I talk COLAs, over at AEI's online magazine, The American.
Friday, May 20, 2011
Should we reduce COLAs? Or increase them? Maybe a bit of both…
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Occasional comments on the economics and politics of Social Security policy by Andrew Biggs.
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- Should we reduce COLAs? Or increase them? Maybe a ...
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About me
- Andrew G. Biggs
- I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.
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1 comment:
COLA was never a part of the original SS-OASI program. It was added in the early 70's. The problem with COLA is the same problem as with SS-OASI, funding.
In 1937 the payroll SS-OASI tax was 2% on the first $3,000 of income. Today the rate is 10.6% on the first ~$106,000. In simple terms the base tax increased over 500% while the base to which SS-OASI tax is applied has increased over 3,300%. Clearly the tax rate increased far faster than life expectancy or cost of living. The tax rate of a fully funded program is around 6% with COLA.
Our problem is not COLA or life expectancy, but the SS-OASI program itself. It had good intentions, but failed in implementation. Now people are looking at ways to extend of fix Social Security. My question is why? Who are you attempting to fix it for? If it is for those age 55 and over, then we should let those 54 and under opt out. If this were done, the problem with SS-OASI would be clear as bell.
No one likes paying more for a product or service. In instances where we do not like the service or product we walk with our pocket book. Those under 46 clearly do not like social security, yet they think they are powerless to do anything about it. The fact is they out number all the boomers and seniors by a wide majority, they just do not yet realize the potential of their vote. Much like the movie ants where the ants were taken advantage of by the grass hoppers. Sooner or later the young will wake up and SS-OASI will be changed to their liking, most likely with very severe cuts.
Are we at the point with twitter, face book, blogs and email? We could be. How secure are you that even at age 55 that when it comes your turn at the trough at age 67 SS-OASI will still have support? Maybe just as you are about to receive, those paying the bill for all past generations will stand together as one and repeal Social Security. Is it better for those at 55 to support SS or support its repeal and save the next 12 years worth of SS-OASI taxes?
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