Five charts that explain what a disaster looms. And they don’t include the coming breakthroughs in life extension.
12 thoughts on “How Much Trouble Is Social Security In?”
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Five charts that explain what a disaster looms. And they don’t include the coming breakthroughs in life extension.
Comments are closed.
The charts are very misleading. For example, chart 2 points out that life expectancy is up 26% since 1935, while retirement age is up 3%. The implication is that retirees are receiving benefits for much longer than they used to. But life expectancy at birth isn’t the issue, it’s life expectancy at retirement: that tells you how long we’ll be paying benefits.
Since 1970 life expectancy at 65 has increased by only 3.2 years, and most of that reflects gains by the upper half of the income scale. For workers in the bottom half of the income distribution — i.e. the ones most reliant on Social Security benefits — it has increased by only 1.3 years since 1977. Meanwhile, the Social Security retirement age has increased by 2 years. So the people who need Social Security the most are receiving benefits for a slightly shorter period than before — exactly the opposite of the impression given by the chart.
a disaster looms
No, it doesn’t. Social Security is facing a longterm funding shortfall of less than 1% of GDP. You could solve the problem entirely by eliminating the income cap on the payroll tax.
Funding Medicare — guaranteeing that all senior citizens have access to medical care, while health care costs spiral up — is a hard problem. Funding Social Security is not a hard problem.
The trouble is that all citizens receive Social Security, even if they don’t need it, so longer living high income people still exacerbates the problem. I’ll also point out that 1% of GDP is a HUGE F-ING PILE of money.
You can’t solve cost problems with revenue. Costs have a structure; revenues have a structure. If the structure of your costs is off, the fix you apply today will not stay relevant in the future; it only happens to match today. It’s like the deficit; revenues are up slightly from 2007, but costs went up by 40%. If revenues go down in a recession and a costs go way up, that’s an even worse structure than an airline. And how much higher will it go if we have another Great Depression? It’s not just about balancing the budget; we here to fix how our national P & L is structured.
Meanwhile, the Social Security retirement age has increased by 2 years.
Go reread your charts, Jim. Your data goes from 1912 to 1941. You claim 1977, because that’s 65 years added to 1912. The problem is that for those born between 1912 and 1941, the retirement age only went up 8 months, not 2 as Jim ignorantly suggests. In short, the retirement age increase is about half that of the life expectancy growth (for just Jim’s bottom half, it gets worse if you don’t cherry pick).
I do find it interesting Jim, that you only focus on the bottom half. See, the life expectancy overall has increased more than 1.3 years, right Jim? We are talking about the entire cost of social security versus its funding. Why only include the bottom half? It’s not like the upper half is receiving less even if they are less reliant? Well, unless you add a means test, which currently doesn’t exist. Were you thinking of adding a means test, Jim? Maybe retroactively?
Thanks for the correction on how the retirement age increase is phasing in. It’s still the case that most recipients are receiving benefits for only a few months longer than they did forty years ago.
The reason to focus on the bottom half is that they are the people who rely on Social Security to avoid poverty in retirement. The referenced chart suggests that we raise the retirement age in step with average life expectancy. If you do that you avoid longer payout periods for long-lived, better-off beneficiaries, but you cut living standards and shorten retirements for blue collar workers. If the problem is that well-off retirees are receiving benefits for long periods, a means test is a better solution than an across-the-board increase in the retirement age.
One of the members at my church who is big on organizing various kinds of volunteer and charitable efforts had this arrangement where Second Harvest bread was set out on a table outside the social hall. She made an announcement in church urging parishioners to help themselves to that bread.
Our usher captain, a retiree with fairly strong Republican if not Libertarian views asked her if it was OK if he took some bread. The reply was, “that bread is both for the needy along with the greedy.”
My Republican friend was taken aback. Whereas he was a retiree on a fixed income, he was maybe too proud to consider himself to be in need of that bread, he bristled at the suggestion that he was in the second category of being greedy. I took him aside and told him, “It is like Social Security. Everyone receives benefits, rich and poor alike, for the reason that if it were means tested, there would be stigma associated with it.”
I have problems with means-testing Social Security just as I have a problem with a Millionaire’s Tax to pay for reductions in the Payroll Tax as a stimulus measure. You are going to move that program from being like the Second Harvest bread table at church, that is, paying benefits to rich and poor alike to becoming a welfare program for the aged. When you go down that road, that Social Security is no longer a “paying forward” program of redistributing money from the working young to the retired old, but more like welfare, you will bring on it all of the stigma associated with poverty and resentment of people paying for the system.
Raise the retirement age? Like there is no age discrimination in hiring. Retirement at the ages we allow is a graceful and face-saving way for people to withdraw from the labor force who couldn’t get work, apart from being a Wal-Mart greeter.
I favor “leaning” the system by “playing games with the COLAs” so that Social Security stays at some reasonable share of national income. The other thing is that if an old person is truly well off, they are paying substantial income taxes, recapturing money from wealthy Social Security recipients that way. Bill Clinton raised the taxable portion of Social Security from 50% (the “hidden” employer-paid portion on which you didn’t pay income tax at the front end) to 85% — maybe make it 100% taxable.
Again with means testing, in late old age one can have enormous long-term care expense (nursing home for the neurologically disabled senior) not covered by Medicare, not covered by health insurance, perhaps covered by long-term care insurance, but that is a new “product” without much track record. Residing in a nursing home, one can have substantial income which all goes out the door into health care expense, which is currently deductable.
Is a person going to be means-tested out of Social Security so as to end up on Medicaid support in a nursing home by exhausting financial resources, sooner?
Now as to all of this talk about Ponzi schemes, y’all yelling Ponzi Scheme, Ponzi Scheme, Ponzi Scheme whenever the subject of Social Security comes up. What . . . do . . . you . . . think . . . your . . . 401K . . . plan is? Social Security is a Ponzi Scheme and your 401K is not? That there will be an endless supply of gullible young people to pay top dollar for the common stock in your 401K to you can live high off the hog? Or in a nursing home without being on Medicaid? Is that what people around here are seriously thinking?
So by means test, your view is that people who contribute more to social security should receive less from it? It’s no longer sufficient that some receive far less than they put in, now that shouldn’t receive anything at all?
And why is the social security administration advocating for means testing on their website? I wonder if my Congressman is aware.
Anyone who babbles about “means testing social security” is functionally ignorant of irrevocable trusts and can safely be ignored.
Problems with Socialist Security:
– It’s a Ponzi Scheme.
– Defined benefit retirement plan. We all should know how well those have panned out.
– Fails to account for shifting demographics of longer life spans.
Check out this page from the Social Security office. http://www.ssa.gov/history/lifeexpect.html. It’s like a flat-out lie. It says that the life expectancy information doesn’t matter, but it’s crazy. If the same number of 21 year-olds in 1935 and 1990, even with the same after 65 year old life expectancy, a rise in the 21-65 life expectancy by 20% still means 20% more mouths to feed per month, and that’s what counts for costs. (Someone could check my math, but statistics and percentages are funky enough that it may not be actually 20%. It’s more, though)
Umm, more 21-65 year olds does not mean more costs, because non-disabled 21-65 year olds don’t receive Social Security (except for the ones who take early benefits at 62…). More 21-65 year olds means more people working and paying taxes.
One way to improve the finances of Social Security would be to let more young immigrants into the country, to balance the overall aging of the population. The fact that we have a higher birthrate and more immigration than, say, Japan, is one reason why our retirement system is in comparatively better shape.
One way to improve the finances of Social Security would be to let more young immigrants into the country, to balance the overall aging of the population.
Yes, ponzi schemes do require more new investors to help pay off the promises to the previous investors. And now, your plan Jim, is to tell some investors they made too much money from other investments to get payback for their social security investment.
By the way, how does allowing more young immigrants into the country to pay for social security work when unemployment is high?