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View Diary: They have been trying to "rescue" Social Security through the years. Looking back. (22 comments)

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  •  Northwest Plan for a Real Social Security Fix (1+ / 0-)
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    Clem Yeobright

    Some online friends and I devised a FICA only plan based on phased in and triggered increases in rates. It is similar to Option 2 of CBOs 2010 Social Security Policy Options but is more flexible, particularly in allowing future year increases to be cancelled or pushed back as projections change for each Report Year.

    That is the 2012 version permanently solves the actuarial gap while never departing too far above actuarial balance (I.e a Trust Fund with a Ratio as high as today's 350) and of course never having projections fall below a TF ratio of 100.

    If the 2013 Report shows some change in 75 year actuarial balance (and typically those changes are small) then some future years that didn't have increases would be scheduled for them or some that did would have increases cancelled but once the overall plan was implemented these changes would be not only very small on a year over year basis but typically years out in time.

    The result is a tax only plan that has a solution that is simultaneously permanent yet flexible.

    The Northwest Plan can be combined with other policy changes. For example modest changes to the cap formula would allow the subtraction of some future FICA increases. Equally macroeconomic policy that actually served to move future projections of productivity and real wage would automatically be accommodated by Northwest. And in the extreme case of Low Cost Plus (better than Low Cost outcomes) you would see either reductions in FICA rates in certain future years or improvements to scheduled benefits.

    Basically for Northwest the methodology is the fix and Social Security always maintained in 10 and 75 year actuarial balance by incremental changes in the out years set in the current year. Meaning there is never any "wait and see" or second guessing of the Trustees/OACT projections. Because even biases to the pessimistic side ultimately self correct as actual results roll in. - SocSec.Defender at - founder DK Social Security Defenders group - (hmm is there a theme emerging here?)

    by Bruce Webb on Thu Mar 28, 2013 at 08:31:03 PM PDT

    [ Parent ]

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