More from SSA on Simpson-Bowles: Plans 2A & 2B
by Bruce Webb
On Thursday I put up an extract from a SSA Office of the Actuary score of one of two of the Simpson-Bowles draft Social Security plans, that is the bottom line of Plan 2A Bottom Line Score on Simpson-Bowles. This post expands on that by including the cover letter and plan details on 2A as well as details and score on 2B. As it turns out 2A and 2B have the same bottom line projections and outcomes but in the interest of completeness here you have them. This is not the complete letter, there are two more tables which did not as I could see add much. I don’t know if the letter has been published on the SSA site, I received it in PDF form, but I can forward the whole 7 pages to whoever wants it. (For example I was not able to screen capture the footnotes in a single shot so I left them off).
Thurs’ post drifted first to generalities and then to personalities, hopefully this will a little more data focused.
The first thing I would note is that the Plans are on the face of things overkill. The current 75 year actuarial gap is 2.01%, but both 2A and 2B score at 2.22%, which is to say an average ‘fix’ of 110%. Moreover they leave Social Security with a 4.43 percentage point surplus in the 75th year, which is more than a third of the 12.4% FICA devoted to Social Security. That is in the process of starving the beast (otherwise known as Social Security beneficiaries) Simpson and Bowles seem to be proposing a vast bloating of the Trust Funds after mid-century. Of course a cynic might look at those numbers and conclude that they were just carving out room for a diversion of one third of workers contributions to personal accounts, or the same 2 percentage points of the workers 6.2% share that most privatization plans suggest as a good starting point.
Put me in that cynic camp until I get a better explanation of that 4.43% number for 2080.
And that is post number three! Plan the overkill and keep the pet peeve!
Well I got a better explanation. From maybe the top living expert on this stuff.
That 4.43% surplus, though a natural reading of Goss’s language actually is a 4.43% point IMPROVEMENT over the baseline of -4.16% in 2084 for a net surplus of .27 or right in line with the overall 75 year .21 improvement over projected 2.01.
Luckily I was able to delete my dKos diary on this before I made a fool of myself too far.
Webb said, “I don’t know if the letter has been published on the SSA site, I received it in PDF form, but I can forward the whole 7 pages to whoever wants it.”
Anyone can access the entire document at the SSA’s website. It’s been available.
Christ MG and for once in your life you DON’T provide a link? Are you that intent on your game of one-up-man-ship over me that you won’t even help out other AB readers? How petty can you be?
Bruce–I wonder exactly what impact the proposed reductions in benefits would have on GDP when they become effective. Since I have zero math ability, I can’t even manage a guess. I think you know what percent of GDP SS benes make now and there may be a way to project GDP in the future.
If you take away X percentage of income from RSDI beneficiaries, you are taking income from the lower and middle level retired/disabled wage earners. These are the people who spend all or nearly all of their income just to get by. So, wouldn’t cutting the SS checks nick into what goes into the domestic economy? If so, don’t Simpson and Bowles have to figure a way to replace it? Do they think that family members will automatically make up the difference? If so, do they mean for people to end up like the Waltons but without the charm? Other things would disappear too–like money to save for retirement or for college for the kids, or just to save for emergencies such as protracted unemployment.
Thing is I keep wondering where all the jobs are going to come from to provide any sort of increased wages as in the past. We have about 3 years and counting on a major recession and no sign that wages are going to budge from current depressed levels. No one thinks that American industry is going to rebound in any serious way. The bankers are paying each other quite handsomely but practically no one else has a hope of job security let alone increased wages.
So, looks like these people and the wonderful bond traders they represent are planning to impoverish middle and lower income people. No explanations necessary from their perspective it seems. Meanwhile, we’re rolling on at maybe 15% unemployment/underemployment and nowhere is there anything to address this fact. So, tell me wise Master, was gibt? NancyO
This and the other links give your query one kind of answer Nancy
i can’t say i really know the answer here, but i think technically cutting benefits, or raising them, has no effect on GDP which is a measure of production. With SS consumption is shifted from the taxpayer to the beneficiary… which is ultimately from your younger self to your older self. whatever you produced to make the income remains produced. you just consume less now so you can consume more later.
on the other hand, raising the retirement age should increase GDP. but are you so sure that’s what you want to do. i mean you could increase GDP by eliminating weekends and returning to 16 hour workdays under the lash.. if GDP was what you really wanted out of life.
btw… that increase in GDP is a first order approximation. i suspect that us workers would find a way to slack off under those conditions. give the Republicans something else to shake their heads about.
Thanks, Rdan. I remember this but didn’t read it carefully at the time. Woulda,coulda,shoulda. NO