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  #1231  
Old 10-26-2018, 04:05 PM
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Mary Pat Campbell
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https://www.forbes.com/sites/ebauer/.../#39992aa46d3c

Quote:
Social Security, The FICA Tax Cap, And Having Your Cake And Eating It, Too

Spoiler:
Every time I write about Social Security and its financial woes, I inevitably get comments that the entire shortfall can be solved simply by eliminating the cap on FICA taxes, so that the wealthy pay "their fair share." After all, the Medicare portion of FICA has already had cap removed, so why not do the same for Social Security?

Here are some key facts:

In 2019, the maximum taxable earnings for Social Security will be $132,900, according to recently-released figures. Below this level, all Americans pay 6.2% of their earned income into Social Security, and their employer pay another 6.2%. Self-employed workers pay 12.4%.
According to The Social Security Game, by the American Academy of Actuaries (it's fun; you should try it), if the cap were eliminated and earnings above the cap were not credited with Social Security benefit accruals, it would make up for 88% of the shortfall. If high-income workers did receive accruals based on their above-cap pay, it would only make up for 71% of the shortfall.
The Social Security benefit formula is structured to be "progressive" -- that is, lower-income earners accrue benefits at a higher rate relative to their income than higher-income earners. Here's how it works: all of your income as recorded by the Social Security Administration is indexed, which means it's adjusted to 2018 based on national average wage increases since the year you earned it. Then the highest 35 years are averaged together (if you had less than 35 years of work, there are 0s included in the average), and then your benefit is 90% of the first $11,112 of your average indexed earnings, 32% of the next level of earnings up to $66,996, and 15% of earnings higher than this level. (See The Motley Fool for these updated-to-2019 figures.) It's the same idea as marginal tax rates, except in reverse. Which means that, while it goes without saying that if high-paid workers simply paid in more taxes without any new accrual, the additional taxes collected simply subsidize everyone else, it's also the case that even if higher earners accrued benefits on this income, they would still be heavily subsidizing lower earners -- otherwise this wouldn't be remedying the shortfall.
Removing the ceiling is consistently popular in polls. For example, a 2017 poll by the National Committee to Preserve Social Security and Medicare found that 61% of likely voters "strongly" and 13% "not so strongly" favored a proposal to "gradually require employees and employers to pay Social Security taxes on all wages above $127,000, which they don't do now" and an even higher percentage -- 69%/10% -- favored a proposal to "increase Social Security benefits by having wealthy Americans pay the same rate into Social Security as everyone else." An admittedly-leading question in a 2016 poll found that 72% of respondents supported "increasing -- not cutting -- Social Security benefits by asking millionaires and billionaires to pay more into the system." And a more academic but somewhat older analysis from 2014 found that 39% of Americans strongly favored and 40% somewhat favored eliminating the cap.

Looking at this can make it appear as if it's a no-brainer to remove the cap. Only the rich pay, and everyone else benefits. Yes, they might whine that their taxes go up by 12.4% with nothing to show for it and they're already paying higher rates, but better that than raise taxes across-the-board or force the elderly to cope with benefit cuts.

But what about the conventional wisdom that says that we need to keep the payroll tax cap (and in addition reject means testing) in order to get broad support of the system as one in which everyone contributes their fair share and has earned their benefits rather than receiving welfare?

How can such large proportions of Americans support making a change that fundamentally undoes this "earned benefits" design to Social Security, especially when the conventional wisdom is that Americans believe that, not only have they earned their benefits, but that the money they contributed was set aside to fund their own personal retirement benefits (or, alternately, would have been had Congress not "stolen" it)?

Is this cognitive dissonance? Are Americans foolishly, even ignorantly, clinging to their belief that they earn their benefits fair-and-square even when their support of removing the cap says they believe the rich should pay for everyone else? Do they want to have their cake and eat it too, by collecting subsidies while still insisting they've stood on their own two feet all along?

I don't think so.

After all, a 2017 poll found that 48% of Americans support the idea of a universal basic income, up from only 10% a decade ago, when described as a way to help people who lose their jobs due to AI. Another poll found 38% somewhat or strongly supported a $1,000/month government check paid for with a tax hike on those earning $150,000 or more.

These UBI supporters are still in the minority, but the idea's popularity is increasing, and it appears to be just one way out of many in which people are growing increasingly comfortable with the idea that the middle-class should receive government benefits, not (just) the poor. And once people are comfortable with the idea of "middle class welfare," then it stands to reason that they'd consider the right solution to the funding deficit to be one requiring the wealthy to top up the system however much is needed? In such a case, they might be viewing their benefits as "earned" in a more metaphorical/symbolic sense, in which they have a right to them by having been a hardworking American during their working lifetime, regardless of what the math shows.

If the payroll tax cap is removed, it will not be a matter of having the wealthy pay "their fair share." It will be a shift towards, or a recognition of (depending on your perspective) FICA taxes being taxes, nothing more or less. And in that case, why not integrate it all into our regular income tax structure, with the same marginal tax rates, deductions, taxation of investment income, and the rest?

Side note: I tried to find polling on the extent to which Americans understand that Social Security is fundamentally a pay-as-you-go system with modest reserves having been built up by past surpluses, rather than a genuinely prefunded system, and is a system with significant subsidies from one group to another (not just by the benefit formula, but subsidies from singles to families and from dual-earner to single earner couples, as well), but there's not much out there. Polls intending to determine Social Security knowledge, such as this Mass Mutual survey, ask about such practical items as retirement ages and spousal benefits. One 2010 survey does ask a more basic question and finds that roughly a quarter of Americans believe that benefits are based on contributions plus interest, one half either answer correctly or a rough approximation of the correct answer -- that is, either an average of the highest 35 years of earnings or a private pension-like 5 year average pay times working years -- and one quarter don't know; it does not ask whether people think the system is funded or pay-as-you-go, or whether they think their benefits are proportionate to their income. But without more survey questions, we're left to draw conclusions from such sources as viral Facebook posts, including one, a variant on a Snopes-fact-checked version, that came across my Facebook feed recently and insisted, "This is NOT a benefit. It is OUR money , paid out of our earned income! Not only did we all contribute to Social Security but our employers did too ! . . . This is your personal investment."


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  #1232  
Old 11-12-2018, 09:49 AM
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https://www.plansponsor.com/crash-co...security-aarp/

Quote:
Crash Course on Social Security From AARP
One key misconception to break is that Social Security is meant to be an adequate source of income on its own for retirees.


Spoiler:

AARP updated its recently launched Social Security Resource Center with an analysis of the 12 most common Social Security misconceptions held by workers and retirees in the U.S.; the publication also discusses solutions and strategies for improving the long-term strength of the system.

According to David Certner, AARP’s legislative policy director, probably the first and most pervasive misunderstand is that Social Security is at risk of “going bankrupt” in the near term.

“At the moment, you could say the opposite; the Social Security trust funds are near an all-time high,” he says. “The program really is in good shape right now,” says David Certner. “But we know it has a long-term financial challenge.”

The white paper recounts how, for decades, Social Security collected more money than it paid out in benefits. The surplus money collected from payroll taxes each year got invested in Treasury securities, generating reserves that are now worth about $2.89 trillion.

“But as the birth rate has fallen and more Boomers retire, the ratio of workers to Social Security recipients is changing. This year is a tipping point,” Certner says. “The program will need to dip into its reserves to pay full benefits from this point forward, absent any change to the program. It’s now forecast that the trust fund reserves could be exhausted in 2034. Even if that happens, Social Security won’t be bankrupt. The program will continue to pay benefits, but at a rate of 79% of what recipients expected to receive.”

According to the AARP analysis, some ideas to reform funding are starting to take shape, but near-term Congressional action remains unlikely.

“One proposal is to either raise or eliminate the wage cap on how much income is subject to the Social Security payroll tax,” AARP says. “In 2019, that cap will be $132,900, which means that any amount a worker earns beyond that is not taxed. Remove that cap, and higher-income earners would contribute far more to the system. Other options lawmakers might consider include either raising the percentage rate of the payroll tax or raising the age for full retirement benefits.”

According to AARP, it is important that workers are made to understand their Social Security benefits can be taxed, especially when an individual can draw significant resources from other income sources, such as defined contribution (DC) or defined benefit (DB) retirement accounts. As the white paper recounts, single filers whose combined annual income exceeds $34,000 might pay income tax on up to 85% of their Social Security benefits; couples filing jointly may pay tax on up to 85% if their combined income tops $44,000.

Another key myth to break is that Social Security is meant to be an adequate source of income on its own for retirees.

“The SSA says if you have average earnings, the program’s retirement benefits will replace only about 40% of your pre-retirement wages,” the analysis says. “Nevertheless, 26% of those 65 and over who receive a monthly Social Security benefit today live with families that depend on it for almost all of their retirement income. And 50% of them say their families depend on Social Security for at least half of their income.”

The full publication is available on AARP’s website.
https://www.aarp.org/retirement/soci...REALPOSS-TODAY
Quote:
12 Top Things to Know About Social Security
Understanding the program that helps secure your future

Spoiler:
1. Social Security is not going bankrupt
At the moment, you could say the opposite; the Social Security trust funds are near an all-time high. “The program really is in good shape right now,” says David Certner, AARP’s legislative policy director. “But we know it has a long-term financial challenge.” Here’s why: For decades, Social Security collected more money than it paid out in benefits. The surplus money collected from payroll taxes each year got invested in Treasury securities; today, the trust fund reserves are worth about $2.89 trillion. But as the birth rate has fallen and more boomers retire, the ratio of workers to Social Security recipients is changing. This year is a tipping point: The program will need to dip into its reserves to pay full benefits from this point forward, absent any change to the program. It’s now forecast that the trust fund reserves could be exhausted in 2034. Even if that happens, Social Security won’t be bankrupt. The program will continue to pay benefits, but at a rate of 79 percent of what recipients expected to receive. But if the goal is to keep benefits at their current levels, the sooner funding issues are addressed, the better. The reason is simple: The earlier you make needed adjustments, the less dramatic they need to be. “The longer we wait to fix Social Security funding, the more the cost will be paid by the younger generations, either on the tax side or the benefits side,” says Kathleen Romig, a Social Security analyst at the nonpartisan Center on Budget and Policy Priorities.

2. Congress probably will not take up Social Security reform anytime soon
Several members of Congress have proposed legislation to address the program’s long-term funding issues. But given the deep political divides on Capitol Hill, it’s unlikely that Congress will make any effort to reform Social Security until there’s the possibility of bipartisan support. “Because Social Security is so important, we need to be really thoughtful and deliberate about how to make change,” Romig says. “And we want a bipartisan consensus because we want the change to last.” There are concerns that the tax-cut legislation passed in late 2017 could lead some lawmakers to look for places where they might cut spending. “The stage has been set by the tax bill to take another run at Social Security, Medicare and Medicaid,” says Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare. Control of Congress after this year’s elections will play a key role in how Social Security’s funding is addressed.

3. Some ideas to reform funding are starting to take shape
One proposal is to either raise or eliminate the wage cap on how much income is subject to the Social Security payroll tax. In 2019, that cap will be $132,900, which means that any amount a worker earns beyond that is not taxed. Remove that cap, and higher-income earners would contribute far more to the system. Other options lawmakers might consider include either raising the percentage rate of the payroll tax or raising the age for full retirement benefits.

4. Lawmakers do not raid the trust fund
Another common myth about Social Security is that Congress and the president use trust fund assets to pay for other federal expenses, such as education, defense or economic programs. That’s not accurate. The money remaining after the Social Security Administration (SSA) has paid benefits and other expenses is invested directly into U.S. Treasury securities. The government can use the money from those securities, but it has to pay the money back with interest. Congress does get to determine each year how much the SSA spends on administrative costs, which includes staffing at field offices and call centers. In the most recent fiscal year, the SSA got an increase of $480 million, which raised the agency’s administrative budget to more than $12 billion.

Illustration of how Social Security works
TODD DETWILDER

5. Many believe it can be run better
As you would expect, the SSA is a big operation, with more than 60,000 employees and 1,200 field offices nationwide. With the rapid increase in the number of retirees, the agency has struggled to keep up. “There aren’t enough resources to take care of all the people now, and another 10,000 people turn 65 every day,” Richtman says. A recent audit showed that average wait times at field offices increased 32 percent between fiscal years 2010 and 2017, for example. During that same period, the number of visitors who had to wait over an hour to be seen at a field office nearly doubled.

6. Your Social Security benefits can be taxed
If you have other income in addition to Social Security, you might have to pay federal taxes on your benefits. Single filers whose combined annual income exceeds $34,000 might pay income tax on up to 85 percent of their Social Security benefits; couples filing jointly may pay tax on up to 85 percent if their combined income tops $44,000. And 13 states tax Social Security benefits depending upon differing variables: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.

7. Social Security is not meant to be a retiree's sole source of income
The SSA says if you have average earnings, the program’s retirement benefits will replace only about 40 percent of your preretirement wages. Nevertheless, 26 percent of those 65 and over who receive a monthly Social Security benefit today live with families that depend on it for almost all of their retirement income. And 50 percent of them say their families depend on Social Security for at least half of their income.

8. The purchasing power of social security is diminishing
Every year, the SSA issues a cost-of-living adjustment (COLA), which is an annual adjustment that beneficiaries receive to help their monthly checks keep up with inflation. However, the formula used to calculate the COLA does not fully account for the medical costs of an average older American. These costs have been increasing faster than other goods and services. An average American 55 and older spends about 27 percent more annually on health care than the overall population, according to the Bureau of Labor Statistics.

Have questions about benefits or coverage? Visit AARP's Social Security Resource Center

9. You can work and get Social Security
But beware: The agency will withhold some of your benefit if you are younger than full retirement age and your earned wages exceed a certain limit. In 2019, the threshold on your earnings will be $17,640. Make more than that, and the government will temporarily withhold $1 from your benefit for every $2 earned over the cap. You will receive this money eventually, in the form of higher benefits once you hit your full retirement age. If you wait until full retirement age to start drawing Social Security, you can work as much as you like and your benefits won’t be reduced.

10. Social Security has gone digital
The U.S. Treasury Department has moved away from sending out paper checks in favor of electronic payments. The SSA also has set up an online portal called My Social Security, where you can track your benefits. People are encouraged to go to the website (ssa.gov/myaccount) and set up an account. It will help prevent scammers from setting up an account in your name and possibly stealing your benefits.

11. Social Security is not just a retirement program
There are four main types of Social Security benefits: retirement, disability, dependent and survivor. Sometimes a person can qualify for more than one of these. However, Social Security generally will only pay one benefit at a time to a person. When filing for benefits, you should make sure to ask about your eligibility for other benefits. And if there is a change in your family status, such as the death of the family breadwinner, you should inform SSA of his or her death and ask if you or other family members are now eligible for additional survivor or dependent benefits.

12. Most people get back more than they put in
Worried that the money taken out of your check to fund Social Security will never come back to you? Over the years, studies have shown that most people receive more in benefits than they paid into the program. The Urban Institute issues reports that estimate how much people are paying into the program and what they are likely to receive in retirement benefits. (The reports can be viewed at urban.org.) As a general matter, married couples are more likely to get back more than they contributed than single people, and both low-income and high-income people may receive more dollars from the program over a lifetime than the amount of money they contributed to it.


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  #1233  
Old 11-20-2018, 06:48 AM
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https://www.forbes.com/sites/ebauer/...c#1776369a500d

Quote:
Yes, Social Security Is An 'Entitlement'

Spoiler:
No doubt you've heard this before, on your Twitter or Facebook, or among your friends:
"Social Security isn't an entitlement, it's an earned benefit!"
See, for example, this The Hill opinion piece from late October, the title of which contains the entire thesis:* "Treat Social Security the way President Roosevelt intended, as an insurance program not an entitlement."* The author,*Rep. John B. Larson (D-Conn.), laments that "Republicans have tried to privatize [Social Security and Medicare and] label it as a welfare or entitlement program."* And as of this writing, a Google search pulls up numerous recent instances of recent letters-to-the-editor, such as this one at the East Oregonian ("The GOP leadership has started referring to Social Security and Medicare as “entitlements” . . . but . . . these are benefits we have earned and paid for with deductions from our paychecks . . . . They are not gifts."), the Dayton Observer ("It’s their money, not a gift or entitlement from the government."), and another at the Lynchberg News & Advance, ("Social Security is not entitlement programs [sic] (nor is Medicare); rather that it is a program that folks have paid into all their working lives.").
Of course, that's*all a bit silly.
An "entitlement," as a type of federal spending, is a government program in which recipients automatically receive benefits that they're eligible for based on the applicable legislation.* Social Security is an entitlement because everyone who meets the eligibility criteria (40 "quarters" of*eligible earnings) is*entitled to a benefit.* No one is dependent on Congress to appropriate spending every year in order to receive their Social Security checks.
SNAP (food stamps) is also an entitlement program.* Here's GettingSNAP.org:
SNAP is a federal entitlement program. This means anyone who is eligible will receive benefits. You will not be taking away benefits from someone else if you apply.
By comparison, Section 8 housing vouchers are a government program that is not an entitlement.* This doesn't have anything to do with whether or not it's a "welfare" program but simply because Congress appropriates a certain sum of money for the program regardless of whether it's enough to give benefits to everyone who meets the eligibility criteria.* Those hoping to receive benefits end up on waiting lists because the number of people seeking benefits far outstrips the funds available.
Why, then, do Republicans say things like, "we have to consider entitlement reform in order to reduce the federal deficit?"* The same reason that the bank robber gave:* "it's where the money is."* Yes, it is true that the government could take in more revenue if Congress chose to re-raise taxes, and it's beyond the scope of this article to discuss the question of what tax rates should look like.* But federal spending on the "Big Three" of*Social Security, Medicare, and Medicaid comprise 48% of federal spending -- with the remainder taken up by the military (15%), other mandatory spending like unemployment compensation, federal employees' retirement benefits, and SNAP benefits (15%), interest on the national debt (7%), leaving only the remaining 15% for non-military discretionary spending such as transportation, education, and housing.* (That's from 2017, as featured in a handy Wikipedia infographic.) And as a reminder, spending on these programs is forecast to grow dramatically over the next several decades.
This should not be a surprise.
Instead,*it seems to have become what you might call a dog whistle, except in reverse.* Conservatives aren't using "entitlement reform" as a means of*speaking to their base that's invisible to everyone else.* Instead, it's*progressives who hear "entitlement reform" entirely differently, as if conservatives are saying, "these are welfare programs with handouts to lazy layabouts that don't deserve them."
I have to admit that this puzzles me.* Perhaps this is like the Yanni/Lauren dispute or the time that my teen enjoyed finding high pitched noises on Youtube and asking me whether I could hear them, but I cannot "hear" the word "entitlement program" as*anything other than a straightforward way of categorizing programs where people who qualify are entitled to the benefits rather then Congress appropriating a given amount of money each year and good luck to you if you are stuck on a wait list.
But*it does appear*that -- for, well, People Who Are Not Me, "entitlement"*is a pejorative.* For reasons that aren't entirely clear to me, those who object to the phrase connect it up with a negative sort of behavior, "having a sense of entitlement," meaning expecting success in life that one doesn't deserve, for instance, for instance, a stereotypical young man feeling "entitled" to having the woman of his choice go out on a date with him or feeling "entitled" to a good grade in his college class or a pay raise or promotion regardless of effort.
All that being said, I'm very much in favor of discussing the future of Social Security, and of retirement, with a common set of facts and vocabulary.* And I'd be happy to say that if significant numbers of people are misinterpreting the expression "entitlement program," we should change our terminology.* But I don't see what alternate expression is on offer that expresses the core challenge of these programs, that the benefits and eligibility are fixed by law in a way that makes it very difficult to modify spending in the future.
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  #1234  
Old 11-20-2018, 02:27 PM
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https://www.thinkadvisor.com/2018/11...ifeHealthDaily

Quote:
Republicans' Latest Hoax Is About Entitlements
Here’s how one of Bernie Sanders’ economic advisors sees the status of Medicare and Social Security.

Spoiler:
When Republicans passed the Tax Cuts and Jobs Act, they knew it was projected to add $1.5 trillion to budget deficits over the next 10 years. They did it anyway.

Many Democrats pointed out the hypocrisy of the GOP embracing budget deficits after purporting to decry them for so many years under President Barack Obama. Others warned that driving up the deficit was all part of a calculated plan to cut Social Security, Medicare and Medicaid.
How are the Republicans trying to carry out that plan? Basically, by creating the fiscal equivalent of the migrant caravan.

After voting for the tax legislation, Arkansas Republican Steve Womack, chairman of the House Budget Committee, sounded the fiscal alarm. “The time is now for Congress to step up and confront the biggest challenge to our society,” he said. “There is not a bigger enemy on the domestic side than the debt and deficits.”

(Related: What Is Money, and Why Is Europe So Messed Up?)

It does no good to remind Republicans that their tax cuts added trillions to future debt and deficits (nor does it matter all that much). They’re not having any of that. As Senate Majority Leader Mitch McConnell explained to Bloomberg last month, “It’s disappointing, but it’s not a Republican problem.” Entitlements, he said, are “the real drivers of the debt,” and the only way to deal with the looming crisis is “to adjust those programs to the demographics of America in the future.”

Ratcheting up the threat level is national security adviser John Bolton, who recently warned that entitlements are pushing the debt to unsustainable levels, where we will ultimately face “a national security consequence.”

Yes, Republicans want us to believe that entitlements — like the caravan of Central Americans headed toward the U.S. — are a creeping threat to our national security.

In the case of the caravan, most Democrats vigorously rejected the narrative. They called it out for what it was — a political stunt designed to garner support for military action to defend the border from a manufactured threat. When Republicans make the case for cutting entitlements in the name of defending our nation from fiscal ruin, Democrats should respond with the same skepticism. The whole thing is a hoax.

The problem is that instead of countering the Republican narrative with unassailable facts, Democrats are helping to cement the idea that there is a fiscal caravan.

By telling voters that Republicans want to cut Social Security, Medicare and Medicaid to “pay for” their tax cuts, Democrats are unwittingly lending credibility to the idea that cutting entitlements is one way to escape a fiscal dilemma.

Here’s what they should be saying instead.

First, there is no long-run fiscal crisis — the Republicans are making it up. They rely on the Congressional Budget Office’s long-term budget outlook to create the caravan effect. By focusing on the blue line in the chart below, Republicans claim that programs like Social Security and Medicare have us on an unsustainable trajectory.

As Stephen Goss, the chief actuary of the Social Security Administration, has shown, the blue line assumes that the federal government will begin borrowing to cover shortfalls once the trust funds for Social Security and Medicare Part A are depleted. There’s just one problem — it can’t happen under current law.

Under the law, “because there is no borrowing authority, there is really a hard stop,” said Goss. That means that the blue line is really a red herring. According to Goss, the black line paints the more accurate fiscal trajectory.

Henry Aaron, senior fellow at the Brookings Institution, agrees:

If one excludes deficits in Social Security and Medicare Hospital Insurance that cannot occur under current law and established policy, the ratio of national debt to gross domestic product will fall, not rise, as CBO budget projections indicate. In other words, the claim that drastic cuts in government spending are necessary to avoid calamitous budget deficits is bogus.

The second fact Democrats should expose is even simpler and more powerful. To make it, all they have to do is repeat after Alan Greenspan.

The exchange, which took place in March 2005 at a House Budget Committee session, is a little wonky, so let me break it down. To try to get Greenspan, who was the Federal Reserve chairman at the time, to support privatizing Social Security, Republican Rep. Paul Ryan begins by describing the program as insecure. Danger — caravan — ahead!

Instead of agreeing with Ryan’s premise, Greenspan (under oath) rejects it outright. Here’s the critical part of the exchange:

Paul Ryan: “Do you believe that personal retirement accounts can help us achieve solvency for the system and make those future retiree benefits more secure?”

Alan Greenspan: “Well, I wouldn’t say that pay-as-you-go benefits are insecure, in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.”

Greenspan made two critical observations. First, he explained that keeping promises to future beneficiaries is entirely a matter of political will. Unlike a household, Congress can never run out of money.

That means Congress can always decide to make up any shortfall once the trust funds are exhausted. They just need to modify their own law to make it possible. So the blue line could become a reality, but it can’t lead to a debt crisis.

Second, Greenspan tried to get us to focus on a potentially legitimate risk — inflation. He knew that as baby boomers leave the workforce and move into retirement, they’re leaving behind fewer and fewer workers to produce the goods and services that all of us will want to consume in the years and decades ahead. The number of workers per retiree is expected to drop to 2:1 by 2035, from 3:1 in 2015.

Greenspan knows Congress can always meet its financial obligation to future retirees, but he’s concerned about what those benefit checks will be able to purchase. If tomorrow’s workers aren’t productive enough, then we could end up with an inflation problem as seniors compete with workers for a dwindling supply of real goods and services.

Democrats should be challenging Republicans to support the kinds of policies that will boost future productivity and ensure an adequate supply of labor — investments in education, infrastructure, R&D and immigration reform. To do that, they have to stop getting pulled into a blame game with Republicans over the cause of the so-called fiscal crisis. That caravan is a hoax.

In my next column, I’ll discuss an issue that really does amount to an entitlement program, the interest on the federal debt, even though no one looks at it that way. Pundits are panicking over these costs, too. Are their fears justified — or overblown?


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Old 11-23-2018, 12:18 PM
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https://blog.oup.com/2018/11/time-to...etirement-age/

Quote:
It’s time to raise the retirement age again

Spoiler:
Donald Trump and Russian President Vladimir Putin and both correctly agree on an important fact for national retirement policy: People live longer than they used to.

In his Executive Order on Strengthening Retirement Security in America, President Donald Trump instructed the Secretary of the Treasury to “examine the life expectancy and distribution tables” which govern mandatory retirement distributions. Under current law, a retiree must begin to receive her pension, IRA or 401(k) distributions no later than her “required beginning date.” For most people, this date occurs between their seventieth and seventy-first birthdays. Once such mandatory distributions have begun, they must be paid over the person’s remaining life. Because the average American is living longer than before, the executive order states, the Treasury tables (based on earlier, shorter life expectancies) may force “retirees to make excessively large withdrawals from their accounts.”

President Putin’s recognition of the pension implications of longer life expectancies has taken the controversial form of proposed later retirement ages to receive the Russian equivalent of Social Security payments. Under current law, Russian women start government pensions at age 55 while men commence such pensions at age 60. Putin proposes that the retirement age of Russian men be delayed in stages to 65 while the retirement age for women will be set in stages at 60—three years earlier than Putin’s original proposal to establish 63 as the female retirement age in Russia.

Both the Trump and Putin proposals reflect the fact that, on average, people live longer than they did when current retirement ages were established. Pension policy must confront these greater longevities.

Averages, of course, are just that, averages. Within the overall trend towards longer life expectancies, there are exceptions. In the United States, average life expectancies have actually decreased slightly in the last two years. Russian life expectancies are considerably lower than those in other industrialized nations.

Nevertheless, on balance, in both countries, and throughout the industrialized world, people live longer than they did when current retirement ages were established in 1983. Longer lives mean longer retirement payouts. This strains the finances of public and private pension plans. The French pension system, for example, confronts this same phenomenon of extended pension payouts.

This is not an unprecedented problem. In 1983, after intense partisan wrangling, President Ronald Reagan and House Speaker Tip O’Neill negotiated a compromise to bolster the finances of the federal Social Security system. One important part of that compromise was the decision to raise gradually the Social Security normal retirement age from 65 to 67. Thirty-five years later, a similar increase may be appropriate to bolster the finances of the Social Security System. The Committee for a Responsible Federal Budget, using numbers from the Congressional Budget Office, estimates that moving the Social Security normal retirement age from 67 to 70 by 2035 would save $120 billion.

A rejoinder is that it is easy for white collar workers who love their jobs (e.g., law professors like me) to propose delaying retirement ages. For blue collar employees whose jobs are more physically taxing, delayed retirement looks less attractive.

It’s a fair criticism. The problem is that a system with varied normal retirement ages based on occupation would in practice be unworkable. For example, some think of manufacturing as a classic, physically -taxing blue collar job but much manufacturing today involves the operation of computerized equipment. In a system with different retirement ages for different occupations, how would the system distinguish between the manufacturing employee whose work is physically strenuous and the manufacturing worker whose high-tech environment is not? What would be the retirement age of a line-worker who is promoted to a management position?

The age adjustments proposed by President Trump are politically (relatively) easy since these adjustments will enable retirees with relatively large retirement accounts to withdraw their funds more slowly if they want. The kind of Social Security reform adopted in the U.S. in 1983 and now proposed by President Putin is politically tougher to enact since, even when phased-in, delaying pensions can disappoint the expectations of those affected.

But, at the end of the day, the solvency of public pension systems will require bi-partisan cooperation in the spirit of the Reagan-O’Neill compromise of 1983. Along with additional tax revenues, delaying the age of retirement to reflect longer life expectancies should be a component of that cooperation.

The two presidents are correct: we are living longer and pension policy must adjust to the reality of expanded longevity.


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Old 11-26-2018, 10:12 AM
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The Committee for a Responsible Federal Budget, using numbers from the Congressional Budget Office, estimates that moving the Social Security normal retirement age from 67 to 70 by 2035 would save $120 billion.

A rejoinder is that it is easy for white collar workers who love their jobs (e.g., law professors like me) to propose delaying retirement ages. For blue collar employees whose jobs are more physically taxing, delayed retirement looks less attractive.
We should certainly assume that the cost to SSDI (disability insurance) will increase as both those who become disabled prior to their current SSNRA will draw disability payments for a longer time and also because there will be a lot of claims of those age 67-69... in even greater proportion than those under 67.

Also, they need to increase the minimum age for drawing a benefit, IMO. Increase it in lock-step with the SSNRA. Don't let the gap increase beyond the current 5 years. JMO.
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Old 11-26-2018, 10:35 AM
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I agree the minimum age of eligibility should be pushed up.
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Old 11-26-2018, 06:36 PM
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Raising the minimum age saves very little in the long range because people forced to claim at older ages receive larger monthly benefits.

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Old 11-26-2018, 10:09 PM
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What information or models are there that project whether increasing minimum age would lower the amount of poverty overall, or just be a greater hardship for those who would like to claim asap? Unemployment at that age is difficult. Even though the reduction factors aren't purely actuarial my recollection is they are roughly so.
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Old 11-26-2018, 10:35 PM
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It's clear enough that people claiming at age 62 have significantly smaller average benefits than people claiming at age 70, beyond the differences that can be explained simply by delaying retirement. Most people agree that many age-62 claimants simply have no choice; they have no other income or assets on which to live. People waiting until age 70 (as I plan to do) don't really need the money earlier.

Thus, forcing age-62 claimants to claim at age 63 or 64 would surely cause substantial hardship and create more poverty. Moreover, it wouldn't do much at all to help Social Security, because the actuarial reduction and increase factors are close enough to actuarial.

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