Kotlikoff on Social Security
The $20.5 trillion fiscal gap separating Social Security’s liabilities and assets — its unfunded liability — is enormous; it is 1.4 times U.S. gross domestic product and 34 times annual Social Security taxes…
To pay all promised benefits would require immediately and permanently raising Social Security’s 12.4 percent payroll tax…by 31 percent, or 3.9 percentage points…
What about cutting benefits?…”saving” Social Security this way requires reducing all benefits immediately and permanently by almost one quarter…
How about increasing the retirement age from 67 to 70 for those now 50 and younger?…That’s far too little too late. If we wait 20 years to act, we will need to cut benefits by almost 50 percent to eliminate the system’s funding gap.
More on this issue in Bloomberg.
Social Security is robbing the poorest Americans (young people) to give to the wealthiest (older Americans. We’re compromising people’s future in order to pay off those who have already contributed.
Consider it in a smaller context: If my parent’s support me and help me until I am grown, then I have a responsibility to offer that same help and support to them when they need it. However, if my parents demanded more than I could give unless I comrpomised my own financial stability, then I would tell them no. The same situation applies now to Social Security.
The days of grandma being afraid she might have to eat cat food to get by are gone. The wealthiest Americans are over 50, so frankly I think they should help each other rather than foist it off on young people just trying to get by.
Titus has a point. Each generation should save for their own retirement. Part of the reason the system is having problems is due to the difference in cohort sizes. The huge population of Baby Boomers made it easy to provide lavish benefits with low payroll contributions to the generation that came before the Baby Boomers. But, the 78 million Boomers will tax the system when they need benefits.
Another problem is the political one: when there are resources available, politicians will try to reap rewards by redistributing them. Examples of this include the (generous) rate of return on Social Security benefits received by the generation that came before the Baby Boomers. Another is the ease of which it is to qualify disability benefits.
No one running for office is talking about this.
Wealthy people (that is, primarily, people over 50 years old) don’t have to depend on Social Security anymore when they retire. This shows how much this system is gratifying the wealthy and immensely affecting the middle and lower class (that is, of course, the younger generations.)
Reading the comments above it is interesting, and predictable, that generational envy will just become worse.
It is impossible to save a Ponzi scheme. Social Security has to be phased out and it is going to be painful and not “fair” to everyone.