I am neither an economist nor a student of economics. I am, however, concerned with all the recent fuss over Social Security and try to stay current with the information available. In a Social Security Administration memorandum dated, February 7, 2005, Chris Chaplain and Alice H. Wade describe and project several adjustments that could be made to strengthen Social Security (via Josh Marshall, talkingpointsmemo.com). They group their 20 scenarios into 7 categories: Below are the verbatim plan descriptions: I contructed the following table from memo data and added the column “Method”, my simplified categorization of the plans:PLAN METHOD Benefits Paid Exceed Revenue Received Trust Fund Insolvency 1 Reduce benefits 2019 2052 2 Reduce Benefits 2022 2069 3 Reduce Benefits 2018 2045 4 Reduce Benefits 2019 2047 5 Reduce Benefits 2019 2070 6 Reduce Benefits 2019 2047 7 Reduce Benefits 2019 2050 8 Change Retirement Age 2019 2045 9 Change Retirement Age 2019 2048 10 Change Retirement Age 2019 2048 11 Increase Taxes 2024 solvent thru 75 year projection 12 Increase Taxes 2018 solvent thru 75 year projection 13 Increase Taxes 2019 2047 14 Increase Taxes 2025 solvent thru 75 year projection 15 Increase Taxes and Increase Benefits 2024 2079 16 Increase Taxes and Increase Benefits 2021 2053 17 Increase Benefits 2019 2046 18 Invest Trust Fund in Market 2018 2050 19 Invest Trust Fund in Market 2018 2047 20 Invest Trust Fund in Market 2018 2043
Notice that plans 11 and 14 delay by 6 or 7 years the time in which benefits paid exceed tax and Trust Fund interest revenue. Additionally, plans 11, 12 and 14 all secure Trust Fund solvency thru the next 75 years. What do these three plans have in common? Tax increases.
Before that scares anyone off, look at the proposed models. Plans 11 and 12 are regressive, though moderate tax increases. They leave the payroll cap ($90,000 subject to SS tax, anything above that is exempt) intact, but hike the tax rate by 2 percentage points. They are flexible in that the hike can be accomplished by any combination of employer and taxpayer contribution. However, it lets higher income individuals off the hook. This tax increase is regressive because those making less than $90,000 would be effectively taxed at a higher rate than those making over $90,000. In other words, Paris Hilton would be paying the same amount of SS taxes as the combined SS taxes of two first year assistant professors at a NY State university.
Plan 14 is a progressive tax increase. It eliminates the payroll cap making all earnings (all payroll, interest on savings, dividends on stock, capitol gains, etc…) subject to SS tax. It maintains the cap for benefit calculations. Though it may seem especially unfair for the millionaires and billionaires, some iteration of this plan may be the way to go. The authors of this memo state that each plan projection is considered as if that plan were the only measure implemented. Hybrid plans, they say, would require much more difficult math for the 75 year projection.
Stay tuned for the 2005 Social Security Trustees Report.
{Update, 2/26/05, 5:14 pm} Josh Marshall comments on how those who wan't to dismantle Social Security are distorting information from this memo.
2 comments:
Very interesting site - keep up the good work!
Post a Comment