Gero 350 What s the future for social security?
Reading 38: How to Save Social Security What do Diamond and Orszag suggest are the two problems with the current Social Security system, and what solutions do they propose?
"Share the pain" SSI shortfall can be reduced by Reducing promised benefits in the future, modestly increasing tax rate, and raising the maximum level of earnings subject to the payroll tax. Cuts in benefits would be progressive to protect poor people.
Social Security retirement benefits average around
$14,000 a year for a single individual
Social security payroll taxes now bring
$400 billion each year, an amount larger than the entire military budget
There is debate over whether Social Security is:
1) a welfare program designed to prevent impoverishment in old age or 2) an annuity program that entitles everyone who pays into it to receive proportional benefits
Someone earning big wages would have a replacement rate of
28%
In 2011, the tax on individual wages was temporarily reduced to
4.2%; this "payroll tax holiday" was intended to stimulate the economy.
Someone earning the average would have a replacement rate of
43%
Married women are entitled to
50% of their husband's Social Security benefits, and a higher amount if the husband dies
Someone earning half the average would have a replacement rate of
56%
And people making more only pay
6.2% on the first $106,000 of income
The age of eligibility is set to slowly rise from 65 to
67 over the next few years
Social Security was originally planned for a one-earner family, but more than
70% of women are in the labor force today
Men age 21 have a
72% chance of living to age 65 and expect to live 17 years after.
Women age 21 have a
83% chance of living to age 65 and expect to live 20 years after that
More than just a retirement income program
Also provides wage-earners with disability insurance $203,000 and life insurance $300,000
To be eligible for Social Security benefits, a person must:
Be age 65 (or age 62 for early retirement) and have worked for 10 years in a job where Social Security taxes were deducted
Reading 41: Social Security for Yesterday's Family? Steuerle and Favreault remind us that Social Security was implemented during a very different historical time when Americans lived much shorter lives on average than they do today. What reforms are they suggesting need to be made to adjust to the changing modern family and its needs in later life?
Benefit should not be based on sex or marital status it should be based on individuals with low lifetime earnings and low income.
Social security surplus is really a collection of
IOU's that will be needed when the baby boon generation starts to retire in large numbers causing surplus to decline and causing problems.
Privatizing can mean several possible changes from the current system:
Increase the level of funding—move from a pay-as-you-go system to a "funded system" that involves an increase in national savings
Reading 39: The Necessity and Desirability of Social Security Reform Ponnuru takes a more conservative approach to the issue of Social Security reform than do Diamond and Orszag. What are his main assertions and what solutions does he put forward?
Increased life span and decreased childbearing have made pay as you go hard to sustain. Forms of denial even if economic growth does help, it mostly by swelling the balance of the trust fund, giving the system more IOUs to claim against future tax payers. Price index would eliminate short fall by itself. personal accounts are a way of softening the blow.
Reading 40: Social Security Reform and Benefit Adequacy What are the contours of Thompson's framing of "benefit adequacy" when it comes to Social Security benefits?
Reduction of social security benefits are not a viable way to dealing with the financial gap. Half retirees would have benefits fall below the reasonable benchmarks for benefit adequacy. First, any further increase in the normal retirement age needs to be accompanied by an equal or greater increase in the age at which people are first eligible to draw benefits. Otherwise further increases in the reduction factors for early retirement will cause actual retirement benefits to continue to fall relative to average earnings levels. Second absent a substantial increase in age at which benefits can first be drawn, it is probably not possible to close the financial gap current projected for Social Security without the financial gap entirely through benefit to such low levels that the program would fail to serve the social purpose for which it was created.
Another problem with Investing the Trust Fund in the stock market is the size of the trust fund which would mean that, by 2015,
Social Security would own $800 billion in shares—or 10% of the entire stock market This would be a big step toward national influence over the stock market
The Social Security payroll tax is a "regressive tax"
a person earning $20,000 a year and a person earning $106,000 a year both pay at the same 6.2% rate
Another variation is an "affluence test" where
benefits might be eliminated for people who are above some threshold
But the baby boom generation is much
bigger than the cohort before or after it
Second meaning to privatization might be to accompany private investment with increased
choice over the individual retirement savings e.g., investing part or all of the Trust Fund in private savings such as the stock market vs. bonds
Woman's lifetime economic contributions for social security is
disregarded
The largest
domestic government program today
Third meaning of privatization is to eliminate the way Social Security redistributes benefits
either from one generation to another, or from high-wage earners to low-wage earners
Others argue for making eligibility "means-tested," or only available to people whose income
falls below a certain threshold
But an across-the-board reduction would result in more
hardships for the poorest beneficiaries
The generation following doesn't
have enough workers to contribute as much as will be needed under the pay-as-you-go system
Some possible problems include: To finance the privatization of Social Security, the federal government would
have to borrow money to make up for retirement benefits already promised to people now retired. means that people would have to pay higher taxes
Today's higher divorce rates, gender pay gap, and the fact that married women earn more from their husband's benefits than their
own work benefits are a few of the gender inequalities with Social Security
Social Security is modestly
progressive in its distribution of benefits because of the "replacement rate"—the proportion of wages replaced by Social Security at the point of retirement
Two income couples
receive proportionately lower retirement benefits than one-earner couples
Others suggest reducing Social Security benefits to make them
reflect the actual rate of inflation
Yet, Social Security was never meant to be used as the
single source of income for people in retirement
75 years later, Social Security remains America's most
successful, and perhaps most popular, domestic government program
Social Security is funded by payroll taxes that go into a large account called
the Social Security Trust Fund
If more money is collected from payroll taxes than is paid out that year, then
the Trust Fund runs a "Social Security surplus"
Social Security
the public retirement pension system administered by the federal government
Some people suggest raising the age of eligibility even higher
to 69 or 70, but this could create more hardships for minority groups who have a lower life expectancy than Whites
Any program that tries to accomplish such fundamentally different goals is bound
to have both its challenges and its critics
Originally designed to operate as a modified "pay-as-you-go" system,
where the money collected each year mostly pays for people who receive benefits in that same year
Funded by a tax on earned wages during working years,
which is then subsidized as a wage repayment during retirement
social security benefits
widows not secondary earners
Almost three-quarters of older people who live in poverty are
women
