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View Diary: The Thing About Social Security (178 comments)

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  •  If they really protect the poorest (9+ / 0-)

    Then it isn't really a budget measure anymore.  It's just a political fig leaf so Rs can claim they're doing something about the evil "entitlements"

    If you're going to means test the COLA though, that opens the idea of means testing the whole thing.  Most of the reason SS and Medicare are a ton more popular than Medicaid is that they're NOT means tested, so they can't be spun as "giving your hard earned dollars to unworthy people" as easily.

    Really the solution to SS is on the revenue side.  Tie the income cap to the COLA and the prior year's growth rate so there is always enough money.    The formula for this is simple enough that you only need algebra to come up with an answer, assuming your measures of growth and inflation are close to accurate.

    One reason they can keep spinning SS as being "in crisis" is that any time we have an economic downturn, the revenue cap doesn't rise to account for reduced growth (and incomes below the cap) in the overall economy.   We instead rely on the idea that the surplus years pay for the bad years....which is probably ok from a policy standpoint but has proven risky politically.

    •  sure it is (0+ / 0-)
      If they really protect the poorest then it isn't really a budget measure anymore.  
      the program would still end up saving overall, simply because of the math of who lives to what ages and stuff.  
      If you're going to means test the COLA though, that opens the idea of means testing the whole thing.  Most of the reason SS and Medicare are a ton more popular than Medicaid is that they're NOT means tested, so they can't be spun as "giving your hard earned dollars to unworthy people" as easily.
      that is already true with SSDI, though.  FICA covers that as well, even though not everybody claims disability.
      Tie the income cap to the COLA and the prior year's growth rate so there is always enough money.
      what are the particulars of that?

      thanks!

      Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

      by Cedwyn on Sun Dec 23, 2012 at 11:17:20 AM PST

      [ Parent ]

      •  The payroll cap (3+ / 0-)
        Recommended by:
        SethRightmer, Roger Fox, Cedwyn

        is based around the idea that there is a cap on benefits (a maximum income that social security will insure) so there should also be a cap on the income which is tapped to pay for social security.

        The problem is that Social Security's payouts rise with cost of living, but its revenues rise only as salaries below the cap rise (either with more folks employed or higher average salaries).

        These two things are not the same.   The amount of revenue collected below cap during 4% unemployment is less than that during 8% unemployment, and if salaries are stagnant but cost of living increases, you also risk a gap increasing.

        The way to fix this is to do two calculations every year.

        1.  Cost of living adjustment based on change in a cost of goods (however you measure it....hopefully with some basis in reality)

        2.  Payroll cap adjustment, based on the revenue required to pay for the COLA, and also based on the trailing year's actual revenues.   Pick a large enough cap that with last year's actual salaries and employment levels, all the future year's payouts are covered.

        It isn't perfect, as the following year won't be the same as the prior  year, but to some extend fluctuations from year to year will damp that effect (a bad year followed by good adds a surplus, a good followed by a bad, a deficit, but in long term trend, no matter what happens from year to year, it should be pretty stable).

        Measure #2 just needs to be tuned a little high to average a slight surplus, to deal with the damage a string of unusual years can cause, and you're done.

        Alternately you increase fica % yearly, keeping the same cap but that's much more regressive.  The advantage of tying COLA to payroll cap is any "extra" needed in a bad year is paid for by those who can most easily afford it.

        •  that makes enough sense (0+ / 0-)

          i think raising the cap makes sense if we revise the benefits formula, like people only get x % above a certain dollar level back or something.

          Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

          by Cedwyn on Mon Dec 24, 2012 at 06:44:54 AM PST

          [ Parent ]

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