My AEI colleagues Aspen Gorry and Sita Slavov have an article in the Daily Caller say that President Obama should move quickly on Social Security:
“In his State of the Union speech, President Obama urged Congress to ‘act soon to protect future generations.’ He was talking about addressing environmental issues. But there's an easier, more obvious step we can take to improve the lives of our children and grandchildren. We can act now to fix Social Security.”
Click here to read the whole piece.
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"In 1950, there were 16.5 workers for each Social Security recipient. Today, there are just 2.8. The Social Security trustees project that on current trends, the Social Security trust fund will be exhausted in 2033. At that point, the revenue coming into the system will be sufficient to fund only about 75 percent of benefits."
A bit more research would clear up this mythical irrelevant 16.5:1 ratio. In 1937 there were only workers paying into Social Security and not a single beneficiary. I guess you could call the ratio infinity right? In 1940 OASI began paying benefits for the first time and only to those who had paid OASI taxes and were age 65. How many workers would have met this criteria? According to SSA there were 225,000 beneficiaries making the ratio a bit lower than infinity. In fact with each passing year, the ratio dropped considerably.
Think of it this way. When you connect a garden hose to our outdoor faucet and then turn the water on, do you get water out the end of the hose immediately or do you have to wait until you fill the hose? Social Security was an immature program for the first 45 years which meant the worker to beneficiary ratio was irrelevant. It would take the 20 year old in 1937 45 yeas before they would become eligible for Social Security.
The mere fact that "Aspen Gorry and Sita Nataraj Slavov" did not consider this tid bit makes them the last people to rely on any "fix for Social Security.
"The Social Security trustees estimate that we can keep Social Security solvent for the indefinite future if we immediately raise the payroll tax rate by 4.1 percentage"
The current scheduled OASI benefit requires only a 6.5% payroll tax to fund on an actuarial basis. increasing the current payroll tax from 10.6% to 14.7% will not solve the OASI programs future problems. It actually takes a payroll tax of greater than 18% to do that.
Does saving future generations mean they should pay 14.7% for something that should cost only 6.5% of payroll? This is not saving future generations.
When a ponzi scheme implodes watch out.
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