The Heritage Foundation's David John writes about the Social Security reform bill recently introduced by Senators Lindsey Graham (R–SC), Rand Paul (R–KY), and Mike Lee (R–UT). The Graham–Paul–Lee bill greatly improves Social Security's financial future without tax increases. If it became law, Social Security would still run deficits, but they would be much smaller in the near term and would end permanently after 2052. This is far more responsible than the results of what appears to be the Obama Administration's preferred scenario: perpetual deficits for at least the next 75 years and 22 percent benefit cuts for all after 2036. Hiding your head in the sand, as the Administration has done so far, does not solve a problem. Fixing Social Security requires the kind of leadership that is willing to face facts and make difficult decisions. Read the whole article here.
Monday, June 13, 2011
Heritage’s David John on Graham-Paul-Lee reform bill
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2 comments:
Washington isn't trying to fix Social Security. It is trying to pay for it.
Lowering the economic returns of the sysetm only encourage people to further avoid the system. Social Security is a paygo system. Penalizing younger workers only invites an unstable end.
This law is simply throwing other people's money at the problem. It fixes nothing. The system has problems today : it can't allocate risk, price services, or invest the money well. It will continue to have those problems.
This effort is simply another attempt to cobble together 51% of voters willing to mug the other 49%. We need to fix a broken system, not pay for one.
"The Graham–Paul–Lee bill greatly improves Social Security’s financial future without tax increases. If it became law, Social Security would still run deficits, but they would be much smaller in the near term and would end permanently after 2052. This is far more responsible than the results of what appears to be the Obama Administration’s preferred scenario: perpetual deficits for at least the next 75 years and 22 percent benefit cuts for all after 2036."
If you believe this, I have a bridge to sell you. Let me just put it bluntly and simple as can be. The promised benefit target is 42% of life time indexed wages. Today we have 3.9 workers for every SS-OASI beneficiary and the worker is paying 10.6% of wages up to the base to SS-OASI.
The number of births per woman has been dropping for 200 years. Since around 1975 the birth rate per woman has been about 2.1 which is equivalent to zero population growth. This means the only increase in population is coming from legal and illegal immigration.
Based on math, the worker to beneficiary will fall to around 2.5 workers for every SS-OASI beneficiary. Raising the retirement age effectively reduces the total years paid, lowers the number of beneficiaries and in that way only makes benefits payable or does it?
Based on a retirement age of 70, the theoretical worker to beneficiary ratio is 2.6. With 2.6 workers paying 10.6% of their wages to SS-OASI to support one beneficiary means life time indexed wage benefit is more along the lines of 79% of promised benefits.
Unless you think woman will begin having far more babies in the future, the short fall has an infinite time horizon. It is not the baby boom that is causing the problem, but the baby bust following the baby boom bust.
http://www.justsayno.50megs.com/ss.html
http://www.justsayno.50megs.com/pdf/worker_ratio.pdf
Baby boomers have paid the highest payroll tax of any generation period. Yet with four times the payroll tax paid, the program is already in negative ash flow and it will increase until ~2037 when across the board cuts take place and there is no COLA by current legislation. The SS OASI has sunk. Let it rest at the bottom and let those who we can save, save for themselves.
If you value your children, grandchildren or great grandchildren, the most precocious gift you can give them is to Support Repealing Social Security and Medicare. Free them from this indentured servitude.
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