The National Center for Policy Analysis released a new paper, "How Reforms Would Affect Social Security's Funding Shortfalls, Total Spending, and Distribution of Benefits and Taxes," Entitlement reform has dominated the ongoing debate over reducing the federal government's persistent deficits and mounting debt. Together Medicare and Social Security account for a third of current federal spending and will continue to grow as a share of both the economy and federal spending in coming years. Since the inception of Medicare and Social Security, numerous reforms have been proposed. This study focuses on Social Security reform, examining four types of reform that represent the range of most commonly mentioned options. Click here to read the entire article.
by Liqun Liu and Andrew J. Rettenmaier. Here's the summary:
Wednesday, November 9, 2011
New paper: “How Reforms Would Affect Social Security’s Funding Shortfalls, Total Spending, and Distribution of Benefits and Taxes”
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Social Security and Medicare may account for 1/3 of all Federal Spending, however neither has contributed to the national debt. This is because neither program can borrow money and General Revenues cannot be used to pay benefits.
Myth 6
High deficits in the future make it difficult to pay social security benefits:
Social Security by law cannot borrow money. It has statutory authority to spend only those funds received from the dedicated social security tax on wages, tax on benefits and funds in the trust fund. Federal Law prohibits transferring general revenues to any trust fund.[4]
By law the trust fund cannot be drawn down to zero. The trustees must submit a report promptly to congress detailing benefit cuts or tax increases when in any given year the trust fund is projected to fall below 20% of that given years expenses. Social Security's ability to pay future promised benefits is dependent solely on the ability to raise social security taxes.[5]
[4] United States Code Title 42, Chapter7, Subchapter VII, Sec. 911 (a),
http://www4.law.cornell.edu/uscode/42/911.html
[5] United States Code Title 42, Chapter7, Subchapter VII, Sec. 910 (a),
http://www4.law.cornell.edu/uscode/42/910.html
The above statutes were passed in 1984 with the purpose of eliminating the potential that these two program would consume the General Budget.
Congress if focusing on these program with the intent of deflecting focus from the prime cause of the national debt and continued deficits since 1958.
These reforms simply shuffle the chairs on the deck of the SS Titanic. It is the same form taken in 1977 to reduce benefits (change the way benefits are calculated). Raise the base and tax rates and increasing retirement age on the premise that life expectancy per cohort at age 67 is increasing at the rate of 18 days per birth year. 18 days is like a half month of benefits. Let us call it $750. What is the increase needed to fund a present value benefit of $750 over 45 working years and then 20 retirement years? Come on folks, you need to wake up.
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