Wednesday, June 17, 2015

Social Security: Is the GOP Scared of the Issue?

The Fiscal Times says no,

Social Security is not just a gray hair issue. Millennials are not only a major force as voters, but the massive generation now comprises the majority of the American workforce. And one thing all workers take note of -- all of the deductions from our paychecks. We’re all paying into the Social Security system; the question is: What will we receive in return tomorrow for every dollar that’s taken out of our paycheck today? And when do we get our money back?
Republican presidential candidates are already stirring voters with talk of raising the national retirement age. Presidential candidate and Florida Governor Jeb Bush says Social Security benefits need to be delayed to age 68 or 70.

Click here to read the whole article.


WilliamLarsen said...

It is clear those born prior to 1938 collected far more in benefits than those who come later. As a mid boomer, my benefit will be about 52 cents on the dollar including US Treasury Interest if nothing is done. My children who were born after 1985 can expect at most 29 cents in benefits for each combined dollar and US Treasury Interest.

I support repealing the Social Security Act as do my children.

Andrew G. Biggs said...

Those numbers sound very low to me. According to OACT's money's worth ratio's note, for a two earner couple born in the mid-1960s, discounting taxes and benefits at the TF bond rate, the ratio of benefits to taxes is around 0.9 under payable benefits. For a couple born today, it's around 0.77.

WilliamLarsen said...

The way I calculate the return on OASI contributions is to take the actual payroll tax paid each year and apply the US Treasury Rate that was earned by the Trust fund in that year. I then apply the 1977 OASI benefit formula to the wages to calculate the initial OASI Benefit. Using the cpi to increase the initial OASI benefit over the course of the cohort's life expectancy at full retirement age I calculate the cash flow over the individuals life.

I also use my computer model of OASI and the year that it predicts the payable benefit. Since the payable benefit for my cohort is 100% for only 8 years and then is reduced by 26% the first year and by about 1/2% there after the cash flow analysis shows a dramatic difference. I also eliminate COLA in year 7 as required by 1984 law that is based on the Trust fund to OASI expense ratio.

I have found that people who use discount rates in many cases use the wrong discount rate (cpi, Wages, Treasury rate). Since all three are different and are exponential, it is difficult to choose the correct one or one that fits. That is why I do a side by side analysis for the full term and compare the end result.

I also use the full 10.6% OASI tax as the tax,not 5.3% employee. Employers count their 5.3% (half) as part of the wage and benefit package paid to the employee.

Arne said...


You are attempting to apply a section that applies to a complicated formula for readjusting cost of living increases if they ever end up using wage increases as a substitute for Dept of Labor's CPI. Of course, although you are not reading it correctly, it is obvious that full scheduled benefits cannot be paid if the trust fund is depleted because Congress has not done anything.

Given how far you are from published analysis which does account for actual revenue rather than scheduled benefits, I cannot trust your analysis.

WilliamLarsen said...


I was asked to testify before Bush's commission on Social Security. I even sent the commission a well written brief on the cause and math behind social security OASI. The interim report has three sections that nearly read word for word from by brief.

The math is simple. If you think my math is wrong, please show me I am wrong. I dearly hope I am wrong, since this would make things better, not worse.