Ss policystream


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Ss policystream

  1. 1. Social Security: Policy Stream Julie Anderson, Betsy Self, Maee Aly, and Seneca Sok
  2. 2. Options in Revenue <ul><ul><li>Adjustments </li></ul></ul><ul><ul><ul><li>Payroll Tax </li></ul></ul></ul><ul><ul><ul><li>Taxable Maximum </li></ul></ul></ul>
  3. 3. Options for Adjusting Taxation of Earnings <ul><ul><li>Increase by 1 Percentage Point in 2012 </li></ul></ul><ul><ul><li>Increase by 2 Percentage Points over 20 years </li></ul></ul><ul><ul><li>Increase by 3 Percentage Points over 60 years </li></ul></ul><ul><ul><li>Eliminate Taxable Maximum </li></ul></ul><ul><ul><li>Raise the Taxable Maximum to Cover 90% of Earnings </li></ul></ul><ul><ul><li>Tax Covered Earnings Above the Taxable Maximum; Do NOT increase benefits </li></ul></ul><ul><ul><li>Tax Covered Earnings Up to $250,000; Do NOT increase benefits </li></ul></ul><ul><ul><li>Tax All Earnings Above the Taxable Maximum at 4%; Do NOT increase benefits </li></ul></ul><ul><ul><li>Tax All Earnings Above $250,000 at 4%; Do NOT increase benefits </li></ul></ul>
  4. 4. Options that Would Change the Benefits Formula <ul><ul><li>Increase the number of years used in calculating Social Security retirement and survivors benefits </li></ul></ul><ul><ul><li>Changing the factors in the formula that determine what percentage of each worker’s average monthly lifetime earnings are replaced. </li></ul></ul><ul><ul><li>Modify the formula used to calculate initial benefits to reduce benefits across the board </li></ul></ul>
  5. 5. Options that Would Change Early and Full Retirement Age <ul><ul><li>Modifying adjustments for early or delayed retirement </li></ul></ul><ul><ul><li>Adjusting to reflect improvements in longevity </li></ul></ul>
  6. 6. Options that Would Increase Benefits for Low Earners <ul><ul><li>Reduce or eliminate benefits for workers with higher incomes – “ Means Test ” </li></ul></ul><ul><ul><li>Introduce a New Poverty-Related Minimum Benefit </li></ul></ul><ul><ul><li>Enhance Low-Earners’ Benefits on the Basis of Years Worked </li></ul></ul>
  7. 7. Beneficiary: Disabled <ul><ul><li>19% of SS beneficiaries are disabled or family of the disabled. </li></ul></ul><ul><ul><li>Expected to exhaust in 2018 under current law </li></ul></ul><ul><ul><li>Alternative: DI & OASI trust funds combine so they last until 2039 </li></ul></ul>
  8. 8. Cost of Living Adjustment (COLA) <ul><ul><li>Any change in COLA would affect all beneficiaries </li></ul></ul><ul><ul><li>COLA is based on the consumer price index (CPI). </li></ul></ul><ul><ul><li>Studies have found that the CPI overstates the true rate of inflation, making COLAs higher than necessary </li></ul></ul>
  9. 9. Disability & COLA <ul><ul><li>Disability Insurance (DI) </li></ul></ul><ul><ul><ul><li>Younger </li></ul></ul></ul><ul><ul><ul><li>Remain in program longer </li></ul></ul></ul><ul><ul><ul><li>If the COLA was reduced, could be subject to reductions in benefits for many more years than retirees </li></ul></ul></ul>
  10. 10. Alternative for COLA <ul><li>Reduce COLAs by 0.5% </li></ul><ul><ul><li>Project to begin in 2012 </li></ul></ul><ul><ul><li>Pay-out would decline by 0.4 % points of GDP in 2040, or by 7 % from currently scheduled pay-outs. </li></ul></ul><ul><ul><li>Extend the trust fund exhaustion date by nine years to 2048 . </li></ul></ul><ul><ul><li>Benefits would be reduced by about 6% for people born in the 1950s or later </li></ul></ul>
  11. 11. Alternative for COLA <ul><li>Base COLAs on the Chained CPI-U </li></ul><ul><ul><li>Projected to begin in 2012 </li></ul></ul><ul><ul><li>Use another measure of inflation to chained CPI-U (consumer price index for all urban consumers) </li></ul></ul><ul><ul><li>It is projected that the CPI-U will increase, by 0.3 % more slowly per year than will the CPI-W. </li></ul></ul><ul><ul><li>Pay-outs would decline by 0.2 % of GDP in 2040, or by 4%, from currently scheduled pay-outs. </li></ul></ul><ul><ul><li>Extend the trust fund exhaustion date by four years, to 2043 . </li></ul></ul>
  12. 12. Changes in COLA
  13. 13. Privatization <ul><ul><li>What Is It? </li></ul></ul><ul><ul><ul><li>Privatization would involve the creation of a private savings account for every worker. </li></ul></ul></ul><ul><ul><ul><li>Workers would “own” this account, meaning it is portable (not tied to a specific job) and self-managed. </li></ul></ul></ul><ul><ul><ul><li>Workers could invest in a broad range of options. </li></ul></ul></ul><ul><ul><ul><li>Workers would receive Social Security payments upon retirement, but value would be frozen. </li></ul></ul></ul><ul><ul><ul><li>The account would be inheritable. </li></ul></ul></ul>
  14. 14. <ul><ul><li>Brookings Plan: </li></ul></ul><ul><ul><ul><li>Create private accounts and reduce benefits and increase payroll tax. </li></ul></ul></ul><ul><ul><ul><li>All money from increased tax goes into individual accounts. </li></ul></ul></ul><ul><ul><ul><li>Participation is mandatory . </li></ul></ul></ul><ul><ul><li>Cato Plan: </li></ul></ul><ul><ul><ul><li>Create private accounts but no reduced benefits or increased payroll tax. </li></ul></ul></ul><ul><ul><ul><li>Participation is voluntary. Workers could contribute either to Social Security or to savings account. </li></ul></ul></ul><ul><ul><ul><li>Employers would continue Social Security payments. </li></ul></ul></ul>Variations in Plans
  15. 15. <ul><ul><li>There is general agreement that: </li></ul></ul><ul><ul><ul><li>Social Security payments are inadequate for many people. </li></ul></ul></ul><ul><ul><ul><li>Many Americans are not saving enough for retirement. </li></ul></ul></ul><ul><ul><ul><li>These plans would restore long-term solvency of Social Security. </li></ul></ul></ul><ul><ul><li>Some disputed claims are that: </li></ul></ul><ul><ul><ul><li>Savings investments have potential for higher rate of return than Social Security does. (While this is true, there are of course also economic downtimes.) </li></ul></ul></ul><ul><ul><ul><li>Individuals would put more money into savings. </li></ul></ul></ul><ul><ul><li>Who supports it? </li></ul></ul><ul><ul><ul><ul><li>Brookings and Cato Institute. </li></ul></ul></ul></ul>What are the arguments in favor of it?
  16. 16. <ul><ul><li>The transition would create shortfalls that would have to be covered by: </li></ul></ul><ul><ul><ul><li>“ Double payment” by younger workers. </li></ul></ul></ul><ul><ul><ul><li>Government payment (from somewhere). </li></ul></ul></ul><ul><ul><ul><li>Benefit cuts. </li></ul></ul></ul><ul><ul><ul><li>Risk exposure. </li></ul></ul></ul><ul><ul><ul><li>Many people do not have enough financial knowledge. </li></ul></ul></ul><ul><ul><ul><li>Partial privatization or voluntary contribution is a “slippery slope.” </li></ul></ul></ul><ul><ul><li>Who opposes it? </li></ul></ul><ul><ul><ul><ul><li>Center for American Progress and AARP. </li></ul></ul></ul></ul>What are the arguments against it?
  17. 17. Universal and/or Automatic Enrollment 401(k) <ul><ul><li>What Is It? </li></ul></ul><ul><ul><ul><li>A way to increase retirement security by increasing savings. </li></ul></ul></ul><ul><ul><ul><li>A form of investment in addition to Social Security. </li></ul></ul></ul><ul><ul><ul><li>Workers would have 6% of income put into 401(k) unless they explicitly opt out. </li></ul></ul></ul><ul><ul><ul><li>Workers would own and manage the account. </li></ul></ul></ul><ul><ul><ul><li>Contributions could be made during times of unemployment. </li></ul></ul></ul>
  18. 18. <ul><ul><li>More workers participate in their 401(k) if they are automatically enrolled. </li></ul></ul><ul><ul><li>Would increase retirement savings. </li></ul></ul><ul><ul><li>Has potential for greater rate of return than Social Security. </li></ul></ul><ul><ul><li>Who supports it? </li></ul></ul><ul><ul><ul><li>Center for American Enterprise and Heritage Foundation. </li></ul></ul></ul>What are the arguments in favor of it?
  19. 19. <ul><ul><li>Didn’t find any – maybe policy folks ignore the idea rather than confronting it? </li></ul></ul><ul><ul><li>Who opposes it? </li></ul></ul><ul><ul><ul><li>No one or unknown. </li></ul></ul></ul>What are the arguments against it?