tag:blogger.com,1999:blog-7334408760351487944.post2612951520755052680..comments2023-11-12T06:43:00.060-05:00Comments on Notes on Social Security Reform: New papers from the Social Science Research NetworkAndrew G. Biggshttp://www.blogger.com/profile/16617460431856611873noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-7334408760351487944.post-32004962982336776402016-02-09T23:40:11.787-05:002016-02-09T23:40:11.787-05:00Families and Social Security
“Using our calibrate...<b>Families and Social Security</b><br /><br />“Using our calibrated model economy, we study the role of social security for different household types. Specifically, our counterfactual is a scenario in which the government suddenly and unexpectedly prevents the accumulation of new pension claims for households. Yet, all acquired pension rights – especially those of current retirees – remain untouched and need to be financed by current and future generations.”<br /><br />This is a rather disingenuous assumption. Stop Social Security cold turkey for all new claims, yet require the continue payment of social security to current beneficiaries. Of course this will hurt all people. The correct method is to stop payment for all. This of course shifts the cost to those later in their working lives and those who were current beneficiaries.<br /><br />“Consequently, moving towards a fully funded system induces efficiency losses.”<br /><br />What causes efficiency losses? First, Social Security is taking funds from workers who would have done something totally different with the funds than government. Individuals would have saved, paid down debt, paid for college, healthcare or a number of other things. In simple terms workers would control the growth of economy. When Social Security takes the funds from workers and transfers them to beneficiaries, in efficiencies pop up due to artificial stimulation of the sectors in the economy that cater to beneficaries that would not be there without Social Security.<br /><br />“To test how accurately our model predicts the savings behavior of different household types, we use data from the European Household Finance and Consumption Survey (HFCS) provided by the ECB for Germany.”<br /><br />The analysis used data from European Household Finance. This could be a problem for a number of reasons. The US built highways while Europe built mass transit. The US has a much lower population than Europe. Europe is more socialistic with less disposable income. Healthcare in Europe uses a form or rationing (they do not cover transplants, hip-knee replacement for some based on age/health and their system relies on a full queue leading to long wait times, but much lower costs. Then there is the housing difference. The US is more materialistic.<br /><br />“The data was collected between 2010 and 2011”<br /><br />Why not look at data from 1950, 1960, 1970, 1980, 1990 and look for trends? When you look at a sinking ship, what do you expect to find? Benie Madoff ran a Ponzi scheme for decades. Do you think these people thought they were poor or had less wealth during those years? Then take a look 1 and 5 years later, what happened to them? Cause and Effect should be looked at.<br /><br />“First, as social security stops paying old-age benefits, individuals have to provide for resources in retirement years on their own. This induces a massive increase in private savings and therefore productive capital which causes the economy to significantly expand. As capital becomes abundant, its return declines substantially along the transition. In the new long-run equilibrium the capital stock has increased by about 50 percent which leads to an interest rate that per year is about 2 percentage points lower than in the initial equilibrium.”<br /><br />I agree 100%. This is what happens when the economy is artificially stimulated beyond its means for 79 years. This is why looking at years 1937 through 2015 is critical. Something this report did not do. What this report did not do is identify how SS is going to continue to pay scheduled benefits. If it pays only payable benefits, is that in efficiency?<br /><br />“The reason is that the government now heavily issues public debt to finance shortages in the budget of social security and therefore absorbs almost all additional savings.”<br /><br />The general budget is responsible for the $18.9 Trillion debt. SS short fall today and since 2010 is not SS problem. SS deposited the money in the US Treasury and now they are taking it out. The problem is the General Budget ran deficits every year since 1958.<br />WilliamLarsenhttps://www.blogger.com/profile/00226403551284640494noreply@blogger.com