Well, no and yes…. From the left to the right, political commentators are piling onto Texas Gov. Rick Perry for calling Social Security a "Ponzi scheme." Perry's competitors for the Republican presidential nomination are overjoyed at an opening against the new front runner, with former Massachusetts Gov. Mitt Romney calling Perry "reckless and wrong on Social Security." Mr. Romney's campaign alleged that the Texas governor "believes Social Security should not exist." Even the ordinarily white-hot conservative Michelle Bachman has gotten in on the act, calling it "wrong for any candidate to make senior citizens believe that they should be nervous about something they have come to count on." Perry has responded with a USA Today To begin, Perry questions whether the Framers would even have considered Social Security to be constitutional. This sounds a bit wacky in today's context, but his claim is almost certainly true. Even the Roosevelt administration was worried that Social Security wouldn't pass constitutional muster, going so far as to delink taxes from benefits – that is, to eliminate the ownership right in benefits that Roosevelt thought so important – in order to bypass the objection that the federal government had no constitutional authority for a federally-run insurance plan. As the Social Security Administration's history of the constitutional question makes clear, even this may not have been enough to get the Social Security Act passed by the Court without a little bit of Presidential intimidation. Prior to the Social Security case, Roosevelt threatened to "pack the Court" with additional Justices more to his liking. Roosevelt's plan failed but, as the SSA history notes, …the Court, it seemed, got the message and suddenly shifted its course. Beginning with a set of decisions in March, April and May 1937 (including the Social Security Act cases) the Court would sustain a series of New Deal legislation, producing a "constitutional revolution in the age of Roosevelt." In other words, the Supreme Court ruling validating Social Security's constitutionality isn't exactly how any of us would like court rulings to happen. Nevertheless, as Perry has noted, this is water under the bridge now. He isn't (and shouldn't be) seeking to re-fight a 65-year old constitutional battle. But to think Perry's constitutional claims are wrong is, well, wrong. But now to the Ponzi comparisons. To be clear, these aren't a Perry original. As Perry's campaign pointed out, Romney himself wrote that Social Security resembles a "fraudulent criminal enterprise." Which enterprise might he have been thinking of? Likewise, Senate Majority Leader Harry Reid called borrowing from the Social Security trust fund "embezzlement, thievery," saying that if he had done this in the private sector "I could be criminally prosecuted by the district attorney." So the Texas Governor is far from alone in his comments. But why a Ponzi scheme? The distinguishing characteristic of a Ponzi scheme is its intent to defraud. Charles Ponzi, and his modern cousin Bernie Madoff, meant to rip people off. Whatever disagreements we may have over policy, no one believes that FDR meant to rip people off and neither do modern liberals who wish to maintain the program as is by raising taxes. But when most people refer to Social Security as a Ponzi scheme, they're not thinking intent so much as effect. What makes the Social Security/Ponzi references so common is the similarity in the way they are financed. In both cases, early participants receive payments, not from interest on their own investments, but directly from inflows from later participants. If you were describing the mechanics of how Social Security's financing works, it wouldn't be illogical to refer to a Ponzi scheme, a chain letter or something similar. The more important similarity draws from their funding structures, but is expressed in terms of the expectations they produce. Like a Ponzi scheme, Social Security paid early participants incredible returns on their money, because they contributed to the system for only a few years but received a full retirement's worth of benefits. A person who retired in 1950 received around a 20 percent annual return on the taxes he paid (which happens to be exactly the same return that Bernie Madoff promised to his investors). Put another way, that person received around 12 times more in benefits than he'd paid in taxes. That helps explain why Social Security became so popular: it was simply an incredibly good deal. If you were born in 1950 and heard your grandparents say how much they liked Social Security, you'd be tempted to think you'll get the same sort of deal. But you won't: an average wage earner born in 1950 will receive around a 2.2 percent return from the system, which is less than what you could earn on guaranteed government bonds. A person entering the workforce today will receive only around a 1.7 percent return. In effect, Social Security's reputation is based off a deal that it can no longer deliver. Whatever good it did in the past – and it did do a lot of it, in terms of reducing poverty and helping the disabled and survivors, in the process undercutting Perry's claims that Social Security was "by any measure" a failure – it will do less of it in the future. The biggest difference may be that Social Security can go on forever while a Ponzi scheme can't, but that's mostly because Social Security can force you to participate. If Bernie Madoff could find enough people willing to accept a 2 percent return rather than a 20 percent return, his plan could keep going indefinitely. With Social Security participation is mandatory, so as long as Congress makes the changes necessary to keep the system from going broke it can go on forever. Which, in the end, is what Perry and the other Presidential candidates – including President Obama, I might add – should be talking about. Whether Social Security was constitutional and whether its pay-as-you-go financing structure is optimal, we've got what we've got. A differently-designed Social Security system in 1935 might have produced better outcomes today and in the future, but we can't turn back the clock. We have to deal with the system we have and figure out how to make it solvent and how to make it work better in the future. (For my part, I put together a proposal for AEI as part of a larger budget project for the Peter G. Peterson Foundation.) Instead of arguing about what's wrong with Social Security, we should be thinking about how to put things right.
op-ed on Social Security, stressing the need to reform the system. But, like another recent Texas Governor, Perry has the weakness of saying what he thinks without adequately explaining what he says. This doesn't mean he's wrong – as I'll explain, there's a lot that's right about Perry's claims – but it unnecessarily exposes him to attacks. That's why I don't call Social Security a Ponzi scheme; incendiary language can cloud whatever substantive point you're trying to make. Nevertheless, I'll try to sort a few things out.
Friday, September 23, 2011
Is Social Security a Ponzi scheme?
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The very high returns of people retiring in 1950 were needed because the depression wiped out their savings. FDR set up a Trust Fund goal of 300 percent as compared to todays 100 percent. If Congress had increased taxes to maintain that during the 50s and 60s, we would have a sustainable program that would provide market returns as FDR wanted. (The boomer bulge would have pushed the TF to over 300.)
Taking care of our elderly has always been a reponsibility of the working generation. It has always been pay as you go. Changing that will require that workers receive enough to take care of the transistion and still have enough to increase savings rates. It may be a good goal, but there is no good reason to demonize PAYGO.
If I remember right, true paygo only came about through the 1939 Amendments, which speeded up the payment of benefits and slowed down scheduled tax increases. I don't know how 'funded' the program would have become under the original legislation, but I guess we could guestimate it.
"no one believes that FDR meant to rip people off"
No, it is clear that FDR believed;
FDR's Social Security
January 17, 1935
Three principles should be observed in legislation on this subject.
First, the system adopted, except for the money necessary to initiate it, should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation.
Second, excepting in old-age insurance, actual management should be left to the States subject to standards established by the Federal Government.
Third, sound financial management of the funds and the reserves, and protection of the credit structure of the Nation should be assured by retaining Federal control over all funds through trustees in the Treasury of the United States.
http://www.ssa.gov/history/reports/ces/ces3.html
Where it went wrong was that no one bothered to look at the simple math behind Social Security's financing and if they did, then this clearly is deceit.
A. J. Altmeyer, Chairman
Social Security Board Before the House Ways and Means Committee November 27, 1944
“There is no question that the benefits promised under the present Federal old-age and survivors insurance system will cost far more than the 2 percent of payrolls now being collected. As I pointed out in my testimony of last year, none of the actuarial estimates which have been made on the basis of present economic conditions and other factors now clearly discernible result in a level annual cost of this insurance system of less than 4 percent of payroll.”
“Indeed, under certain assumptions the level annual cost has been estimated to be as much as 7 percent of payrolls. On the basis of a 4-percent-level annual cost it may be said that the reserve fund of this system already has a deficit of $6,600 million. On the basis of 7-percent-level annual cost it may be said that the reserve fund already has a deficit of about $16,500 million.”
http://www.ssa.gov/history/aja1144a.html
Robert Ball
Commissioner of Social Security
1962 and 1973,Wrote June 2005
“When Social Security began, benefits for those nearing retirement age were much higher than could have been paid for by the contributions of those workers and their employers. This was done so that the program could begin paying meaningful benefits even though workers nearing retirement would have only a short time to contribute.”
“Instead, the impression is left that the program was sound only when 16 paid in for every one taking out. Thus, of course, when the ratio changed to 3.3 to 1, the program became “unsustainable.”
“They ignore the fact that in 1950 only about 15 percent of the elderly were eligible for benefits and that it was expected by all who were acquainted with the program that the ratio would, of course, change dramatically as a greater proportion of the elderly became beneficiaries.”
“What in fact happened is that when just about all the elderly first became eligible for Social Security benefits, about 1975, the ratio was 3.3 contributors to each beneficiary and the ratio has stayed that way for the past 30 years. As the baby boom reaches retirement age, as the administration says, the ratio is expected to drop for the long run to 2.0 or 1.9 workers to each retiree. But that is the size of the problem - a drop from 3.3 to 2 workers per retiree.”
http://www.tcf.org/Publications/RetirementSecurity/ballplan.pdf
Clearly Altmeyer, Chairman Social Security Board informed congress and I would FDR would have paid attention, knew that funding was insufficient.
Even Ball identified that "it was expected by all who were acquainted with the program that the ratio would, of course, change dramatically as a greater proportion of the elderly became beneficiaries.” Again two commissioners of SSA knew, identified to Congress and the President more than 67 years ago there was a problem, yet congress did not act, but concealed the fact.
As part of the big fix of 1983 SSA was to begin sending out yearly benefit statements. However, this did not begin until the late 90's. What type of out cry would have occurred in 1984 had people read that they could pay 74% after 2064 (the year SSA projected trust fund exhaustion)?
Keep in mind the SS-OASI trust fund earned just 3%. Therefore, how do you reconcile knowingly paying beneficiaries 20% and more?
www.ssa.gov/OACT/ProgData/interestrates1937-89.html
www.ssa.gov/OACT/ProgData/effectiveRts1940-79.html
www.ssa.gov/OACT/ProgData/effectiveRates.html
"Taking care of our elderly has always been a reponsibility of the working generation. It has always been pay as you go. Changing that will require that workers receive enough to take care of the transistion and still have enough to increase savings rates. It may be a good goal, but there is no good reason to demonize PAYGO.
Taking care of elderly is an individual responsibility. You are responsible for taking care of yourself. Why should a minimum wage earner being paying 10.6% to pay benefits to a person with a standard of living far higher than theirs? 1 in 5 probably closer to 1 in 4 SS-OASI beneficiaries have a million dollars in assets. Can you justify a minimum wage earner paying to support this person who is clearly getting far more than the current worker will get?
When a person says “We Earned it!” what exactly do they mean?
To me, this phrase is a righteous euphemism for making the more truthful statement: "We were snookered by this Social Security Ponzi scheme, and now we are going to snooker the next generation!"
If Social Security benefits have been "earned" who is obligated to pay benefits to those who "earned" them? Workers? On a regressive tax basis? Why? Why perpetuate a fraud upon the innocent? Who is responsible for bearing the burden of a fraud? The person defrauded? Or an innocent or unborn child?
Taking care of those who are in need is far different from paying a benefit that is based on age and nothing to do with taxes paid.
As for FDR set up a trust fund goal of 300%, I have never seen this. Can you provide a link. What I have seen is FDR wanted a fully funded trust fund, far different than 300%.
"paygo only came about through the 1939 Amendments"
Not as far as I can see. The 1939 amendments did not change the TF target from 300 percent. It changed the tax by only 1/2 percent for 1940-42. It advanced benefit payments by 3 years at a time when receipts were well ahead of expectations. Those were all small compared to adding benefits for dependents, and much smaller than the subsequent bills which cut taxes to less than those set out by the 1939 amendments.
What really cut SS from a mix of paygo and interest earning was a coalition of people who did not want the government controlling a large trust fund and people who did not want to raise taxes. Congress held payroll taxes at the 1939 rate until 1950 with annual budget votes. The 1939 amendments ramped up to 3 percent for 1948, but that was not actually reached until 1960.
Part 1)
From the text of the 1939 amendments:
""(3) Report immediately to the Congress whenever the Board
of Trustees is of the opinion that during the ensuing five fiscal
years the Trust Fund will exceed three times the highest annual
expenditures anticipated during that five-fiscal-year period, and
whenever the Board of Trustees is of the opinion that the amount
of the Trust Fund is unduly small."
The intent is not described, but anything over 300 percent was considered noteworthy. The 1941 report indicates that the 5 year period looked solvent, but warned that the longer run would require "outlays many times greater". The 3 percent payroll tax scheduled for 1948 was not anticipated to be enough to even make paygo viable in the 1960's. That is why Altmeyer in 1944 was telling Congress that they should not keep cutting back on the scheduled increases. (Altmeyer did underestimate how much the economy would grow, but he was essentially correct.)
Part 2)
The high return at the beginning of SS is largely an artifact of the startup and the need to help people who had been wiped out by the Depression, but part of it does come from not having collected the scheduled taxes from 1940 to 1960 and waiting another 20 years to fix it. That 20 percent return should have been 7 to 10 percent (if they wanted to stay with the originally planned mix of paygo and earned interest).
Demographics have changed since 1935 so that being actuarially sound requires a higher premium. They have continued to change since 1983, so (if we still want to be able to retire while we are mostly healthy) we need to adjust premiums up again. Whether it is saving ahead or being helped by our children, retirement is becoming more costly, and we need to accept that if we are going to solve this.
Part 3)
"Can you justify a minimum wage earner paying to support this person who is clearly getting far more than the current worker will get?"
SS is a complicated compromise of insurance and savings. Those who make more during their career get back more, but at a lower replacement rate. That means that over a lifetime richer beneficiaries are subsidizing poorer beneficiaries. In one respect it is unfair to those millionaires. But it is insurance and just as I don't want to be in a car wreck or have my house burn down, I will accept that being poor is less desirable than subsidizing SS benefits.
A lot of people who feel they have "earned" their benefits do not understand how the compromise works and believe they have earned it in a financial sense, but SS is insurance, so they actually earn their benefits simply because they participate. The caveat is that the program they participate in needs to be adjust to changing demographics.
"SS is a complicated compromise of insurance and savings. Those who make more during their career get back more, but at a lower replacement rate. That means that over a lifetime richer beneficiaries are subsidizing poorer beneficiaries. In one respect it is unfair to those millionaires. But it is insurance and just as I don't want to be in a car wreck or have my house burn down, I will accept that being poor is less desirable than subsidizing SS benefits."
I think you missed my point. There is a lag of 45 years between when payroll taxes are paid and when benefits are received. Because SS-OASI never collected enough in payroll taxes to pay the initial beneficiaries (Ball stated that SS-OASI wanted to pay meaningful benefits, not fair or reasonable) there was a huge unfunded liability. The demagraphics were known back in 1935. Life expectancy was a well known data point. The births per woman was also well known and had been declining for decades it not two centuries due to decrease in infant mortality rates. The basic problem is Social Security had no blue print or design as to how much was needed to fund benefits. When I called the SSA in 1973 to obtain a wage and benefit statement, I was told I was too young and that it would be meaningless. When I asked for the formula I was told there was no formula, that congress set the benefit each year. This is why in 1950 there was a 775 increase in benefits. In fact benefits grew by 50% greater than inflation between 1940 and 1975.
SS had no idea what was needed to fund SS-OASI, yet they continued to make promises that they were told could not be kept.
The question once again is why should an 18 year old making minimum wage, projected to get at most 29 cents back for each $1 paid into SS-OASI with credited interest at the US Treasury Rate be paying a beneficiary today who is getting greater than $1 back and has a higher standard of living?
SS was never fair, cannot be made fair and is a government ponzi scheme. There are 118 million potential voters under age 46, 42 million seniors and 58 million boomers left. The numbers favor the young if thy ever decide to vote.
"projected to get at most 29 cents back for each $1 paid "
This is wrong. If you insist on doing a time value of money analysis of a pay as you go program, you still get 64 cents, not 29.
SSA link
But since SS is paygo, such an analysis is not correctly considering money flows. The correct comparision is not what you would get by investing, but how much you would pay to provide support for the previous generation if there were no SS. Time value of money does not come in to it. Even so, people insist on doing the analysis and have calculated the real return is about 1.4 percent.
At the link: "If a risk-adjusted real interest rate less than about
1.35 percent is deemed appropriate, as suggested by some research,[49] then the estimates
displayed in Chart 3 indicate that even the most distant birth cohorts are projected to
receive their money’s worth from the OASI program under either of the balanced budget
policies considered."
"a beneficiary today who is getting greater than $1 back"
It turns out this is mostly wrong as well. You have to be born before 1932 to get over $1 per $1, and this is a small portion of current retirees. The number for 1945 (this year's retirees) is 73 cents.
The people who got much greater than 100 were the people who were wiped out by the Great Depression.
"This is wrong. If you insist on doing a time value of money analysis of a pay as you go program, you still get 64 cents, not 29."
I disagree and have done the calculation many times.
Let us use the following assumptions;
Wage growth 3%
Inflation 2.5%
US treasury Rate 5%
Wage $30,000
SS-OASI tax 10.6%
begins work at age 21 retires at age 67. life expectancy at age 67 is 18.42 years more (weighted male/female life expectancy for those born in 1990)
The required tax rate is 8.3%, not 10.6%
To put it another way the person can can take out $16,063 a year instead of $12,600 (today's dollars). or 78.4% of what it would have earned. But wait, Social Security can pay 76% under current law and under current law, COLA's are eliminated/across the board cuts take place when the trust fund falls below 20% of any given years expenses.
Every SSA wage and benefit statement has stated the trust fund will be exhausted in "X" year. This means NO COLA'S!
Therefore, we must use a zero % inflation in the calculation. The US Treasury rate would provide $19,343 without COLA and this is compared to the payable benefit of 76% x $12,600. this is 49.51%. It is not the 29% I quoted because the payable benefit in 2036 is 76% per SSA, 73% by my calculations) and drops to 63% over another 25 years, reducing it to 41%.
Using historic US Treasury Rates of 6.0% (20 year moving average), the annuity would be $26,882 a year versus the payable benefit of $8,190 or 29.5 cents on the dollar.
http://www.justsayno.50megs.com/how_much.html
"The correct comparision is not what you would get by investing, but how much you would pay to provide support for the previous generation if there were no SS."
Assuming no SS, then how much would the working cohorts contribute to the retired cohorts who were once eligible for SS-OASI is a good questoin. First half the cost of SS-OASI goes to 1/3 of the beneficiaries, ~14 million. This group clearly can live without SS-OASI which reduces us to 28 million. Of those 28 Million, nearly half have assets that could be used to support nearly 100% of their retirement. Granted, they have to sell assets, reverse mortgage etc and reduce expenses, but they could make do. This leaves 14 million who need assistance. Again how much assistance will they need? My wife's grandmother lived with her family growing up which added little cost. Clearly reducing the number of house holds would save a considerable amount of money. It is my guess that we could fund this at 3% payroll tax and after 40 years, it would be at 1% of payroll with 9.6% of payroll being saved by the worker.
http://www.justsayno.50megs.com/ss.html Look for "The Larsen Plan For Social Security" for details.
"Time value of money does not come in to it."
I disagree. There is an equivalent cost analysis that must be done to determine the effectiveness of any expenditure.
Even so, people insist on doing the analysis and have calculated the real return is about 1.4 percent.
The real rate of return is somewhere between -1% and 2%. Compare this to 5 to 6% and you get a payable benefit that is 29% of what the US Treasury would pay.
My model that was revised in 1984 to take into account the 1983 changes identified late 2036 as being the year full benefits could not be paid (COLA was eliminated four years before). Since that time with updated US Treasury rates from SSA, the date has remained steady. Now that SSA has few 30 year bonds,the effective rate is declining fast and the 20 year moving average my model uses is going to show SS-OASI moving from 2036 to about 2030 maybe 2031. If I keep my moving average of unemployment the same, the unemployment will begin cause the date to move forward a year or two.
""a beneficiary today who is getting greater than $1 back"
It turns out this is mostly wrong as well. You have to be born before 1932 to get over $1 per $1, and this is a small portion of current retirees. The number for 1945 (this year's retirees) is 73 cents.
The people who got much greater than 100 were the people who were wiped out by the Great Depression."
I am not sure where you are getting your information from. Maybe you should spend some time doing the math yourself. Based on my calculations using the SSA web data for US Treasuries, the 1938 cohort single worker was the last year to get a fair ($1 paid, $1 in benefits). Now if the person was married and had a non working spouse, that cohort moved to as late as 1945.
It gets more complicated when two people work. The lower wage earner has a choice between drawing the higher of their wage record or 50% of the spouses wage record. This means if the lower wage spouse chooses the higher wage earner spouses record, their benefit in relation to what they paid will be higher, resulting in a higher effective rate of return. On the other hand if two wage earners are drawing benefits off their own work record, then the cohort of 1938 was about the last cohort to get a fair deal.
I am currently updating the internal rate of return for all cohorts at the request of an individual.
If you find an error in my numbers, please let me know.
"I am not sure where you are getting your information from."
My numbers come from the SSA at:
www.ssa.gov/policy/docs/workingpapers/wp110.pdf
Appendix B
William,
Nice spreadsheet. I get the same numbers from a very similar spreadsheet I wrote up. Useful for something like a Roth IRS where income grows tax-free.
I do not see where you get $12600 for SS. I calculate $14813.
If I use your planning form with current age = 32 and six feet under age = 98, I get $8454 as the withdrawl amount. This is less than what this person (an admitted corner case) would get from SS. Although I have pushed the limit with this calculation, you have pushed the limit in the opposite direction. Someone investing his SS money on his own would need to plan for alot more than the 50th percentile for his lifespan. Someone working a full 46 years would also be unlikely, and if you are going to justify using 18 years (although you should not round down) average life expectancy, then you should use a meaningful average work years (whatever that is).
The 6 percent treasury rate to get 29 cents per dollar is wrong since real return is the driving factor and you would need to change CPI and AWI along with. To be able to use 76 percent in 2036 you need to use the rates in the SS report.
I believe you have also misread things to get that the COLA should be zero - can you provide a link plus a section in the SS report that show that 76 percent in 2036 is calculated with that assumption?
United States Code Title 42, Chapter7, Subchapter VII, Sec. 911 (a),
http://www4.law.cornell.edu/uscode/42/911.html
United States Code Title 42, Chapter7, Subchapter VII, Sec. 910 (a),
http://www4.law.cornell.edu/uscode/42/910.html
Data I use in my analysis:
http://www.justsayno.50megs.com/references.html
The % to save at a particular age to retire with100% of life time indexed wages. At age 21, it is 11.5%, at age 32 it is 20.8%, large difference.
http://www.justsayno.50megs.com/tables/t-save_percent.html
$12,600 comes from the targeted 42% of life time indexed wages the 1977 formula hoped to achieve. 42% x $30K. Now this was done years ago and the average wage is higher, but the percents do not change.
Using age 98 instead of life expectancy of the cohort at age 67 is not a comparison between a cohorts value and SSA benefit.
Working 46 years is probably more difficult, but my guess is the majority of people do it.
The 2011 benefit statement I received stated SSA could pay 76% of promised benefits under current law in 2036. I calculate it to be closer to 73% in 2036 and this is without COLA as identified in the above link. It drops to ~60% by 2070. Of course with lower Treasury rates, higher unemployment the years will move forward.
CPI has no impact on SS-OASI Benefits after about 2030, COLA is zero. A Lower AWI decreases the SS-OASI benefit, but if you noticed using a lower wage growth or replacement rate, you need to save or the tax to pay future benefits/annuity drops. In other words lower wage growth means a higher annuity in the future.
The Treasury got rid of 30 year bonds. Had they not done this, the effective rate would still be close to 6%. But you are right the lower treasury rate reduces the individual's annuity in the future, but only if rates do not go back up. I earned some high rates ~17% in 1981. Treasury rates were well above 10% in the late 70's and early 80's.
I do not trust the SSA report. They use GDP and linear analysis when exponential variables (Treasury, Wages, CPI) and cohort sized are different. Each cohort has their own unique average benefit. You cannot lump them all together and hope to project an accurate forecast using a linear growth.
"I do not trust the SSA report. They use GDP and linear analysis when exponential variables (Treasury, Wages, CPI) and cohort sized are different. Each cohort has their own unique average benefit. You cannot lump them all together and hope to project an accurate forecast using a linear growth."
If there is no agreement on what numbers to use Congress will never make progress on SS, and it does need attention. From the Dean Leimer report I linked above it is obvious that not all cohorts are lumped toogether. From descriptions in the annual report, they know how to handle non-linear factors.
Perhaps I misunderstand the complaint about GDP and linear analysis. Can you be more specific?
"In other words lower wage growth means a higher annuity in the future."
This erroneous result comes from not separating inflation and wage growth and from mistakenly using ROR as the discount rate for your time value of money calculations.
"The Treasury got rid of 30 year bonds. Had they not done this, the effective rate would still be close to 6%."
I was able to find 30 year rates. They are currently less than 4 percent and have not been above 6 percent since 1998.
From Table IV.B1 of the report, income is still 74 percent of costs where costs are specifically defined to include scheduled benefit payments (which does include COLA).
Your US Code links are dead, but a google search shows that they do not say what you think about COLA.
I can understand, based on your own analysis, why you think SS is such a bad deal, but your analysis has several things that need correcting.
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