At the last audit paper I received from SSA, I had contributed over $300,000 IN TAXES into my Social Security Account. Any attempt to reduce my benefits that I was forced to pay for (or eliminating it entirely) will be met with a class action suit before the Supreme Court. I will sue to receive the full contribution in cash in a lump sum.
Today’s “fiscal responsibility” summit, which was originally much feared as a Trojan Horse for Social Security cuts, has apparently been downgraded into relative obscurity. But I thought it might nonetheless be worth talking briefly about the math of the entitlements issue.
Usually this is done with fairly elaborate projections, but I think the essence can be explained with a back-of-the-envelope calculation. So here goes.
Right now, the federal government spends about 9 percent of GDP on the three biggies, Social Security, Medicare and Medicaid, with the total roughly evenly divided between retirement and medical care.
We have an aging population, which will tend to increase the share of GDP spent on these programs. Looking ahead to circa 2050, we’ll go from about 3 workers per retiree to 2. This would, other things equal, raise spending on the programs by about 4 percentage points of GDP. (Not 4.5, because only part of Medicaid is age-related). That is, we’d spend 6.75 percent of GDP on retirement, 6.25 percent on health care.
Now, 4 percent of GDP is a lot, but not catastrophic: remember, the share of GDP spent by the government currently is 10 percentage points or more higher in a number of wealthy countries than it is here.
What makes the projections you actually see so scary is the assumption that “excess cost growth” in health care will continue — that is, health spending per person will continue to rise at close to 2 percent faster than GDP per capita. This means, circa 2050, that health care costs will be roughly double what pure demography would predict, adding another 6 plus percentage points to the entitlements projection. Looking beyond that, demography adds very little — it’s all health care.
So if excess cost growth in health care can be brought under control, the entitlement problem is manageable. If not, even savage cuts in Social Security will make little difference.
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Comments: 9
Second, since production per worker per hour is likely to continue to increase, it is doubtful whether there would be any decrease in the average worker's standard of living.
Third, the elderly will work longer in their lives, just for the pleasure of it. (I am 67 and I still love to work. I have no intention of retiring.) When medical care provides us with still youthful bodies and minds, there is no point in quitting.
Finally, if we use the solution in Invisible Hand there won't be any money problems with any of social security or medicare or medicaid.
Mooch
http://zfacts.com/p/318.html
BTW, SS is not bankrupt. The trust fund isn't supposed to sit there unused. It's supposed to be borrowed so that it can earn interest and we don't have to borrow that much more and pay that much more interest to external lenders. Though I suppose we could have tried to do so and then put the money in the stock market like GW suggested, lol.
Hmmmmm, collect 2000 a month x 12 months x 20 years and what would that figure out to be? Many men live into their 80's.....I had 2 aunts and a grandmother that collected their SS for well over 38 years! What am I missing?
I paid in for over 50 years, I WILL get it back.
And there are 3 different SS projections based on what unemployment and productivity growth levels we may have in the future.
The low-cost projection, which has been shown to be the most accurate projection in history, shows that we'd have a surplus of 83 trillion in SS Surplus at the end of the 75-year projection! So in that case, we'd most likely be looking to reduce SS payroll taxes because of the quickly growing SS trust fund.
In the intermediate projection, which is what most people use because it's in the middle, despite it being historically less accurate, shows the trust fund will be depleted in 2040. And then after that, payroll taxes would have be be raised a total of 2%... That is 1% to employer share, and 1% to employee share. And that's it. Plus at that point, average real wages would be about $54,000 compared to today's $35,000. So future workers would be much more able to afford that tax than today's workers, if it even turns out to be necessary and we aren't instead trying to lower payroll taxes due to the huge surplus.
"I paid in for over 50 years, I WILL get it back."
Yes, you will.
Jim, we'll have to pay health care costs whether we pay out of pocket or via taxes to a health care program. As I understand it, there's savings to be had through a number or reforms. Cutting out administrative costs, ER and preventable costs, and insurance overhead costs are part of the savings of some form of universal care.