Ezra Klein: Making Social Security less generous isn't the answer

[cal04]

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/04/AR2010090400096.html?hpid=topnews

There are a lot of things Congress doesn't know right now. What to do about jobs, for instance. Who'll be running the House come January. How to balance the budget. But there is one thing that both parties increasingly seem to agree on: You should work longer.

Raising the Social Security retirement age has become as close to a consensus position as exists in American politics. House Minority Leader John A. Boehner (R-Ohio) supports it. House Majority Leader Steny H. Hoyer (D-Md.) has said that "we could and should consider a higher retirement age." And for a while, I agreed with them, too. It seemed obvious: People live longer today, and so they should work later into life. But as I've looked at the issue, I've decided that I was wrong. So let me be the skunk at the party. We should leave the retirement age alone. In fact, we should leave Social Security alone -- unless we're making it more, rather than less, generous.

Social Security provides disability insurance and survivor's benefits, but when people talk about it, they tend to be referring to its role as a program that provides income support to retirees. The average monthly benefit of $1,170 replaces about 39 percent of the person's pre-retirement earnings. Over the next two decades, the "replacement rate" is slated to drop to 31 percent. That is less than in most developed countries -- the Organization for Economic Cooperation and Development ranks it 25 out of 30 member nations.

The system, in other words, is not that generous, and it's becoming less so every year. The age at which you can begin collecting full Social Security benefits is moving from 65 to 67, as part of a deal struck in the 1980s to ensure the system's solvency. And all this at a time when employers are getting rid of defined-benefit pensions, which means that most workers will have no guaranteed retirement income except for Social Security.

[elleng]

1. Which brings us to Social Security's financial "crisis."

The issue isn't that Social Security is spending too much or that we're living too long. It's that we're not having enough children (or letting in enough immigrants). As Stephen C. Goss, the system's chief actuary, has written, Social Security projects an imbalance "because birth rates dropped from three to two children per woman." That means there are relatively fewer young people paying for the old people. "Importantly," Goss continues, "this shortfall is basically stable after 2035." In other words, we only have to fix Social Security once. . .

An August survey from Greenberg Quinlan Rosner Research tested reactions to a variety of Social Security fixes. One of the options was raising the retirement age to 70. Two-thirds of respondents opposed it. Another option was eliminating the cap on payroll taxes so that well-off workers pay the tax on their full income, just as middle-income workers do now. A solid 61 percent supported it. . .

The universally unpleasant options for reform are a testament to Social Security's efficiency. It's a simple transfer program, with administrative costs that amount to less than 0.9 percent of total spending. There's not much fat to cut.

That can't be said for much else in American public policy. Our health-care system costs twice as much as the German system and doesn't deliver better results. Our defense sector is wasteful and bloated. Our tax code could raise more money and do less to harm growth if we cleaned it out. Our home prices are driven upward by the mortgage interest tax deduction. Our health insurance premiums are goosed by the exclusion of employer-sponsored insurance from taxable income.

Reforming any of those sectors (or, in the case of health care, reforming it more) would be politically difficult, but would mean better policy. Reforming Social Security will be politically difficult and result in worse policy. That's the good thing about putting everything on the table. It allows you to think more clearly about what should be taken off.

[bluestateguy]

2. I have a question

"Age 66 is when you get full benefits. But most people begin taking Social Security at age 62."

Is that really true?

[cal04]

3. According to this it's by the year your born

http://www.socialsecurity.gov/retire2/agereduction.htm

[Faryn Balyncd]

4. Correct....

:kick: