How can we raise the $4 Trillion to gap Social Security?
- Demographic - increase immigration, increase the birth rate, and raise the retirement age
- Idealogical fixes - raise payroll taxes across the board, eliminate the payroll tax wage cap
What are the two main components of Bush’s Social Security reform plan?
- Private Retirement Accounts
- Progressive Price Indexing
Why is Social Security so popular?
- The program has paid benefits in excess to what they earned. Social Security gives back more than you would earn by investing in a long term annuity, the middle-class and lower-class get a huge windfall.
- Social Security provides the most generous benefits to the poorest. It is the most effective anti-poverty program - better payments with none of the stigma.
What are private retirement accounts?
Workers can divert 4% of Social Security and Medicaid taxes into private accounts which would be invested in broad mutual funds. This would get people better returns than typical S.S. returns, and it would be theirs to pass down.
What is progressive price indexing?
Social Security benefits are currently indexed at wages, the average is 40% of income earned in the last year before retirement. Bush wanted to change from wage index to price index. The poorest would keep the same benefits, bt wealthier will see their benefits reduced.
What is the liberal view on Social Security?
- The program is solvent until 2037 - it is not a problem now
- Even after it becomes insolvent, it is not bankrupt
- Raise payroll tax to fix problem - only by 1% on people and 1% on employer
- Should eliminate wage cap
What is the conservative side on Social Security?
- It is a crisis that will happen sooner rather than later - 2016 or now
- By 2020’s S.S. will have to borrow money from the gov’t to pay benefits (from imaginary “trust”)
- The longer we wait the more radically we will ahve to cut benefits and raise taxes
- Will be easier to make changes now.
What is the Greenspan Commission?
It was made by Reagan in 1982 as a way to bi-partisanlly fix the Social Security funding problem. The committee made a “1983 fix” in which they proposed to raise the retirement age to 67, excelerate the payroll tax, and tax S.S. benefits.
What is the Social Security trust fund?
When S.S. was founded in 1935 it was supposed to be a fully funded program. It was supposed to build up a reserve (trust) over the years to pay for all of the benefits, however people get anxious when money is building up so in 1938 it was changed to a pay-as-you-go system. The trust fund does not exist - it is a pile of IOU’s from the government borrowing money from the “trust”.
