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Social Security

All articles with the "Social Security" tag.

Published: Wed, 21 Mar 2018 00:00:00 -0400

Last Build Date: Wed, 21 Mar 2018 21:39:04 -0400


Ivanka and Conservatives Want to Raid Social Security to Pay for Parental Leave

Thu, 08 Mar 2018 11:15:00 -0500

Some conservative lawmakers, along with First Daughter Ivanka Trump, are contemplating a scheme to use Social Security funds to help new parents take paid time off from work. It's a clever idea that certainly avoids some of the problems with rival parental leave plans. Still, this is a flawed proposal that'll do more harm than good, including to its intended beneficiaries. The plan is the conservative answer to the liberal lament that America is the only industrialized country that doesn't offer government-mandated paid parental leave—although many companies do so voluntarily. Authored by the Independent Women's Forum's Kristin Shapiro, the idea is simple and elegant: It would let working parents collect Social Security for up to 12 weeks after childbirth so long as they agree to postpone retirement benefits for an analogous time later. A woman who enters the workforce at 21, Shapiro estimates, would earn an average of about $31,000 by the time she has her first child at the age of 26. Using the formula deployed to calculate Social Security disability benefits, Shapiro estimates that this would make her eligible for $1,175 a month for three months, or about 45 percent of her wages, roughly comparable to what other rich countries offer. On the back end, she would only have to forego retirement benefits for a matter of weeks to make the numbers work. Also, since Social Security disability payments are means-tested, poor and middle-class couples would get more relief than richer ones, targeting help to those who most need it. At first blush, this seems like a win-win-win. Deferring retirement benefits for a few weeks doesn't involve great hardship to older people—whereas collecting early would potentially make a meaningful difference at the hardest times in the lives of young couples. Also, because couples are basically borrowing against their own future benefits, the program is self-funded and would require no new government spending or taxes. Likewise, employers would face no new expense either. So what's not to like? Well, plenty. For starters, just because employers don't have to fund the program doesn't mean there would be no cost to them. The scheme will incentivize more workers to take off and for longer periods of time. This will be especially disruptive for small businesses and start-ups that operate on a shoestring budget and can't spread the responsibilities of the absent workers across a large workforce. They will inevitably shy away from hiring young women of childbearing age. This will diminish these women's job options. And for what? The sum total of the average benefit over three months works out to $3,525. With a little advance planning, many couples can save that amount in a couple years before having children, so long as they can both find work. But if one of them can't, the lost wages may add up to far more. In other words, many couples would have no net financial gain from this scheme, but could face a potential net loss. Furthermore, it isn't like Social Security has a ton of spare cash lying around to dole out to people other than retirees. The program used to generate surpluses when its worker-to-retiree ratio was high. But this ratio has dropped from 42 workers to one retiree in 1945 to less than four workers per retiree now. And even though payroll taxes have gone up from 2 percent at the program's inception to 12.6 percent now, the system is still taking in less money than it is paying out in benefits, because of all the retiring baby boomers. In theory, past surpluses are covering the rising burden. But in fact, these surpluses were spent as they were collected, so there is no actual piggy bank full of cash to draw from. If Social Security funds are used to pay for parental leave, it would mean even less money to cover retirees. They would either face benefit cuts or would have to be paid either by drawing funds from other programs or by raising taxes on everyone else. Shapiro and co. are also selling the program as a back-door way of creating personal savings accounts by giving individuals m[...]

Conservatives Want to Hand Grandma's Social Security to Little Johnnie: New at Reason

Thu, 08 Mar 2018 11:15:00 -0500

(image) Back in 2015, when Reason published a roundtable discussion of reform conservatism, Ben Domenech lambasted the movement that sought to come up with uniquely conservative welfare policies to help middle-class families. Indeed, Domenech criticized Sens. Marco Rubio and Mike Lee's plan, plucked from the reformocon handbook, to give child tax credits to parents as "social engineering" of the right.

Now Domenech, in a recent The New York Times piece titled "How Trump Can Be More Trumpian," endorsed a new Rubio-Lee social engineering scheme to raid Social Security to pay for parental leave.

It's an ingenious idea that avoids some of the pitfalls of liberal schemes to force employers to pay for parental benefits, notes Reason Foundation Senior Analyst Shikha Dalmia. But that doesn't mean the scheme won't have serious unintended consequences.

Woman Still Getting Civil-War Survivor Benefits Shows How Federal Policies Mortgage the Future

Sun, 04 Feb 2018 00:01:00 -0500

Twenty or 50 years from now, the uproar over the House Intelligence Committee memo will be no more than a footnote to history, and many Americans living then will have fading memories, if any, of the Trump administration. But they will be sure to feel the consequence of other policies, little noticed now, that will weigh more heavily with each passing year. You may have never heard of Irene Triplett, who illustrates something politicians often forget: Decisions made for immediate purposes can reverberate for a long, long time. During the Civil War, to bolster military recruitment, the U.S. government established pensions for veterans wounded in battle and widows of those killed. After the war, the system was repeatedly expanded to cover ever more beneficiaries, including men whose disabilities had nothing to do with their service in uniform. As economist John Cogan of Stanford University and the Hoover Institution notes in his new book, The High Cost of Good Intentions, Congress eventually granted pensions to widows of Union veterans who married after 1890. Then it included all widows whose marriages had lasted 10 years. "In 1957," he writes, "Congress dropped the 10-year requirement. Incredibly, a year later, Congress granted pensions to widows of Confederate soldiers." In 1924, Mose Triplett, who had served in both the Union and the Confederate armies, married a woman who bore him a daughter named Irene. Born five years later, she is still getting survivor benefits from the Civil War, 153 years after it ended. Cogan's book chronicles the steady growth of federal entitlements. Social Security was originally meant to ensure protection against poverty to about half of future retirees. But "every Congress, save one, and every president during the years from 1950 to 1972 took action to expand the program." The pattern is logical. New programs "confine benefits to a group of individuals who are deemed to be particularly worthy of assistance," says Cogan. But groups outside the category push to be included and ultimately prevail. The change puts another group closer to qualifying, and that group does the same thing. The process repeats until the original rationale is lost. Today, federal entitlement assistance of one type or another goes to more than half of U.S. households—and 31 percent of beneficiaries are in families whose income exceeds the national average. In 2015, households in the top fifth of earners collected $225 billion in federal benefits. Restraining the cost of entitlements such as Social Security and Medicare is especially hard now. The ongoing retirement of the baby boom generation automatically swells their rolls. With a commitment to fiscal responsibility and regard for future generations, our elected officials might devise humane ways to curb this growth. But to the extent that commitment ever existed, it is gone. It vanished on December 22, when President Donald Trump signed a tax bill that the Committee for a Responsible Federal Budget projects will generate $1.8 trillion in additional deficits over the next decade—on top of the $10.2 trillion already in the pipeline. The bipartisan watchdog group also says, "Congress is likely to consider increasing discretionary spending caps for the next two years, disaster relief to deal with last year's hurricanes, (and) extensions of temporary tax provisions that expired at the end of 2016." In that scenario, the extra 10-year deficits would be more like $2.2 trillion. Conservatives claim the gap will force Congress to slash domestic spending. Fat chance. In the late 1990s, President Bill Clinton and the Republican Congress could envision and reach a clear achievement: balancing the budget. But once that goal is hopelessly out of reach, politicians have nothing to gain from spending discipline. Once deficits are considered the immutable norm, elected officials have every reason to enlarge them, delivering ever-richer benefits to current voters without charging those voters the full price. Much of the cost [...]

Start Saving Now, Because Social Security Is Screwed

Mon, 15 Jan 2018 07:00:00 -0500

The single largest government program in the United States will soon have an annual budget of $1 trillion a year. Yet even that amount isn't sufficient to fulfill the promises it has made. If Congress doesn't address its insolvency issues, payouts will need to be slashed by a quarter starting in fewer than 20 years. The program is Social Security, and our national pastime seems to be turning a blind eye to its dysfunctions. The problems with this entitlement aren't unique. Obamacare is also a mess, while cumulative government spending on Medicare and Medicaid is growing at a faster rate than Social Security is, and eventually will consume a larger share of the economy. But that's no reason to ignore the serious fiscal issues with America's main retirement program. Since 2010, it has been running a cash-flow deficit—meaning that the Social Security payroll taxes the government collects aren't enough to cover the benefits it's obliged to pay out. That should have been a signal that the time had come to look at reform. Instead, we've spent the last seven years ignoring the problem. To get by, the program started tapping into the assets set aside beginning in the 1980s for rainy days. Prior to 2010, the program collected more in payroll taxes than was needed to pay the benefits due at the time. The leftovers were "invested" into Treasury bonds through the so-called Old Age Trust Fund, which is now being drawn down. In fact, the Treasury bonds are nothing but IOUs. When it's time to disburse benefits they can't afford, Social Security administrators turn in those paper promises in exchange for hard cash from the Treasury Department. But Treasury also doesn't have the money: It has already spent it on wars, roads, education, domestic spying, and much more. So when Social Security shows up with its IOUs, Treasury has to borrow to pay the bonds back. That adds to the debt that future generations will be on the hook for via higher taxes. Did you catch that? Past generations of workers paid extra payroll taxes to bulk up the Social Security system. But the government spent that additional revenue on non-retirement activities, so now your children and grandchildren will also have to pay more in taxes to reimburse the program. You may be tempted to wave away this problem. After all, there's more than $2.3 trillion left in the trust fund. Don't. The Social Security trustees have calculated that the cash-flow deficit over the next 80 years will amount to a staggering $44.2 trillion, and that's after adjusting for inflation. Under current projections, the make-believe assets in the fund will only be enough to pay full benefits until 2034. At that point, the system will have to revert to paying out only the amount taken in through annual taxes. And that means benefit cuts across the board of 25 percent. This will screw up everybody's plans, but it will be especially hard on lower-income Americans, who are more likely to depend entirely on the program during their later years. Options for reform at that point will be limited. With the national debt projected to be 105 percent of GDP, or $39.1 trillion, in 2034—and with Medicare and Medicaid facing even bigger long-term problems—Congress will be too broke to restore full benefits for all. The most likely scenario is that higher-income earners will see their benefits disproportionately reduced, their taxes disproportionately hiked, or both. To them I have but one piece of advice: Start saving now. Given this predicament, Congress should make it easier for all Americans to save. One way to do that is through the creation of Universal Savings Accounts, or vehicles that allow people to invest money without all the complicated rules that now apply to IRAs and 401(k)s. In addition, Congress should boost the maximum contributions people can make to Health Savings Accounts, so that more Americans can afford the medical expenses most of us inevitably incur in our old age. More broadly, Congress should shift awa[...]

A Troubling Number of Young People Expect Social Security To Be a 'Major Source' of Retirement Income

Wed, 07 Jun 2017 12:05:00 -0400

The prognosis for Social Security has not improved one bit since Vice President Al Gore promised to put it in a lockbox nearly two decades ago, yet 25 percent of Americans between the ages of 18 and 29 expect to rely on Social Security benefits in retirement. According to Gallup, which released this survey data late last month, 25 percent represents an all-time-high display of confidence for that age bracket since the group began polling on the question:


"This has occurred even as Congress and previous presidents have taken no significant steps to address the looming issue of projected shortfalls in Social Security funds," Gallup notes. So what phenomenon has convinced 25 percent of young people to believe Social Security will be there when they retire, when realistically the number should be zero?

Gallup's data tracks pretty neatly with the national conversation about Social Security's long-term viability. The decline in 25-to-35-year-olds' confidence in Social Security began in 2005, when President George W. Bush announced Social Security reform would be his top domestic priority. Faith in the program bottomed out during Bush's promotional tour for personal retirement accounts. By 2007, when young people's confidence began to climb back up, Bush's reforms were dead and buried. That confidence continued to climb through the financial crisis, and aside from a brief dip in 2013, has steadily increased since then. (Whatever financial anxiety President Trump has inspired with his erratic behavior, he has promised not to touch Social Security.)

It doesn't necessarily follow from this that young people are opposed to reforming the program. In May 2009, the Center for American Progress (CAP) released survey data collected from 915 Americans aged 18 to 29. "What is most important about these voters is not their current predilection for Democratic candidates," the survey authors wrote, "but rather the deeply held progressive beliefs underlying their voting preferences."

One of those beliefs: that "Social Security should be reformed to allow workers to invest some of their contributions in individual accounts," a "conservative position" (in CAP's words) that garnered support from 64 percent of the young people they surveyed.

Now is an excellent time to remind working age Americans that Social Security is not a sufficient primary income for today's retirees, and likely won't be for future retirees. While very few Americans of any age are prepared for retirement, millennials are better positioned than most to set up alternate streams of retirement income. As of right now, most of us aren't saving nearly enough using tax-advantaged savings accounts, but we have time. We should not spend it waiting for decisive action on Social Security, be it Bush-style reform or the opposite.

Trump Defends Due Process

Wed, 08 Mar 2017 00:01:00 -0500

What do you call a regulation that summarily deprives law-abiding Americans of their Second Amendment rights without any evidence that they pose a danger to others? If you are a New York Times editorialist, you call it "sensible." That was the newspaper's take on a Social Security Administration (SSA) rule that Congress canceled with a bill President Trump signed last week. The objections aroused by the rule's demise show that its supporters do not understand it, do not value the constitutional right to arms, or both. The SSA rule would have blocked gun purchases by anyone who receives Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) benefits and who, because of a mental impairment, has been assigned a representative payee to handle the money. According to the SSA, such an individual has been "adjudicated as a mental defective" and is therefore prohibited from owning firearms by the Gun Control Act of 1968. But as the American Civil Liberties Union (ACLU) pointed out, "the determination by SSA line staff that a beneficiary needs a representative payee to manage their money benefit is simply not an 'adjudication' in any ordinary meaning of the word." The beneficiary has no right to a hearing where he could contest that determination with the help of a lawyer, as he would if a court were deciding whether he is legally competent or whether he should be committed to a psychiatric facility (another disqualifying criterion under the Gun Control Act). Furthermore, the ACLU noted, "the rule automatically conflates one disability-related characteristic, that is, difficulty managing money, with the inability to safely possess a firearm." In doing so, "it advances and reinforces the harmful stereotype that people with mental disabilities, a vast and diverse group of citizens, are violent." There is no evidence that the SSI and SSDI beneficiaries covered by the rule are especially prone to violence. The SSA conceded as much, saying, "We are not attempting to imply a connection between mental illness and a propensity for violence, particularly gun violence." Supporters of the SSA rule glided over the lack of due process, noting that beneficiaries could appeal the loss of their constitutional rights after the fact by trying to show they pose no threat to public safety. In other words, they would be presumed guilty unless they could prove themselves innocent, and in the meantime they would be deprived of the basic human right to armed self-defense. The rule's defenders also ignored its weak empirical basis. The Times simply asserted that letting disabled people with representative payees buy guns "poses an inordinate and needless risk to public safety," while a Bloomberg View editorial said "America's tragic experience with mentally ill gunmen―from Virginia Tech in 2007 to Newtown, Connecticut, in 2012—shows the folly of simply dismissing the danger." Neither of those killers would have been covered by the SSA rule. Many press reports misrepresented the rule's scope, saying it would affect a total of 75,000 people. The Obama administration estimated that the rule, applied prospectively, would have affected about 75,000 people each year. The SSA rule, which was finalized in December, never actually took effect, so withdrawing it merely maintains the status quo. Yet editorials and news stories implied that the congressional override would expose Americans to new dangers. A New York Daily News editorial (tactfully titled "Gun Crazy") claimed the vote against the SSA rule would "liberalize access to weapons," "making it easier for the mentally troubled to get guns." Bloomberg said it would "weaken" background checks for gun owners, while BBC News said it would "loosen" them. NBC News said Congress was "revoking Obama-era gun checks for people with mental illnesses." Legal restrictions on gun ownership in the United States already disqualify millions of people who have [...]

The House Passes a Gun Measure Supported by the ACLU and Mental Health Advocates. Media Hysteria Ensues.

Fri, 03 Feb 2017 20:56:00 -0500

The Associated Press would have you believe yesterday that "House votes to roll back Obama rule on background checks for gun ownership." Discussing the same incident, National Public Radio informed its sober, serious listeners who want real news and not all that cable network noise that "House Votes to Overturn Obama Rule Restricting Gun Sales to Mentally Ill." Charles Cooke at National Review has an excellent post with visuals of many idiotic news tweets and a great explanation of the controversy. The impression one would get from those headlines, and others that you can see in Cooke's article linked above, is that background checks for gun ownership maybe weren't going to exist anymore? That before Obama, you could sell guns to the mentally ill, and now that he's gone the GOP says you can again? Getting across every nuance of a convoluted procedural change in a headline is tough, sure. But one should err on the side of avoiding strongly implying something serious and panic-inducing to many of your readers that just isn't true. (Unless your goal is to seriously panic your readers.) What actually did happen? The Obama administration had proposed and passed a rule via what he called at the time "executive actions to reduce gun violence" (that is, somewhat like the "executive orders" you hear so much about these days, something the executive branch wanted to do and just went ahead and did) to arbitrarily deprive an entire class of innocent American—a certain class of Social Security recipients who are not yet at full retirement age and who get their money sent through a "representative payee" and not directly to themselves—of a constitutional right that could be vital to their safety and security. I critiqued that awful idea here when it was still just a trial balloon in 2015, and Jacob Sullum also explained the injustice of it in January 2016. This week the House of Representatives voted 235-180 to abolish that Obama rule. Federal law since 1968 has prohibited those who have "been adjudicated as a mental defective or...been committed to any mental institution" from having a gun. And 1993's Brady Law mandated a national background check system to find out whether those disqualifying events have occurred for all sales from licensed firearm dealers. Nothing about this House vote has anything at all to do with either of those things changing, despite misleading headline implications. A wide variety of groups dedicated to the rights of the disabled or mentally impaired or ill, and the American Civil Liberties Union (ACLU), were very much in favor of the House's move to eliminate this rule. See the ACLU's letter to Congress advising them to do the thing that A.P. and NPR wanted their readers to be so scared of, giving an account of the regulation and what was wrong with it: the SSA [Social Security Administration] promulgated a final rule that would require the names of all Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) benefit recipients – who, because of a mental impairment, use a representative payee to help manage their benefits – be submitted to the National Instant Criminal Background Check System (NICS), which is used during gun purchases. We oppose this rule because it advances and reinforces the harmful stereotype that people with mental disabilities, a vast and diverse group of citizens, are violent. There is no data to support a connection between the need for a representative payee to manage one's Social Security disability benefits and a propensity toward gun violence... the rule automatically conflates one disability-related characteristic, that is, difficulty managing money, with the inability to safely possess a firearm. The rule includes no meaningful due process protections prior to the SSA's transmittal of names to the NICS database. The determination by SSA line staff that a beneficiary needs a represe[...]

Hey Boomers, Give Thanks To the Millennials We're Like Totally Ripping Off!

Wed, 23 Nov 2016 11:30:00 -0500

How bad are baby boomers—who rightly rebelled against their parents' repressive ways—ripping off millennials, i.e., The Next Big Thing in American Culture? Over at The Daily Caller, Mark Tapscott does the math (and it's not that fancy "New Math" that some of us were taught a million years ago, either): More than half of the nation's 25 most generous state and local public pension systems received Ds when graded by the non-profit government watchdog Truth In Accounting (TIA) on their ability to pay promised benefits to a rising flood of Baby Boomer retirees. That's very bad news for millennials because unfunded pension benefits often mean higher taxes for productive workers. Millennials who are now moving up career ladders and earning higher incomes make up the biggest portion of the taxable workforce now and will represent 75 percent of it by 2030 when the tail end of the Boomer generation is entering retirement. I write not simply as the parent of one millennial and another whatever-the-next-gen-is-being-called and as a late-era baby boomer born in 1963. The public-sector pension problems discussed by Tapscott and TIA are of course dwarfed by similar dynamics undergirding the nation's primary old-age entitlements, Medicare and Social Security. There are plenty of reasons to be pissed off about these programs, but here are four (using numbers from 2014): Some of these numbers have changed a bit in the past couple of years, but as with the public-sector pensions, they still add up to a world of hurt for younger, poorer Americans who are getting robbed systematically to maintain older, wealthier people's standards of living. It's well past time to shift from Bismarckian entitlement systems in general and away from age-based welfare systems. Our society should provide a social safety net for Americans who cannot take of themselves regardless of age (we do some of this) and we should help people who are knocked down get back on their feet. This is all copacetic with a limited-government, libertarian worldview. We should not be robbing Peter, Jr. to pay Paul, Sr. and we don't need to be (go here for ways to end generational warfare waged via federal entitlements). And we also don't need to break the budgets of states and municipalities via public-sector pensions, either. Earlier this year, the research arm of Reason Foundation (the nonprofit that publishes this website), helped inspire legislative action in Arizona that protects both pensioners and, more important, future taxpayers in the Grand Canyon State. It's a model that can be widely copied and implemented, too. From a summary of what it does: Cost of living increases (COLA) will be based on the consumer price index for Phoenix and capped at 2 percent and will be pre-funded (which is currently not happening). New hires will be able to choose between defined contribution plan (like a 401(k)-style savings plan) or a hybrid defined benefit plan rather than the traditional pension system. New hires will have the salary cap for pension calculations reduced from $265,000 to 110,000 per year, seriously limiting incentives for finding ways to "spike" pensions with bonuses or unused vacation time to jack up what retiring employees will be receiving. The eligibility age for new hires will be increased from 52.5 to 55. New employees will have to pay 50 percent of plan costs if the plan doesn't meet return assumptions. Employers (that is to say, the government) will be forbidden from having "pension holidays," where they stop paying into pension funds when they are overperforming (which then turns into a crisis when pensions later underperform). The Reason Foundation calculates savings of $1.5 billion over 30 years and a reduction of retirement costs for new employees by 20 to 43 percent. Financial risks borne by the taxpayers should be cut in half, and the accrual of new debt for pen[...]

Social Security's IOU Trust Fund

Thu, 27 Oct 2016 00:01:00 -0400

Social Security is the largest single program in the federal budget. The retirement and disability program will cost about $950 billion this year, which is about 23 percent of the entire federal budget. Along with Medicare and Medicaid, these "entitlement" programs are already the main drivers of federal spending. Unless reined in, Social Security and its counterparts will eventually explode the federal budget. Unfortunately, few in Congress—and neither of the major-party presidential candidates—have any interest in acknowledging, let alone confronting, the problem with Social Security's insolvency. That it's insolvent isn't debatable. Social Security faces a $10 trillion funding shortfall. Since 2010, Social Security has been running a constant cash flow deficit, meaning that the taxes collected for the program aren't enough to cover the benefits paid to beneficiaries. To fill the gap and keep the checks going out, the program has been drawing from federal trust funds. However, the government's trust funds aren't like trust funds in the real world. Trust funds in the real world contain assets; the government's trust funds basically contain IOUs. What that means in simple terms is that the government already has to go further into debt to pay Social Security's bills—and it's only going to get worse. Even if one believes in the sanctity of the government's combined trust funds in general, Social Security's will be exhausted by 2034, thus triggering a benefit cut of roughly 25 percent. However, since President George W. Bush tried and failed to reform the program in 2005, Congress has abdicated its responsibility by simply avoiding the issue. On the campaign trail, things are arguably worse. The two main candidates, Hillary Clinton and Donald Trump, have promised to leave Social Security untouched. When asked about what they would do about it during the debate, Trump responded: "I'm cutting taxes. We're going to grow the economy. It's going to grow at a record rate." That's all well and good, but we can't grow our way out of this mess. That's largely nonsensical. Clinton doesn't want to cut benefits, either, but she'd actually exacerbate the problem by raising taxes on the rich while increasing benefits for lower-income Americans. Though the tax increase part of her plan might extend the life of the program, it wouldn't fix much. The Committee for a Responsible Federal Budget looked at the issue and found that some increase in revenue would occur in the short term, but a cash deficit would return within 10 years and grow over time. It concluded: "This change would close just over one-third of Social Security's structural gap by 2090. In other words, a substantial portion of the fix defers the problem, but does not fix it." And that's calculated even before she starts to spend more on Social Security. But even that's probably too optimistic, says the American Enterprise Institute's Andrew Biggs in a recent Forbes column, because her "tax increases on the rich would boost revenues by far less than she imagines because of rarely-discussed interactions with other parts of the tax code." Third-party candidates are only marginally better on the issue than Clinton and Trump. Gary Johnson, the Libertarian, has called Social Security a Ponzi scheme and has personally endorsed privatization. But he has also talked about means-testing benefits—curtailing the benefits of wealthy Americans—and raising the retirement age from 67 to 72. As he is on most issues, here Johnson is to the left of the Libertarian Party platform, which would "phase out the current government-sponsored Social Security system and transition to a private voluntary system." Evan McMullin, an independent candidate, has acknowledged the problem of overspending on programs such as Social Security, but his plan is light on details. To the best [...]

Brickbat: Reports of My Death ...

Fri, 30 Sep 2016 04:00:00 -0400

(image) Lee Miller of Port Orange, Florida, logged onto his bank's website to find his savings account had been emptied and most of the money in his checking account was gone, too. Thinking he'd been hacked, he called the bank only to find the federal government had drained his money and given the bank a death notice. They say he died back in 2012. Officials with the Social Security Administration say they'll work with him to correct the matter, but only after he signed an affidavit that he was actually alive.

Debt Denialists

Tue, 20 Sep 2016 06:00:00 -0400

It was eight hours before the biggest media opportunity any Libertarian Party candidate had had in decades, and Gary Johnson was in a New York hotel room talking on the phone with Harvard economist Jeffrey Miron about the nuts and bolts of entitlement reform. "When it comes to Social Security," Johnson told his senior economic advisor as they rehearsed for a June 22 CNN town hall that would end up being viewed in more than 900,000 households, "I'm mimicking the lines from four years ago regarding raising the retirement age, fair means-testing, being able to self-direct as many funds as Congress would authorize.…" After wondering aloud whether even these reforms would prevent the Social Security Trust Fund from going "bust," Johnson arrived at his bottom line: The system as currently constituted is fiscally unsustainable. "That's the reality," he said, "and, you know, you can't run for this office and not speak that truth, in my opinion." Johnson, bless his fiscally responsible heart, was confusing can't with shouldn't. Because one of the most ominous and overlooked developments of the head-spinning 2016 presidential election has been that the winning candidates were precisely the ones who steadfastly refused to speak the truth about how rapidly old-age entitlements are scarfing up the pie of federal spending. In fiscal year 2016, $2.47 trillion of the federal government's $3.66 trillion in non-interest expenses came from the "mandatory spending" categories of Social Security, Medicare, and Medicaid. Within a decade, according to the Congressional Budget Office (CBO), those figures are projected to grow to $4.14 trillion out of $5.7 trillion. In its latest Long-Term Budget Outlook, released on July 12, the CBO concluded that even near-term projections show publicly held debt (which is the national debt minus the debt held by government institutions) "growing larger in relation to the economy than ever recorded in U.S. history," from a current debt-to-gross domestic product (GDP) ratio of 75 percent (up from 39 percent as recently as 2008), to 86 percent in 2026 (higher than it has been since World War II), and then 141 percent in 2046 (wheeee!). Debt service alone is on pace to become the third-largest federal spending category during the next president's first term. "Large and growing federal debt over the coming decades would hurt the economy and constrain future budget policy," the CBO warned. "The amount of debt that is projected…would reduce national saving and income in the long term; increase the government's interest costs, putting more pressure on the rest of the budget; limit lawmakers' ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis." That almost sounds like something worth mentioning during a presidential campaign! Yet instead of addressing that reality, Donald Trump has campaigned as the Republican who would protect rather than tweak entitlements. "We're going to save your Social Security without killing it like so many people want to do," he said at a June 18 rally in Phoenix. "And your Medicare." How will the GOP nominee overcome the cruel logic of actuarial tables, which show that the ratio of workers paying into the system to retirees receiving transfers continues to plunge from 16:1 back when Social Security was launched to less than 3:1 now? Through a combination of "dynamic" economic growth and an always-vague promise to root out "waste, fraud, and abuse." As Steve Bell of the Bipartisan Policy Center told The Wall Street Journal in June, "Any notion of waste, fraud and abuse meeting our fiscal needs remains…silliness." Not just silly, but sad! "Trump's comments are just another kick in the stomach to all of us who have worked for more than 30 years for solvency for Social Security." The [...]

Why Obama’s Social Security Proposal Would Screw Over Millennials

Fri, 03 Jun 2016 13:00:00 -0400

With blatant disregard for any type of basic math, President Obama recently called for an increase to Social Security benefits. Millennials, who pay into Social Security without realistic expectations of receiving their promised benefits, should be furious that neither the president nor the presidential candidates will tell the truth about Social Security's broken finances. As President Obama argued in his June 1 speech in Elkhart, Indiana, "We can't afford to weaken Social Security. We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it's time we finally made Social Security more generous, and increased its benefits so that today's retirees and future generations get the dignified retirement that they've earned." There are two main problems with these claims. First, unless Americans are fine with possibly paying a 31 percent payroll tax (up from 15 percent today), entitlement programs cannot afford to maintain their current course—much less be expanded. Second, retirees receive far more than they pay in from the program commonly known as the "third rail" of American politics. President Obama was light on the details of his proposed expansion. But one can assume that he is lining up to support the policy views of Democratic contenders Hillary Clinton and Bernie Sanders. Clinton wants to expand Social Security, while Sanders calls it "the most successful government program in our nation's history." House Republicans, namely House Budget Chairman Tom Price, are making serious efforts to straighten out American's broken entitlement systems. Unfortunately, likely Republican presidential candidate Donald Trump promises he "will not cut" Social Security. Trump has promised to fully fund the program through higher GDP growth. But even if GDP growth magically shot up to 60 percent above the current long-term estimate (2.1 percent), the program will still end up insolvent. Social Security remains popular—especially among seniors—but no level of public support changes the reality that the program is unfair to millennials. If nothing changes, Americans who retire after 2035 (the year the Social Security Old Age Survivors Insurance Trust Fund is projected to be depleted) will only receive about three-quarters of their promised benefits. On the topic of promises, the myth that entitlements are "earned benefits" is one political talking point that simply refuses to die. Typical retirees, especially older ones, are receiving far more in benefits than what they contributed. For example, according to the Urban Institute, a married one-earner couple with average earnings that reached retirement age in 2000 is expected to receive back more than twice what they paid in. A similar couple that turned 65 in 1980 received 4.3 times what they paid in taxes. And those lucky couples in the same earnings situation that retired in 1960 received Social Security benefits that were over nearly 12 times their contribution levels. It is true that Social Security payments provide the majority of cash income for 65 percent of seniors. But this statistic uses the wrong metric and obscures the troubling truth about the program. Of course retirees, who are by definition not working, have low cash incomes. Additionally, Social Security does not just take from the young to give to the old—it steals from the poor to give to the wealthy. In 2011 (the most recent Census data available), the average wealth for a household headed by someone 65 years or older was 26 times the wealth of the average household headed by an adult under the age of 35. In 2009, during the depths of the recession, older households had 50 times the wealth of younger households. Some argue that this disparity in wealth makes sense. After [...]

10 Things to Hate About Bernie Sanders' Economic Policy: New At Reason

Thu, 31 Mar 2016 08:03:00 -0400

There is much to cheer about the unlikely competitiveness of Bernie Sanders against that joyless, big-government machine politician, Hillary Clinton. Sanders is comparatively decent and authentic, and his policies are worlds better on drugs, surveillance, and war. But as I write in the May issue of Reason, the thing that arguably makes fans feel the Bern most is his economics, and from the minimum wage to universal pre-K to expanding Social Security, Sanders’ policy is not just misguided, but actively terrible.

Donald Trump’s Plan to Preserve Social Security by Eliminating Waste, Fraud, and Abuse Doesn’t Even Come Close to Adding Up

Fri, 11 Mar 2016 13:01:00 -0500

Donald Trump has staked out a position as the GOP primary's most ardent defender of Social Security. He has promised not to change the benefit in any way, and insisted that he will both defend the program, which is on track to insolvency, from any cuts or changes and reduce annual deficits and the national debt at the same time. Trump repeated this pledge at last night's GOP debate, saying that he "will do everything within my power not to touch Social Security, to leave it the way it is; to make this country rich again; to bring back our jobs; to get rid of deficits; to get rid of waste, fraud and abuse, which is rampant in this country, rampant, totally rampant." As is so often the case when Trump talks policy, his response makes clear that he has no idea what he's talking about. Let's start with "waste, fraud, and abuse." Eliminating waste, fraud, and abuse is one of Trump's favorite talking point solutions for covering budget gaps. It's not a bad idea, exactly, but getting rid of all improper payments in the Social Security system—assuming this could even be done, which is exceedingly unlikely if you otherwise leave Social Security in its current form—would only net about $3 billion in savings annually. That might sound like a lot, but relative to the overall size of the program, it's not. As the Committee for a Responsible Federal Budget (CRFB) points out, that only represents about 0.4 percent of the program's $900 billion a year in benefit payments. To put Social Security on the track to solvency, you'd need to come up with savings on the order of $150 billion every year. To her credit, debate moderator Dana Bash followed up with Trump by pointing this out. Trump's response was to claim that he's not just talking about waste, fraud, and abuse in Social Security. And then he changed the subject to suggest—well, it's not clearly exactly what, but something to do with cutting back on foreign military involvement. Because they don't cover most of the subjects. We're the policemen of the world. We take care of the entire world. We're going to have a stronger military, much stronger. Our military is depleted. But we take care of Germany, we take care of Saudi Arabia, we take care of Japan, we take care of South Korea. We take -- every time this maniac from North Korea does anything, we immediately send our ships. We get virtually nothing. We have 28,000 soldiers on the line, on the border between North and South Korea. We have so many places. Saudi Arabia was making a billion dollars a day, and we were getting virtually nothing to protect them. We are going to be in a different world. We're going to negotiate real deals now, and we're going to bring the wealth back to our country. We owe $19 trillion. We're going to bring wealth back to our country. The most generous reading here is that Trump wants to save money by reducing the U.S. global military presence. And you could save money—perhaps a lot—by cutting back on the Defense Department's global footprint through base closures and troop reductions. But it's hard to square this with Trump's repeated declarations on the campaign trail that he would make a big effort to increase America's military strength and power. "I want to build up the military so nobody messes with us," he said last year, a promise he's repeated in some variation many times since. "I would bring it back to where it was at the height because we're in such trouble." That doesn't sound like a plan for savings. It sounds like a plan for a significant increase in military spending. And Trump's idea that he would do this and create savings at the same time by making better "deals"—a word he waves around like an all-purpose magic wand for poli[...]

Generational Swindle: How DC is Screwing over Millennials

Wed, 23 Sep 2015 09:20:00 -0400

People "want to frame this as a generational warfare issue, but I think it really isn't," says Jared Meyer of the Manhattan Institute and co-author of Disinherited: How Washington Is Betraying America's Young. "It's Washington versus America's young—not boomers and the Silent Generation."

In Disinherited, Meyer and his co-author Diana Furchtgott-Roth point blame at a wide range of government policies that threaten to leave millennials worse off than Gen Xers and previous generations. When the education system isn't failing kids in K-12, it's charging them exorbitant amounts for college degrees that confer less and less advantage. Fiscal policy, debt, and labor laws are squeezing out opportunities for go-getters and entrepreneurs. And then there's unsustainable old-age entitlements, such as Social Security and Medicare, that take money from the relatively young and poor Americans and give it to older, wealthier people.

"Politicians sold a false bill," Meyer tells Reason's Nick Gillespie. "They said: 'All these programs that you are paying for now, you're going to get the money you paid in later.' But they've made promises where they give benefits now and push the cost off to the future, which means current retirees are getting far more back then what they paid in."

About 6 minutes.

Camera by Todd Krainin and Joshua Swain; edited by Swain.

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