tag:blogger.com,1999:blog-17206839.post5422691042902019750..comments2023-09-09T09:26:22.175-04:00Comments on Andrew Samwick's Blog: Social Security in the SOTUAndrewhttp://www.blogger.com/profile/13514024573333057559noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-17206839.post-14104988157239970922005-02-03T15:07:00.000-05:002005-02-03T15:07:00.000-05:00Thanks for the summary - and especially thanks for...Thanks for the summary - and especially thanks for the editorial comments, all of which I agree with. I found this notion that those 55 and older will not see any benefit cuts interesting. Since Bush is ruling out increases in the payroll tax as well, the oft heard notion that delaying will only raise the cost of reform makes no mathematical sense. Any alleged shortfall equal the difference between payouts and payins. Since Bush is saying no new payins, reducing the cost of reform means reducing payouts. But if we implement a plan in 2015 or we devise a plan now that rules out cuts for those over 55, there is no (material) difference in the payouts. So what is all this babbling about delay meaning higher costs?PGLnoreply@blogger.comtag:blogger.com,1999:blog-17206839.post-26978701712945936272005-02-03T15:15:00.000-05:002005-02-03T15:15:00.000-05:00As every year passes, another birth cohort crosses...As every year passes, another birth cohort crosses over the "55 and over" threshold and is thus held harmless by the reform. Wait 10 years, and the burden of plugging the whole in the system goes up on everyone but those 10 birth cohorts. To me, that's one very real cost of delay.<br><br>The burden also goes up in present value (measured next year) because even implicit debt accrues interest. See this <a href="http://www.blogger.com/r?http%3A%2F%2Fvoxbaby.blogspot.com%2F2004%2F10%2Fwhy-is-social-security-campaign-issue.html" rel="nofollow">post</a> for examples. If the riskfree rate exceeds the growth rate of the economy, then the burden will also go up as measured as a share of GDP.Andrew Samwickhttp://www.blogger.com/profile/13514024573333057559noreply@blogger.comtag:blogger.com,1999:blog-17206839.post-46768426754249202402005-02-03T15:26:00.000-05:002005-02-03T15:26:00.000-05:00With regard to your #4, I think that the wording h...With regard to your #4, I think that the wording has been chosen very carefully. The administration wants people to believe that the system is much closer to financial trouble than is the case. The word 'Bankrupt' may be technically correct, but to the general audience the impression is left (as it is intended to) that Social Security will have no money left. This is a lie.<br><br>In your number 5 you say bringing new money into the system is the reason for the reform, rather than the higher rates of return. But the administration has pretty explicitly ruled out any mechanism by which new money could enter the system. The improved rates of return are the rationale behind the Administrations position.<br><br>Lastly you mention the issue of bequests. This is interesting. Isn't this a way that money will leave the system? Has anyone looked at what the effect on Social Security would be if the system had to pay out the full promised benefits to the heirs of those due to receive benefits? In other words, the current system gets to 'keep' some of the money it does not pay to those who die before receiving some or all of their promised benefits. The system of private accounts does not. What is the effect of this?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17206839.post-83969160261998626572005-02-03T16:03:00.000-05:002005-02-03T16:03:00.000-05:00He also excluded the possibility of raising the pa...<em>He also excluded the possibility of raising the payroll tax to restore solvency.</em>I hope the inevitable compromise takes the form of raising the cutoff income. I am not a fan of excessively progressive income tax, but I despise regressive income taxes, which is what the Social Security tax has amounted to.Vadernoreply@blogger.comtag:blogger.com,1999:blog-17206839.post-4561107998910585162005-02-03T21:56:00.000-05:002005-02-03T21:56:00.000-05:00Andrew: the comparison I was suggesting is: (a) Bu...Andrew: the comparison I was suggesting is: (a) Bush plan - pass it now and exempt the 55+cohort; (b) my plan - pass it in 10 years and exempt the 65+cohert. No difference.PGLnoreply@blogger.comtag:blogger.com,1999:blog-17206839.post-10152222251136150082005-02-04T07:31:00.000-05:002005-02-04T07:31:00.000-05:00That's not what I'm referring to. If the ...That's not what I'm referring to. If the extra returns on a PRA were used to fully offset benefits, then the individual is no better off but the system's solvency is marginally improved. But if the individual keeps the premium on his PRA and his benefit is only offset by some riskless return, then the individual benefits and the system is no better off. Andrew seems to be saying that in the latter case there is no real net benefit to the individual.Maxhttp://www.blogger.com/profile/06876665759984432215noreply@blogger.comtag:blogger.com,1999:blog-17206839.post-83230064202839087752005-02-04T16:17:00.000-05:002005-02-04T16:17:00.000-05:00(GT)You say you've been down this road before,...(GT)<br><br>You say you've been down this road before, in reference to SS bankruptcy. Do you agree that SS, having no debt, cannot go bankrupt?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17206839.post-53636342191625670152005-02-05T00:05:00.000-05:002005-02-05T00:05:00.000-05:00Acturary table suggests that 98% that reach the ...<a href="http://www.blogger.com/r?http%3A%2F%2Fwww.cdc.gov%2Fnchs%2Fdata%2Fnvsr%2Fnvsr53%2Fnvsr53_06.pdf" rel="nofollow">Acturary table </a> suggests that 98% that reach the workforce at age 20, and 82% reach retirement age.<br><br>Thus, a real cost is that about 18% of revenue going into the system would be lost. No, less than that. Something north of 10%.<br><br>I think personal accounts that divert revenues should have to pay a "legacy benefits" fee that covers the transition cost. Otherwise, those costs are borne by other SS beneficiaries, and by the general public. If it is a good enough idea to divert revenues to personal accounts, then it is a good enough idea that they should be "revenue neutral" rather than being subsidized.Cent21http://www.blogger.com/profile/17096407720102520109noreply@blogger.comtag:blogger.com,1999:blog-17206839.post-47794786454158334702005-02-05T15:33:00.000-05:002005-02-05T15:33:00.000-05:00"You say you've been down this road befor..."You say you've been down this road before, in reference to SS bankruptcy. Do you agree that SS, having no debt, cannot go bankrupt?"<br><br>The one and only reason SS cannot go bankrupt is that it is the *government* and the government is not subject to its own bankruptcy laws.<br><br>Any other party in this great nation that can't pay all its liabilities can be put into bankruptcy by those to whom they are owed.<br><br>Social Security will still be able to pay 75% of its legally established liabilities in the out years, so it won't be bankrupt? <br><br>Heck, Studebacker could have gone on forever paying everybody 75% of what it owed.<br><br>BTW, it's interesting that Social Security liabilities that are legally accrued under the law are not considered "debt" by some. <br><br>It's fun being a government. Your legal liabilities aren't debt. ;-)<br><br>But try telling a bunch of 64-year-olds that they aren't *owed* them. ;-(JGhttp://www.blogger.com/profile/11164150812219689611noreply@blogger.com