the ‘new Social Security notch.’

All these celebrities were born in 1947 and thus will be affected by the 'new Social Security notch' I wrote about for the Center for Retirement Research. Allgov.com reports on these victims here. Although I doubt any will be suffering on account of the notch, it's a clever way of illustrating it.

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Cato Podcast on Public Pensions

I'm interviewed for the Cato Institute's Daily Podcast, here discussing public sector pension accounting. You can access it here.

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New papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Key Issues Regarding Japan's Public Pension Reform" Nomura Journal of Capital Markets, Vol. 1, No. 2, Summer 2009

AKIKO NOMURA, Nomura Institute of Capital Markets Research
Email: a-nomura@nicmr.com

Japan's public pension system underwent radical reforms in 2004, and the results of the first financial review under the new regime were released in February 2009. Although the review concluded that systemic revisions were unnecessary, some observers have criticized the report for its use of overly optimistic assumptions. In addition, there has been a rekindling of the debate over whether the basic pension should be funded by premiums or by taxes. If demographics and socio-economic conditions necessitate further reforms, it is essential that those reforms be started without delay.

"Pension Reform in the United States: Guaranteed Pension Accounts are Key" Rotman International Journal of Pension Management, Vol. 2, No. 2, Fall 2009

TERESA GHILARDUCCI, University of Notre Dame - Department of Economics, The New School - Department of Economics
Email: TERESA.GHILARDUCCI.1@ND.EDU

Policy makers in the United States reacted swiftly to the recession by restructuring the nation's collapsing financial institutions, yet they ignored the failing pension system. President Obama is now proposing pension reforms that will likely exacerbate its current problems of asset volatility and inadequate income replacement. This article offers an alternative: Guaranteed Savings Accounts administered by the Social Security Administration. At the start, retirement savings accumulated in Defined Contribution plans could be swapped for Guaranteed Savings Accounts guaranteeing a minimum three percent real rate of return. Over time, Guaranteed Savings Accounts would grow through contributions from employers and employees. Tax expenditures related to current 401(k) pension contributions could be distributed more fairly. This would allow lower-income workers to build their Guaranteed Savings Accounts further through pension tax credits. Accumulating retirement savings would be co-mingled, and professionally managed at low-cost. On retirement, Guaranteed Savings Accounts would be converted into life annuities. Guaranteed Savings Accounts would eliminate four major problems besetting the current American Defined Contribution-based pension system: High asset volatility, high fees, and the hedging difficulties with longevity and inflation risks.

"Focus on... Pension Reform" Journal of Pension Benefits, Vol. 16, No. 4, p. 3, Summer 2009

DAVID A. PRATT, Albany Law School
Email: dprat@albanylaw.edu

The last issue of the Journal included an interesting article by Professor Theresa Ghilarducci, "If This Isn't the Time for a Guaranteed Retirement Account, When Is It?" (Journal of Pension Benefits, Vol. 16, No. 3, Spring 2009.) Professor Ghilarducci is one of the country's most interesting and thought-provoking pension scholars, and her ideas are set out in more detail in her recent book, When I'm Sixty-four: The Plot Against Pensions and the Plan to Save Them.

"Several Issues in Reform and Development of China's Old-Age Security System" China Economist, Forthcoming

YANZHONG WANG, Chinese Academy of Social Sciences (CASS)
Email: wangyzh@cass.org.en

Since China's reform and opening to the outside world, especially since the mid-1990s, China's social security system has undergone a number of reforms and adjustments. We can say that the basic framework of social insurance system had been established, but it is still facing many difficulties such as small coverage, high payment rates, "empty" individual accounts, etc. The question is whether China will choose the proper way from so many suggestions inside and outside China to solve the above issues. I will analyze some important issues on pension reform and old age security system construction and give my own view in this paper.

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Thursday, June 3, 2010

New papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Social Security Reform with Self-Control Preferences" 


UNSW Australian School of Business Research Paper No. 2010 ECON 11

CAGRI S. KUMRU, Australian School of Business at UNSW
Email: cs.kumru@unsw.edu.au
ATHANASIOS C. THANOPOULOS, University of Pittsburgh - Department of Economics
Email: att8@pitt.edu

This paper analyzes a fully funded social security system under the assumption that agents face temptation issues. Agents are required to save through individually managed Personal Security Accounts without, and with mandatory annuitization. When the analysis is restricted to CRRA preferences our results are congruent with the literature in indicating that the complete elimination of social security is among the reform scenarios that maximize welfare. However, when self control preferences are introduced, and as the intensity of self control becomes progressively more severe the "social security elimination" scenario loses ground very rapidly. In fact, in the case of relatively severe temptation the elimination of social security becomes the least desirable alternative. Under the light of the above findings, any reform proposal regarding the social security system should consider departures from standard preferences to preference specifications suitable for dealing with preference reversals.

"Eliciting Individual Preferences for Pension Reform" 


IZA Discussion Paper No. 4479

YOSR ABID FOURATI, National University of Ireland (NUI) - Department of Economics
Email: y.abid1@nuigalway.ie
CATHAL O'DONOGHUE, National University of Ireland, Galway, Rural Economic Research Centre, Teagasc, Institute for the Study of Labor (IZA)
Email: cathal.odonoghue@nuigalway.ie

Pension systems have recently been under scrutiny because of the expected population ageing threatening its sustainability. This paper's contribution to the debate is from a political economic perspective as it uses data from a choice experiment to investigate individual preferences for an alternative state pension scheme based around preferences for cost, poverty, retirement age and pension parameters. Answers are used to estimate a lifecycle utility model of preferences towards pensions' parameters. Results suggest that individuals value orientation is an important determinant of their preferences. Respondents' income determines which degree of redistribution is preferred. However, preferences according to age are in contradiction with what is suggested in theory.

"Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe" 


IZA Discussion Paper No. 4726

ALEXANDER M. DANZER, University of London - Royal Holloway College, Institute for the Study of Labor (IZA)
Email: a.m.danzer@rhul.ac.uk

The retirement decision is under researched in developing and emerging countries, despite the topic's close relation to many development issues such as poverty reduction and social security, and despite the fact that population ageing will increasingly challenge the developing world. This paper uses a natural experiment from Ukraine to estimate the causal effect of a threefold increase in the legal minimum pension on labor supply and retirement behaviour at older ages. Applying difference-in-difference and regression discontinuity methods on two independent nationally representative data sets, the paper estimates a pure income effect that caused additional retirement of 30 to 47 percent. Additional evidence suggests that retirement incentives are stronger at the lower tail of the educational distribution and that the strict Labor Code curbed responses at the intensive labor supply margin. Although the substantial pension increase provided strong disincentives to work and put a heavy fiscal burden on Ukraine, it significantly reduced the propensity of falling into poverty for those in retirement.

"The Changing Role of Political Parties in the Reform of Continental Pension Regimes - Changing Electoral Constituencies as Drivers of Reform" 


APSA 2009 Toronto Meeting Paper

SILJA HÄUSERMANN, University of Zurich - Institute for Political Science
Email: silja.haeusermann@ipz.uzh.ch

Over the last decade, the main puzzle in the analysis of continental European welfare states has shifted from the explanation of stability to the explanation of change. Rather than being "frozen landscapes", most continental welfare states have indeed undergone far-reaching retrenchment and restructuring, even in the field of pensions, which supposedly is the most "path dependent" welfare policy. Moreover, even left-wing political parties and even trade unions have played a major role in cutting back existing pension rights in several countries. How can we explain the contents and coalitional dynamics of these reforms?

This contribution argues that we need to link the analysis of policy-making by political parties and unions with an analysis of the changing socio-structural constituencies these actors represent. When looking empirically at the profile and preferences of the electorate and membership of parties and trade unions, it can be shown that the recent reforms cater to new constituencies, rather than the blue-collar workers, who were the core beneficiaries of the industrial welfare state. However, since the left-wing electorate has become very heterogeneous, the left is increasingly divided. Empirically, socio-structural transformations and the preference profiles of constituencies in Switzerland, Germany and France are analyzed by means of survey data. In a second step, an analysis of collective actor positions in the reform space shows how these micro-level transformations affect the coalitional dynamics in three major pension reform processes in the early 2000s. Methodologically, I use factor analysis to analyze the dimensionality of the policy space, and the configuration of actors in this space.

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Burton Malkiel on Social Security reform

Burton Malkiel, Princeton economics professor and author of my favorite investing book – A Random Walk Down Wall Street – writes in today's Wall Street Journal that taking on Social Security reform would be a good start to fixing the budget. "Almost more important than the progress that would be made in bringing the long-run fiscal deficit under control," Malkiel argues, "would be the psychological message that our political process is actually capable of tackling entitlements. Markets everywhere would celebrate our return to fiscal sanity on at least one entitlement program."

Here's what Malkiel proposes:

Retirement ages. Life expectancy has increased by almost a decade since Social Security was introduced in the 1930s. But we've made only the smallest changes in retirement ages. We could increase the current retirement age schedule by one month a year for the next 36 years—i.e., a total of three years by 2046. After that, retirement ages could be further adjusted with changes in life expectancy. Workers in their 50s might have to work one additional year. We know that those who work after their "normal" retirement age are generally healthier, happier and more mentally alert and engaged than those who don't. Those who are unable to work would be allowed to retire under current schedules. Surveys suggest that younger workers, skeptical that Social Security will be able to pay the present schedule of benefits, would welcome putting Social Security on a sustainable basis.

Revise the indexing formula. Initial Social Security benefits are based on actual monthly earnings during the 35 years in which the person earned the most. These earnings are then indexed to account for changes in average wages since the year in which earnings were received. The indexing formula used to be based on increases in the consumer price index (CPI). During the Carter administration, the index was changed to average wages rather than prices. Changing the formula back to using CPI rather than average wage increases would make a substantial difference in the projected Social Security deficit over the next 75 years.

A proposal more favorable for low-wage earners is called "Progressive Price Indexing." Under this proposal, low earners would continue to receive benefits promised under "wage indexing," while high earners would have their initial benefits calculated under a formula that used "price indexing" instead. Social Security actuaries have estimated that Progressive Price Indexing could reduce the actuarial deficit by more than 70% of the 75-year shortfall.

Changes in the amount of earning subject to Social Security tax. As of 2009, $106,800 of earnings was subject to Social Security tax. That number could be increased to $125,000 or even $150,000. While this would represent a tax increase, it would leave the top marginal tax rate—crucial for preserving incentives—unchanged.

Malkiel's discussion of wage versus price indexing in the benefit formula isn't quite right. He's correct that the formula "indexes" past earnings to wage growth, but that's not what makes the system "wage indexed," by which we mean that benefits rise from cohort to cohort at the rate of wages, thereby keeping the replacement rate – the ratio of benefits to pre-retirement earnings – constant.

Wage indexing is accomplished through the part of the benefit formula known as "bend points," which are the dollar break points at which Social Security replaces different shares of pre-retirement earnings. For 2010, the bend points occur at $761 and $4,586 in monthly earnings. Social Security replaces 90 percent of earnings up to $761, 32 percent of earnings from $761 through $4,586, and 15 percent of earnings above $4,586. The dollar figures are increased each year at the rate of wage growth; this means that as average pre-retirement earnings rise, benefits will tend to rise at the same rate. Before the 1970s Social Security's benefit formula wasn't wage indexed, although ad hoc benefit increases passed by Congress kept replacement rates from falling too much.

That technical issue aside, though, I could see Malkiel's ideas forming the basis of an eventual deal. The question is whether we wait to cut a deal until we're forced or if we act today to get ahead of the problem. I'm not feeling optimistic at the moment, but hope springs eternal.

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How about 78 as the retirement age?

Ok, I'm not actually proposing 78 as the retirement age. But the fact that a case can be made for it explains something about the options available for Social Security reform. From AEI's Enterprise Blog


 

The New York Times' Room for Debate blog highlights disparate opinions on whether to raise Social Security's retirement age and, if so, how high to go. All the posts, from a range of experts on both sides of the issue, are worth reading. Here's my quick take, which I don't think any of them adequately covered.

Social Security, as its defenders like to point out, isn't a savings program but an insurance program. (I've argued that most of what goes on is really just forced savings, but that's a point for another day.) But if it's insurance, what is it insuring against?

Social Security's disability and survivors plans have obvious insurance functions: insuring against the disability or death of an eligible worker. But what does the retirement portion of Social Security insure against? Consider this: a person who entered the workforce in the 1930s, when Social Security first began, had only around a 65 percent chance of surviving to retirement age. Under these circumstances, it might make sense to prepare for retirement through an insurance model rather than a savings model, just as we prepare for other unlikely events through insurance.

Now let's ask, what is the age that a 20-year old today has only a 65 percent chance of surviving to? It's around age 78. In other words, by a pure insurance approach, 78 would be an appropriate age to start paying benefits. At younger ages the probability of surviving is much higher, such that the best approach isn't to insure against survival but to save for it.

What we've seen with Social Security—as with other government programs—is insurance for unlikely events creeping into provision for things that individuals can and should provide mostly for themselves. It's not a coincidence that even as life expectancies have risen, the typical age of retirement has fallen from 68 in the 1950s to around 62 today.

I have nothing against people retiring at 62, or even earlier if they can afford it. And some individuals simply cannot work longer. But for the vast majority of Americans, who are healthier and have better work conditions than ever before, it's hard to point to a pressing need for government to provide retirement benefits covering a third of their adult lives. Encouraging individuals to retire so early is a waste of government resources and, perhaps more importantly, a waste of human talent.

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Tuesday, June 1, 2010

What’s the best way to measure the national debt?

A recent meeting of the Obama administration's deficit reduction commission raised an important question: We all want to reduce the national debt, but how do we measure the debt we're trying to reduce?

One of the witnesses at the fiscal commission's hearing last week was University of Maryland economist Carmen Reinhart, whose book on financial and debt crises with Harvard economist Kenneth Rogoff has become something of a must-read (or at least, must-cite) among the commentariat. In their book, This Time Is Different: Eight Centuries of Financial Folly, Reinhart and Rogoff focus on "gross debt," which, according to the International Monetary Fund (IMF),

consists of all liabilities that require payment or payments of interest and/or principal by the debtor to the creditor at a date or dates in the future. This includes debt liabilities in the form of SDRs, currency and deposits, debt securities, loans, insurance, pensions and standardized guarantee schemes, and other accounts payable.

This measure differs substantially from the oft-cited $8.5 trillion publicly held debt. The IMF measure includes intragovernmental debt, in particular the Social Security and Medicare trust funds. As a result, the measured level of debt is actually $13 trillion, or around 88 percent of GDP. Reinhart and Rogoff have warned that 90 percent of GDP tends to be a crossover point where gross debt affects interest rates, economic growth, and other factors (although the threat can occur at much lower levels for countries with serial histories of default).

But some have countered that the best measure is simple publicly held debt, by which standard the debt-to-GDP ratio is "only" 58 percent. Since only this debt is frequently rolled over in international credit markets, it provides a more accurate measure of how willing international lenders must be to support our spending. While the Social Security and Medicare trust funds are rolled over as well, the government does so by borrowing from itself.

But consistency is important: many of those who argue against including intragovernmental borrowing in measures of public debt also argue that the $2.5 trillion trust fund protects Social Security through 2037, backed by the full faith and credit of the U.S. government (a credit unbroken since the abrogation of the gold clause in the 1930s). But the trust funds cannot be an asset to Social Security but a debt to no one; if the Social Security "crisis" is put off for decades by the existence of the government bonds in the trust fund, then the debt owed to Social Security—which will need to be repaid beginning this year—should likewise be counted.

That said, I personally don't consider trust fund securities debt quite the same as publicly held debt, since the government can control when and whether trust fund debt is repaid by altering the Social Security benefit formula. Raise the retirement age enough or reduce benefits enough and the debt will never come due. And, as noted above, trust fund debt is not rolled over in the same way as publicly held debt. So I agree with those who say that intragovernmental debt is different than publicly held debt, although these folks should then also acknowledge that Social Security's trust fund isn't exactly like a private-sector fund.

But here's what I think matters: Reinhart and Rogoff's statistical analysis showed a relationship between high gross debt and undesirable financial and economic outcomes. But I would be surprised if Reinhart and Rogoff wouldn't reach similar conclusions if they focused only on publicly held debt—since gross debt and publicly held debt are almost surely correlated—except they would likely show trouble beginning at debt-to-GDP ratios below 90 percent.

More importantly, one thing we can't do is mix and match measures. For instance, the Economic Policy Institute's Monique Morrissey writes (in an otherwise not-bad paper on Social Security and the budget) that

a cross-country comparison by economists Carmen Reinhart of the University of Maryland and KennethRogof of Harvard University found no evidence that debt-to-GDP ratios below 90% had any impact on economic growth.

But Morrissey uses this finding to rebut a recommendation by the Peterson-Pew Commission that the country stabilize debt-to-GDP ratios at around 60 percent by 2020. The problem here is that the Peterson-Pew Commission was focusing only on publicly held debt, while Reinhart-Rogoff focuses on gross debt. Morrisey's interpretation suggests that we still have another 30 percentage points of debt relative to GDP to give, while gross debt shows we're already at the level where Reinhart and Rogoff begin to see trouble.

In other words, the precise definition of public debt we focus on matters less than the broad conclusion that, however measured, we're amassing too much of it.

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CAPITOL HILL FORUM ON YOUTH FINANCIAL SECURITY

oin young adults as they consider their financial security and examine where their generation's interests lie in the debate over entitlement reform.

Tuesday, June 15

Congressional Hearing Room

1310 Longworth House Office Builing

Washington, D.C

(Breakfast Refreshments Served)

9:00-9:10 AM Opening Remarks and Q&A with House Majority Leader, Rep. Steny Hoyer (D-MD)

9:30-10:00AM Remarks and Q & A with Congressman John Spratt (D-SC), Chairman, House Budget Committee

10:00-11:00AM Discussion on Financial Security with Congressman Paul Ryan (R-WI), Ranking Member; House Budget Committee

Moderated by Thierry Dongala, Vice President, AGE

11:00-11:30AM Remarks by Gov. Mitch Daniels, Former Director White House Office of Management and Budget

11:35-12:35PM Panel Discussion - Ensuring Financial Security For Young Americans

Young adults disproportionately lack the financial education necessary to make informed decisions about major financial issues, particularly their retirement savings. The lack of financial literacy is compounded by high levels of debt. Together, these patterns are especially worrisome given that the decline of defined benefit pensions has left the responsibility for retirement security largely in the hands of individual workers.

Zach Kolodin,Roosevelt Institute, Project Director for the Future Preparedness Initiative, and Founder of Young People First.

Vanessa Patterson, Chairwoman, Monarch Wealth Strategies

Ken Porter, American Benefits Institute

RSVP or Inquire at info@age-usa.org

Sponsored by Americans for Generational Equity (AGE)
In Partnership with American Benefits Institute

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Upcoming Urban Institute Social Security events

Forum #2: Wednesday, June 16, 8:30–10:00 a.m.
562 Dirksen Senate Office Building,
Constitution Avenue and First Street, NE
Washington, DC

"The Social Side of Social Security: Can Benefit Adequacy and Equity Be Improved?"
Register Online

Opening Remarks

  • Rep. Nita Lowey (D-N.Y.), sponsor of H.R. 769, the Social Security Caregiver Credit Act of 2009

Panelists:

  • Melissa Favreault, senior research associate, Urban Institute; coauthor, Social Security and the Family
  • Virginia P. Reno, vice president for income security policy, National Academy of Social Insurance
  • Sylvester Schieber, former chair, Social Security Advisory Board
  • Paul van de Water, senior fellow, Center on Budget and Policy Priorities; former associate commissioner for research, evaluation, and statistics, Social Security Administration

The experts will examine such issues as who ends up with low Social Security benefits. Why? Should we reform Social Security to better protect the most vulnerable and increase equity? What are the possible options? Should other safety net programs, such as Supplemental Security Income, fill this role? How could we pay for adequacy adjustments? What does Congress think about the options?


 

Forum #3: Wednesday, July 14, 8:30–10:00 a.m.
Washington, D.C., location to be announced

"The Big Balance: Raising the Retirement Age while Protecting Those Who Cannot Work"
Register Online

Panelists:

  • Gary Burtless, senior fellow and John C. and Nancy D. Whitehead Chair in Economic Studies, Brookings Institution
  • Richard W. Johnson, senior fellow and director, Program on Retirement Policy, Urban Institute
  • Karyne Jones, president and CEO, National Caucus and Center on Black Aged
  • Monique Morrissey, economist, Economic Policy Institute
  • David Stapleton, senior fellow and director, Center for Studying Disability Policy, Mathematica Policy Research
  • Frank Todisco, senior pension fellow, American Academy of Actuaries

Panelists will discuss how health status, job characteristics, and job prospects intersect to affect work at older ages. What will happen to Social Security if Americans do not extend their careers as life expectancy increases? Would raising Social Security's early entitlement age or full retirement age hurt low-income groups? Can Social Security Disability Insurance adequately protect workers with health problems? Are there alternatives to raising the retirement age that would promote work at older ages?


 

A light breakfast will precede each event at 8:15 a.m.

These forums are made possible by a generous grant from the Rockefeller Foundation.

Please visit www.retirementpolicy.org to learn about our ongoing research on the distributional effects of Social Security proposals and other income security issues affecting older Americans.

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