Politics

I’ll Never See A Social Security Benefit

Social Security is not going anywhere, end of discussion. And no, raising the taxable wage cap is not the reason.

The following exchange is from letters to the New York Times in response to a Krugman opinion piece. Note what I placed in bold; they are all wrong.

  • A “modest increase in revenue” is code for raise taxes and to fix Social a Security it’s not modest
  • “A simple raising the cap” does not fix the problem, in fact it doesn’t even fix half of the problem even if you eliminate the cap entirely
  • “Modestly reduced benefits” is about a 25% cut

“I would be fine with seeing my contributions to Social Security and Medicare decline substantially or disappear because I know that the program will not exist for me,” Collin Slattery of New York City wrote in response to a recent column by Paul Krugman. “My generation will never see one dollar from Social Security. Not one.”

Mr. Slattery reflects a widespread view. Half of all adults younger than the Baby Boom generation believe they will receive no Social Security benefits at all by the time they’re ready to retire, according to a Pew Research Center poll in 2014.

The program’s shortfalls are entirely fixable, Mr. Krugman wrote in “Republicans Against Retirement.”

“No, Social Security does not face a financial crisis; its long-term funding shortfall could easily be closed with modest increases in revenue,” he wrote.

Eleven readers responded to Mr. Slattery, mostly in an effort to dispel concerns about the program’s sustainability.

“I believed that when I was your age also and yet, here it is 40 years later going strong,” Lori Bell wrote from West Union, Iowa. “A simple raising the cap” on the amount of income taxed “would fix the problem for many years after you retire also.”

“Your generation will see much more than one dollar from Social Security,” Scott Mentink of Vashon, Wash., wrote. “Even if nothing were ever done to shore Social Security up, there is enough money coming in to pay” modestly reduced benefits far into the future.

Government data support their arguments. The Congressional Budget Office said in 2010 that imposing the Social Security tax on higher incomes would eliminate shortfalls. Right now, income above about $120,000 is not taxed for Social Security.

Here is a summary of the findings and estimates from the Congressional Budget Office. What you see is a need for broad-based tax increases on every working American. Other unpleasant options for retirees are changes in the COLA, the retirement age or early retirement adjustments.

Despite all the rhetoric, there will be a fix and Social Security will go on. The real question is will the original intent of Social Security be preserved or will we seek a quick fix as some of the writers above and many politicians suggest and turn the program into welfare.

Sadly, we seem to be in an age of buying any idea that convinces us billionaires and the upper income middle class are the same and merely by raising their taxes all our problems will be solved and life will be fair again.

When did we become the America of seeking the easy way out and allowing our populist politicians to lead us around by the nose?

Fixing Social Security fairly requires changes involving every living American and every American yet to be born. 

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5 replies »

  1. “Fixing Social Security fairly requires changes involving every living American and every American yet to be born. ”

    I completely agree with your comment, but I think your data is out of date. It looks consistent with the data that was part of answers to Sen Hatch. CBO’s latest projection was for a 4.4% IP payroll tax increase for 75 years of solvency. That isn’t fixed. That is the cost to kick the can.

    http://www.fedsmith.com/2015/06/16/cbo-social-security-needs-a-4-4-payroll-tax-increase/

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  2. So, if the left is correct and the system was always sustainable, it will show up as pricetags are adjusted each year inthe future.

    I failed to mention an integral component – this becomes a contract with Americans, not an entitlement that can be changed by a vote. And, the quid pro quo of entering into this contract is a refund of taxes paid, without any interest, as a survivor death benefit to a named beneficiary – to the extent the individual did not receive (individual, spouse, survivor) benefits equal to actual taxes paid ( not including portion paid by employers).

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  3. The problem with those alternatives is that the remove the most effective option for solving the shortfall, and more importantly, they change the allocation of the financing burden. So, if you want a solution that is both inter- and intra- generationally savvy, and “fair” IN THE EYES OF THE TAXPAYERS AND BENEFICIARiES, let me know.

    Else, as I noted in a prior post, it is all Monica’s fault! And, Democrats like Krugman are notsearchingfora realistic solution, as he, Pelosi, Obama, and Reed want to use it as a cudgel to deliver political blows to Republicans. They even have a name for it … Mediscare!

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      • First, give up on changing the status quo – too much politics there, and, importantly, the progressive left like Bernie Sanders, Elizabeth Warren,Paul Krugman and Theresa Ghilarducci all want to Increase taxes on higher income Americans, like Some Republicans,they want to make it into an even more means tested welfare benefit, and increase benefits for the lowest income beneficiaries.

        Second, adopt the rallying cry of the left … It has been a success, why change it?

        Third, adopt the position of the left that it isn’t broken, canpaybenefits into the future for decades.

        Fourth, borrow from Professor Bernatzi’s conceptofsave more tomorrow … All pledge today to save the existing benefit,that they want.

        Fifth, ANNUALLY, confirm taxes paid, “vested status”, “benefit earned” to Americans – specifically what current funding buys …including a 25 percent reduction in benefit payable in 2033 or so – and for those who reach age 62 after 2033, their initial benefit will be confirmed as a much smaller number.

        Sixth, annually give each American a set of options, actuarially priced, including combinations (e.g., forego early retirement benefits, delay retirement commencement to age 70, increase taxes by 1 percent, etc.) and loaded for antiselection, so that the system will be in fiscal balance in the current year,in five years,in ten years, in25 years, in 50 years, in75 years and in 100 years.

        Seventh, adjust pricetags each year, placing system in funded balance annually, where some elections/options like increased taxes go away as people age, all with the goal of maintaining the current allocation of burdens, and giving each individual the option to choose how to fill the shortfall, more taxes, less benefits, forego features (early retirement, post retirement COLA, etc.)

        Since actuaries balance and rebalance each year, the issue is resolved without any “change” – only a decision by each on how to fill the funding shortfall (more taxes, less benefits, fewer features, etc.). Don’t need any votes to change existing system,only a vote to provide all a choice on what to buy,how to pay, etc. and,we don’t add to the existing inter-generational burden; and we don’t try to change the allocation of burdens among each generation.

        Medicare is tougher to solve,but a slightly different solution is available.

        You might recognize this as a quasi-cafeteria plan design.

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