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

[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)