Hearing on Understanding Social Security’s Solvency Challenge
Witness List
Sunday, September 25, 2016
Testimony and Video from Ways and Means Committee Hearing on Understanding Social Security’s Solvency Challenge
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3 comments:
Increased labor participation rates creates larger liabilities because these new workers will earn wages subjected to SS thus they earn benefits. The SSA believes that this additional revenue will solve the problem when in fact it increases the future costs at the same rate.
The SSA states it is difficult to make a comparison between a one year increase in retirement age and the equivalent benefit cut or equivalent increase in payroll tax. This is a relatively simple calculation if they actually had a computer model. The CBO hit it on the head that the SSA does not link payroll revenues with oasi Benefits. The payroll tax is applied to wages up to the base of $118,500. The benefit is based on the wages earned up to the base of $118,500. This is why the SSA 75 years solvency period deficit is low compared to the CBO.
There is no solution that is painless. The money was paid in benefits and the workers who paid the payroll taxes all these years have paid into a ponzi scheme.
On labor force participation (as we as other changes like immigration, fertility, etc) the increase in liabilities to the current generation of workers can be offset by higher payroll taxes paid by future workers (assuming there's more of them, more of them are working, etc). Say, with regard to immigration, the average immigrant receives more in benefits than they pay in taxes. But this doesn't necessarily mean that a larger FLOW of future immigrants will be a money-loser for Social Security. It COULD be, but that depends on other assumptions.
Andrew,
You can't sell a dollar for a dime. You aren't going to stay in business long with that strategy.
If we expand Social Security to cover new state and local workers, the change is modestly positive over the next 75 years. The problem is that in the 75th year, these people are collecting benefits, and the change puts the system in a worse state.
The next generation of workers have their benefits based on wages which drive payroll taxes. If the payroll taxes of future workers rise, so does the benefit level of current retirees. The system has a hole, and it has to be filled by someone. Some workers will have to pay higher rates than can be reasonably expected in return.
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