PBS’s website hosts a question and answer with Boston college professor Larry Kotkoliff regarding Social Security and financial planning. Check it out here.
Read more!Tuesday, February 26, 2013
Gokhale: “AARP Misleads Elderly About Social Security's Fiscal Health”
Over at Investors Business Daily, Jagadeesh Gokhale of the Cato Institute takes AARP to task for their statements on Social Security reform.
“The American Association of Retired Persons (AARP) is perhaps the most powerful lobbying organization in the U.S. Its Policy Council promotes national fiscal policies that protect its members' interests.”
“But the Council cites half-truths, uses ambiguous language, and omits key details about the programs and policies it discusses — especially on Social Security — in its communications with those members.”
Read Jagadeesh’s take here.
Read more!Friday, February 22, 2013
NPR interview with former SSA Commissioner Mike Astrue
NPR has a nice interview with my old boss, SSA Commissioner Mike Astrue, who recently stepped down after the end of his 6-year term. He’s obviously feeling more liberated to talk about the program and the way that Congress and the White House have failed to maintain it. Worth a read.
Read more!New papers from the Social Science Research Network
"Tax Preferences and Mandates: Is the Danish Savings Experience Applicable to the United States?"
EBRI Notes, Vol. 34, No. 1 (January 2013)
SUDIPTO BANERJEE, Employee Benefit Research Institute (EBRI)
Email: banerjee@ebri.org
NEVIN E. ADAMS, Employee Benefit Research Institute (EBRI)
Email: nadams@ebri.org
In an environment where lawmakers are struggling to raise tax revenue, public-policy tax “expenditures” have come under heavy scrutiny. In particular, tax preferences to boost retirement savings in employer-provided retirement plans has been at the center of such discussions. A recent study by Chetty et al., based on data from Denmark, has called into question the usefulness of such retirement tax expenditures in boosting savings. Using quasi-experiments, rich data, and robust statistical methods, the authors of the Danish study offered evidence that changes in the tax preferences for the Danish work place retirement savings plans had virtually no effect on total savings. This has prompted discussions in the United States about the possible modification of tax preferences for employment-based retirement savings plans in this country. This paper examines whether the findings from Denmark are relevant to the United States. The two retirement systems have some similarities but also major differences -- mainly that, unlike in the United States, in Denmark the availability of employment-based, tax-deferred retirement plans is not tied to the tax-deferred status of the accounts. However, aside from the differences in incentive structures between the two countries, the EBRI paper notes that the study of Danish workers examined only the impact that changes in tax incentives for work place retirement plans might have on worker savings behaviors -- but did not address how employers might react to changes in retirement savings tax incentives. Evidence suggests U.S. employers would react negatively to a loss of tax incentives by reducing or ending their retirement plans. Unless the behavior of both employers and workers are considered, the likely effects of any change in tax preference for retirement plans are speculative, at best. Finally, while the study of Danish savings behaviors presented the impact of tax-incentives and the “nudges” of automatic mandatory savings as an “either/or” solution, the optimal solution -- certainly for a voluntary system such as the one currently in place in the United States -- may well be a combination of the two.
The PDF for the above title, published in the January 2013 issue of EBRI Notes, also contains the fulltext of another January 2013 EBRI Notes article abstracted on SSRN: “Views on Health Coverage and Retirement: Findings from the 2012 Health Confidence Survey.®”
"Fiscally & Morally Responsible Social Security (OASI Payroll Tax) Reform"
BRETT BERGEN, Independent
Email: brett.bergen@gmail.com
This proposal offers specific improvement options for the Social Security Trust to maintain long-term solvency without increasing taxes.
The primary solution offered is to allow taxpayers the option to manage their portion of Payroll Taxes through the already existing Federal Thrift Savings Plan system (or similar system) so that they may choose to construct a risk/return portfolio that offers greater benefits by the time of retirement. Portfolio decisions can be informed by the advice and tools that the TSP already has to offer federal employees, and can be augmented by any additional advice from private, certified sources that individuals choose. The proposed reform may allow for the permanent reduction in U.S. Payroll Taxes and make the Social Security Trust solvent without a change to benefits or the eligible retirement age. Other possibilities are also explored.
The expansion of the TSP to the public may also prove an excellent medium through which to provide free, certified financial education to every citizen.
The proposal is meant to be considered by decision-makers as part of the Budget Control Act 2012 deliberations, prior to a budget decision on March 1 2013, if possible.
The SSA program improvements offer decision-makers additional tradespace in balancing the budget this year and every year thereafter, may increase take-home pay for working Americans, may reduce taxes paid by corporations and business owners, boost markets and hiring in the near-term, and put the U.S. economy on a firm footing for the long-run, while providing solvency of the Social Security Trust without a decrease in benefits or an increase in taxes.
A secondary solution explores equalizing the incentive for all income classes to have children, which would require reducing the financial burden for middle or higher income families to have children. This would broaden the taxable population base beyond immigration-related solutions.
"Non-Discrimination on the Ground of Nationality in Social Security: What are the Consequences of the Accession of the EU to the ECHR?"
Utrecht Law Review, Vol. 9, No. 1, p. 118-134, January 2013
FRANS PENNINGS, Utrecht University School of Law
Email: f.pennings@uu.nl
The European Court of Human Rights and the Court of Justice of the EU have both developed their own approach to discrimination on the ground of nationality. The context of both approaches is very different and therefore it is not surprising that they diverge considerably. Because of the expected adherence of the EU to the ECHR it is important to analyse these divergences. This contribution describes the case law of both courts in detail, and pays attention to the differences in approach between EU nationals and third-country nationals. It also analyses the differences in approach in respect of direct and indirect discrimination. Finally, the contribution summarises the areas where differences in approach are most likely to appear.
"Social Security and Early Retirement: The Relationship between Workers, Firms and Governments"
Annals of Public and Cooperative Economics, Vol. 84, Issue 1, pp. 43-61, 2013
MATHIEU LEFEBVRE, University of Liege - Research Center on Public and Population Economics
Email: mathieulefebvre@ulg.ac.be
In this paper we survey a number of theoretical and empirical studies in order to propose explanations to the fall of labour force participation at older age. Starting from the largely studied effect of social security schemes on labour supply, we explore the employers behaviour and the role of governments in the development of early retirement schemes. We show that early retirement is the result of a global agreement between firms and government where workers have incentives to early exit the labour market due to generous non actuarial benefits. Firms have an advantage to separate older workers because they are costly compared to young workers and governments hope that by pushing elderly into early retirement they will solve the massive unemployment problem.
"The Effect of Social Entitlement Programs on Private Transfers: New Evidence of Crowding Out"
KRISTOPHER GERARDI, Federal Reserve Bank of Atlanta
Email: Kristopher.Gerardi@atl.frb.org
YUPING TSAI, Carter Consulting
Email: ping0410@gmail.com
This paper exploits a policy experiment to identify the crowding out effects of public transfers on the incidence and level of private transfers. The introduction of a large social security program in Taiwan is used to estimate the effect of an exogenous increase in government transfer payments to the elderly on the private transfer behavior of their adult children. Using an instrumental variables strategy that accounts for the endogeneity of receiving public transfers, the empirical results show some evidence of crowding out on the extensive margin of private transfers.
Read more!Tuesday, February 19, 2013
New paper: “Modeling Behavioral Responses to Eliminating the Retirement Earnings Test”
The Social Security Administration has released a new paper by Kathleen Romig and Anya Olsen titled “Modeling Behavioral Responses to Eliminating the Retirement Earnings Test.” Here’s the summary:
“The retirement earnings test (RET) is an often-misunderstood aspect of the Social Security program. Proposed RET reforms meant to encourage working at older ages could also cause earlier benefit claiming. We use Modeling Income in the Near Term data to analyze the complete repeal of the earnings test for beneficiaries aged 60 or older, first assuming no behavioral responses to repeal and secondly assuming changes to benefit claiming and workforce participation behaviors. We find that beneficiaries affected by RET repeal would generally receive significantly higher benefits when they are younger than the full retirement age (FRA), and somewhat lower benefits after reaching FRA.RET repeal would not significantly change individuals' lifetime benefits and we find no significant changes in the overall poverty rate under either scenario. We find that assumed behavioral responses—particularly the benefit claiming change—have a bigger effect on lifetime benefits than the RET policy change itself.”
A good piece of work by my former colleagues at SSA. Check it out, wonks!
Read more!Friday, February 15, 2013
Blahous: Are the Trustees underestimating the Social Security shortfall?
Public Trustee Chuck Blahous says no – and he explains why. A good piece over at e21.
Read more!Gorry and Slavov: “To protect future generations, fix Social Security.”
My AEI colleagues Aspen Gorry and Sita Slavov have an article in the Daily Caller say that President Obama should move quickly on Social Security:
“In his State of the Union speech, President Obama urged Congress to ‘act soon to protect future generations.’ He was talking about addressing environmental issues. But there's an easier, more obvious step we can take to improve the lives of our children and grandchildren. We can act now to fix Social Security.”
Click here to read the whole piece.
Read more!
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