Wednesday, June 5, 2013

Goldwein: Reforming Social Security is easy — but it won't be for long

Writing in The Hill, Marc Goldwein of the Committee for a Responsible Federal Budget argues that we can fix Social Security easily – if we act today – and points to a new online tool that lets you see how you would fix the program.


WilliamLarsen said...

I looked at the model and played around with the inputs. I find many to be inconsistent.

Applying OASI to all wages does increase revenues, but the chart increases benefit less than the current OASI benefit formula would suggest. Why did they present a chart versus values that would show in more detail what created the chart?

Just say indexing retirement age by increased life span is vague. Are we looking at cohort life span at age 67 or full retirement age or population life span? I found the result for this selection to be wrong.

Andrew G. Biggs said...

I haven't double-checked, but policies that increase the tax max often don't look as good when expressed as a percentage of payroll, but that's because the base is expanding.

Marc said...

Raising the taxable maximum will result in subsequent increases in benefits since a) wages from $114,000 and up will receive a 15% replacement rate on those wages in the future; and b) those with a few years of wages above the current cap will see their AIMEs increase and a few will even have more income with a 32% replacement rate.

The numbers from raising the taxable maximum are reflective of what is calculated by the SSA Chief Actuary.

In terms of indexing the age to longevity, there is a little "i" next to each option (including that one) which explains details. It maintains constant ratio of working years to adult life which is about 1 month every 2 years.

Marc said...

And in terms of percent of payroll, Andrew, all options are percent of current-law taxable payroll as opposed to after-option payroll. This is the current convention used by the Chief Actuary.