Social Security

[aphar]

A trivial solution:

• Make the age when the Social Security benefits start depend on the current demographic situation, e.g., the oldest 10% of the population get the benefits.


• The specific age when this happens should be computed annually by the BLS.


• For women, the age should be augmented by the number of their children (i.e., a mother of 3 starts to receive Social Security benefits 3 years earlier than a childless woman born the same year) [ouch! sexism!]

Comments

[ymarkov.livejournal.com]

Cute, однако!

This will make planning a tad difficult. Also, the pressure to increase the quality of the final years of life will spike. If, say, you have to be 75 to be in the oldest 10%, the last 5-10 years of work are going to be difficult. I'm not sure if this is a good thing.

[aphar.livejournal.com]

This will make planning a tad difficult.
planning what?

Also, the pressure to increase the quality of the final years of life will spike.
WDYM?

If, say, you have to be 75 to be in the oldest 10%, the last 5-10 years of work are going to be difficult. I'm not sure if this is a good thing.
no, this is not a good thing, but do we have a choice?!
an "alternative" is to do "means-testing" (which will result in people stopping saving in IRA and 401k) which will only reduce the starting age a little bit.
I think encouraging child-bearing should take care of a part of the problem (it should change the demographic pyramid in the right direction) - but it might have the unintended consequence similar to that of welfare...

OTOH, if we believe Kurzweil (who says that immortality is just around the corner) all this is mute and social security has to be abandoned altogether.

[ymarkov.livejournal.com]

planning what?
One's retirement.

The last 5-10 years of work are going to be difficult, hence people will clamor for ways to improve the quality of their lives. Which means even more R&D towards geriatrics. Which may or may not be a good thing, depending on where the money comes from.

We already encourage child-bearing with tax breaks - those credits cut my federal bill in half.

As for choice, IMHO private accounts are a big step in the right direction. Much remains to be worked out, of course.

[aphar.livejournal.com]

We already encourage child-bearing with tax breaks - those credits cut my federal bill in half.
not enough. education and day care credits and vouchers are in order.

As for choice, IMHO private accounts are a big step in the right direction.
maybe not.
what if the markets crash when the people start retiring?
retirement money is not an ordinary investment.
if you are saving to buy a house and market crashes, too bad - but you just wait 5 years and buy then.
if you are saving for your retirement and the market crashes, you might be dead in 5 years, you cannot wait.

Much remains to be worked out, of course.
yes.

[ymarkov.livejournal.com]

Go vouchers!

As for the rest, this is the difference between short- and long-term investing. For a house, you probably shouldn't be saving in stocks anyway.

The argument is that even with demographic swings in the market you will still do better than Social Security's 2.2% return.

[aphar.livejournal.com]

The argument is that even with demographic swings in the market you will still do better than Social Security's 2.2% return.
statistically across all ages, maybe.
note that this is no longer statistics.
a major part of retirees - baby boomers - are certain to lose money in this scheme because when all of them retire at once and take the money out of the market, the stocks will plummet.

[ymarkov.livejournal.com]

Да, а ещё глянь сюда:
http://www.opinionjournal.com/columnists/pdupont/?id=110006296

[aphar.livejournal.com]

yuk!!

President Bush has proposed solving this problem in a different way--with personally owned market accounts to which working people could contribute 4% of their income that now goes to Social Security payroll taxes.

Alan Greenspan already admitted that this is bull.

This cannot solve anything because as soon as this age group starts to take the money out the prices will plummet!

[ymarkov.livejournal.com]

Bull? Is that what he said, really?

From http://www.bloomberg.com/apps/news?pid=10000103&sid=aHs5qbQgzLu4&refer=us

Feb. 17 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan yesterday provided something for everyone in the Social Security debate, endorsing the private accounts Republicans want while buttressing Democratic arguments about deficit-busting dangers.

In his testimony to the Senate Banking Committee, Greenspan praised private accounts, which President George W. Bush has made the centerpiece of his approach. He didn't take sides on the question of whether such accounts should partially replace the existing system, as Bush wants, or should be added on top of it, the preference of some Democrats.

His testimony didn't give Republicans what they needed to win support for their vision of the program's future, said Rudolph Penner, a senior fellow at the Washington-based Urban Institute, who supports the concept.
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But whatever - Greenspan ain't God, I am :-)

[aphar.livejournal.com]

I think I recall that Greenspan said that privatization will not solve the solvency problem.
OTOH, ff privatization is a euphemism for transition from "pay as you go" to "fully funded", then yes, it is likely to solve everything.
What does your omniscience say about this?

[ymarkov.livejournal.com]

Here are his prepared remarks. (http://www.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm) Nothing much there about private accounts. I've found this on MSNBC (http://www.msnbc.msn.com/id/6975923):

He called personal accounts within Social Security “a good thing to do over the longer run.”

What was striking about Greenspan’s three hours of testimony to the Senate Banking Committee was not his caution — that, after all, is the temperament of the Fed chairman — but his tenacity. Repeatedly, he made the case that the current pay-as-you-go Social Security system does not work, due to what he called “inexorable” demographic changes, an “unprecedented potential increase in the number of people leaving the work force” by retiring.

“The existing structure is not working,” he told Sen. Jack Reed, D-R.I., who, like almost all congressional Democrats, opposes the private accounts idea. [...]

The normally placid Greenspan rose almost to the threshold of passion as he made a class-based argument by contending that private accounts would allow low-income people to become mini-capitalists — in his view, a very good thing.

“When you have assets which you own, which you can bequeath to your children, (assets) which have your name on them, I think it is highly desirable thing, because you give wealth to people in lower- and middle-income groups who have not had it before,” he told a clearly skeptical Sen. Charles Schumer, D-N.Y. The Fed chairman predicted private accounts would be “extraordinarily popular,” and “if they are I think it is a very important addition to our society because, as you know, I’ve been concerned about concentration of income and wealth in this country. ... This, in my judgment, is one way you can address that.”
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It is true that privatization alone will not solve the solvency problem. But your concern with baby boomers dumping the market is also misplaced. The huge transition cost is there precisely because it's already too late to privatize the boomers. But for you and me and further on, it's the way to go. (Actually I'm already exempt from SS [ugh], since I work for the state and covered by a real pension plan. The money I contribute to it is mine. Congressmen have the same deal.)

"Fully funded" is an actuarial term that doesn't apply to a pay-as-you-go system such as SS. The way to fix it (and the four plans that were produced by the various blue-ribbon commissions concentrate on that) is by reducing net SS outlays. The idea is to divert, say, 50% of current SS income to alternatives that will produce a return such as to reduce outlays by 70%. That's all.

Interestingly enough, the architect of the system realized that.

The First Social Security Reformer (http://www.opinionjournal.com/best/?id=110006262)

In Friday's Political Diary (subscribe here), John Fund offered an interesting bit of Social Security history:

In an address to Congress on January 17, 1935, President Roosevelt foresaw the need to move beyond the pay-as-you-go financing of the current Social Security system. "For perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions," the president allowed. But after that, he explained, it would be necessary to move to what he called "voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age." In other words, his call for the establishment of Social Security directly anticipated today's reform agenda: "It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans," FDR explained.

"What Roosevelt was talking about is the need to update Social Security sometime around 1965 with what today we would call personal accounts," says one top GOP member of the Ways and Means Committee. "By my reckoning we are only about 40 years late in addressing his concerns on how [to] make Social Security solvent."

Today's reform opponents, in other words, are backward-looking even by the standards of 70 years ago.

[aphar.livejournal.com]

The huge transition cost is there precisely because it's already too late to privatize the boomers.
demographics comes in waves.
children of baby boomers will also retire in bulk.

other than that - "I am with you" (Oh Brother, where art thou)