New paper: “The Distributional Effects of Means Testing Social Security: Income Versus Wealth”

Distributional Effects of Means Testing Social Security: Income Versus Wealth

Alan Gustman, Thomas Steinmeier, Nahid Tabatabai

NBER Working Paper No. 22424
Issued in July 2016
NBER Program(s):   AG LS PE

This paper compares Social Security means tests that would reduce benefits for recipients who fall in the top quarter of the income distribution with means tests aimed at those in the top quarter of the wealth distribution. Both means tests would reduce the average benefits for the affected groups by about $5,000. The analysis is based on data from the Health and Retirement Study and covers individuals aged 69 to 79 in 2010.

About 14.5 percent of retirees in this age group are both in the top quarter of income recipients and in the top quarter of wealth holders. Another 10.5 percent are top quarter income recipients, but not top quarter wealth holders; with an additional 10.5 percent top quarter wealth holders, but not top quarter income recipients.

We find that a means test of Social Security based on income has substantially different distributional effects from a means test based on wealth. Moreover, there are substantial differences when a Social Security means test based on income is evaluated in terms of its effects on individuals arrayed by their wealth rather than their income. Similarly, a means test based on wealth will be evaluated quite differently by policy makers who believe that income is the appropriate basis for a means test than by those who believe that means tests should be based on wealth.

Available here.

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Blahous: Why a Social Security Fix Can’t Wait

Over at e21, Social Security Trustee and Mercatus Center fellow Chuck Blahous writes about the need for – as the Social Security Trustees often put it – prompt action on Social Security reform:

…financing corrections postponed from today until the early 2030s would need to take effect virtually immediately and be several times as painful, rendering enactment highly implausible.  It would be far likelier then that legislators would resort to subsidizing Social Security from the government’s general fund.  This would end longstanding arrangements through which Social Security has enjoyed unique popular support because it is perceived as a separate, self-financing program of benefits workers have earned with their payroll taxes.

Click here to read the whole article.

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Check out the Penn Wharton Social Security Model

The Wharton School at the University of Pennsylvania has released a new Social Security simulation model that allows users to build their own reform plan. What’s interesting about the simulator is that it’s built on an independent microsimulation model of Social Security’s finances rather than pre-run reforms chosen by SSA’s actuaries. This means that as the model is further developed, additional reform options may become available, as well as outputs on the distribution of Social Security benefits. Well worth checking out.

You can find the model here.

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Testimony from July 13 Senate Budget Committee Hearing on Retirement Security

Restoring the Trust for Americans At or Near Retirement

Date: Wednesday, July 13, 2016
Time: 9:30 a.m.
Location: 210 Cannon

Chairman Price Opening Statement
Witnesses:
Jason J. Fichtner, Ph.D.
Senior Research Fellow
Mercatus Center at George Mason University
Testimony | Truth in Testimony
Daniel C. Weber
Founder
Association of Mature American Citizens
Testimony | Truth in Testimony
Scott Gottlieb, M.D.
Resident Fellow
American Enterprise Institute
Testimony | Truth in Testimony
Monique Morrissey, Ph.D.
Economist
Economic Policy Institute
Testimony | Truth in Testimony

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Coming Up! Retirement Policy in the New Economy

Coming up tomorrow! I'll be speaking at this event and promise a stimulating discussion.

Retirement Policy in the New Economy

Wednesday, July 13, 2016

8:30AM – 10:00AM

Rayburn House Office Building, Room B369

Getting to a comfortable retirement is a vastly different challenge for workers in the new economy than for those a generation ago. Workers today change jobs more frequently, are self-employed at higher rates, and are in charge of their own retirement savings to a far greater degree. For some workers in this economy, retirement security is stronger than ever. Yet many others who want to save for retirement through their job are unable to do so. Please join us for a range of perspectives and ideas as we discuss:

What is the extent of the retirement savings gap in America? How can public policy expand participation in workplace retirement plans?

• Congressman Joe Crowley New York’s 14th District Vice Chair of the Democratic Caucus
• Jonnelle Marte Moderator, The Washington Post
• Diane Oakley National Institute on Retirement Security
• Andrew Biggs American Enterprise Institute
• Alane Dent American Council of Life Insurers

This event has been organized to meet the requirements for a widely attended event as set forth in the Congressional ethics rules. If you have any questions, please email mcoglianese@thirdway.org.

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Is Social Security in Even Worse Shape Than We Thought?

Possibly. While the Social Security Trustees’ projections for Social Security’s finances get the most media attention, there are two other sets of projections – from the Congressional Budget Office and the Social Security Advisory Board’s Technical Panel on Assumptions and Methods. And both find a larger long-term deficit than do Social Security’s Trustees.

Click here to read the Committee for a Responsible Federal Budget’s blog post on the subject. Worth reading.

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Upcoming Event: Retirement Policy in the New Economy, Hosted by Third Way. July 13.

Getting to a comfortable retirement is a vastly different challenge for workers in the new economy than for those a generation ago. Workers today change jobs more frequently, are self-employed at higher rates, and are in charge of their own retirement savings to a far greater degree. For some workers in this economy, retirement security is stronger than ever. Yet many others who want to save for retirement through their job are unable to do so. Please join us for a range of perspectives and ideas as we discuss:

What is the extent of the retirement savings gap in America?

How can public policy expand participation in workplace retirement plans?

Congressman Joe Crowley
New York’s 14th District Vice Chair of the Democratic Caucus

Jonnelle Marte
Moderator, The Washington Post

Diane Oakley
National Institute on Retirement Security

Andrew Biggs
American Enterprise Institute

Alane Dent
American Council of Life Insurers

This event has been organized to meet the requirements for a widely attended event as set forth in the Congressional ethics rules. If you have any questions, please email mcoglianese@thirdway.org.

Read more!