Biden Appoints Biggs to Social Security Advisory Board
I (run75441) saw this article on MSN early (AZ time) this morning and sent it off to Dale. For those of you who may not have been around. Dale Coberly, Bruce Webb and Arne would discuss Social Security and how to save it. You also may not know it; Dale and Bruce proposed the Northwest Plan to a NJ Congressional Representative who forwarded it on to the Social Security Administration. In turn, SS replied. it could work.
I was not privy to much of the back and forth with Andrew Biggs by Dale, Bruce, and Arne. It can be found though if you are interested in reading it on Angry Bear and also elsewhere. One point Andrew Biggs has in his argument is the addition of “legacy costs” which are described by him as “additional payments made to SS recipients” before the issue of insolvency. I would add, additional payments to which appropriate congressional funding supporting it was not allocated by a change of law by Congress.
In my planning of capital acquisitions, we would call this “sunk costs.” They (additional past costs) would not be included in any present value calculations of analyzing major acquisitions. Andrew insists they should be included in present value calculations for Social Security. He insists they were not funded by Congress and the funds need to be recouped going forward from recipients in a solution to Social Security’s future short fall. Bruce Webb opposed this backward transfer of $17 trillion in the calculation.
Dale and Arne may have other info. to add.
Recent CNBC article:
“Changes to fix Social Security to take compromise, says Biden nominee” (cnbc.com), Lorie Konish
Dale Coberly (Me) I think this is bad news. Andrew Biggs has been an enemy of Social Security since I began paying attention about twenty years ago. He is also very good about concealing his agenda in quite reasonable sounding language well-crafted to lead the reader to false conclusions.
I haven’t time right now to go into the whole history, but I intend here to write a fast essay by commenting interlinear on the article appearing in CNBC’s report by Lorie Konish August 11, 2022 “Changes to fix Social Security to take compromise, says Biden nominee” (cnbc.com)
CNBC
When Andrew Biggs, senior fellow at the American Enterprise Institute, was nominated by President Joe Biden to be a member of the Social Security Advisory Board in May, it came at an important inflection point for the program.
A report subsequently released by the program’s trustees in June projected its combined trust funds can only pay full benefits through 2035, at which point 80% of benefits will be payable. While that is one year later than was projected in 2021, it still sets a deadline by when Congress must act to make changes to a program approximately 70 million beneficiaries rely on for income.
Me
Mostly true, but keep in mind that the Trust Fund is not especially important to Social Security financing. Social Security is paid for by the workers who will collect the benefits. That is the key to understanding Social Security. The worker’s contribution is deducted from his paycheck and credited to his account which is maintained by the Social Security Administration. When that worker retires benefits will be calculated based on the worker’s own contributions. The benefit is not calculated as a direct “interest” rate of return, but in fact amounts to a rate of return that is equal to inflation plus the real growth in average wages since the contribution was paid in. This contribution is called the “payroll tax,” but unlike regular taxes the worker gets his money back plus interest when he will need it most.
CNBC
The Social Security Advisory Board does not have a direct role in coming up with fixes to address that issue. But after decades of research on Social Security, Biggs has established himself as an opinionated voice on the program.
Me
“opinionated voice”… read that as dedicated enemy of Social Security. He is paid by the American Enterprise Institute.
CNBC
Lorie Konish: You were nominated to be a member of the Social Security Advisory Board by President Joe Biden. You recently wrote that he is the “biggest obstacle” to expanding Social Security. Why?
Andrew Biggs: The article I wrote actually was arguing that President Biden’s position on not raising taxes on lower-income people pushes Democrats and Republicans towards a compromise on Social Security, that the existing plans to expand Social Security significantly rely on raising taxes on Americans earning less than $400,000, which is contrary to the President’s position. So if the president has said he doesn’t favor that approach, that pushes towards a more compromised position, which is what I would favor.
Me
This is technically correct, but wait for the “compromise.” The “existing plan” is the Larson plan discussed below. It is a bad plan because it will raise taxes on the rich, destroying the “worker paid” nature of Social Security which is what makes SS work.
The payroll tax is limited to the first 147 thousand dollars or so of income so that the amount paid by the “worker” will be a fair price for the value he receives in benefits and insurance. Taxing income over this amount would be seen by those being taxed as being taxed for welfare: or paying for other people’s retirement.
Social Security was designed as a way for ordinary workers to save for their own retirement, with their savings protected from inflation and market losses as well as their own failure to save or thrive:
There is a substantial increase in benefits over the amount paid in (including interest) for those whose lifetime incomes did not generate enough savings for a basic retirement. Even those high earners, who paid more in taxes even though their tax rate was the same, can benefit from this boost if by the time they retire, or are disabled their, lifetime income turns out to be a lot less than they might have expected when they were doing well.
MSNBC
(Reporter’s note: The Social Security 2100 Act: A Sacred Trust proposed by Rep. John Larson, D-Conn., calls for reapplying the payroll tax and $400,000 in wages, in keeping with Biden’s promise. However, the exclusion of increases to the payroll tax rate limits the amount of time the program’s solvency can be extended, Biggs argues.)
Me
True enough I suppose. I think he is saying that the Larson plan does not raise the payroll tax for those under the current [and otherwise projected] cap. And this means that the increased tax on the rich will not extend the “solvency” of SS very long. That is true.
MSNBC
LK: Democrats are staunchly opposed to benefit cuts. Republicans are against tax increases. Do you think they can meet somewhere in the middle?
AB: The political reality is that on really any big legislation, but in particular entitlement reform like Social Security, it’s impossible for one political party to pass its own plans without any support from the other side. Our system requires it to pass the House, then have a super-majority in the Senate, then get the president to sign on. It is very unusual for one political party to hold all those keys to power. So in the U.S., big reforms like the 1983 Social Security reforms tend to be bipartisan. I think that ultimately is how things are going to have to turn out.
Me
This is how the system generally works, but it is very dangerous if the compromises on the table are all bad. The R’s actually want to cut benefits, the Dems want to “make the rich pay.” The “compromise” should be:
Leave everything as it is…worker paid with reasonable cap on wages taxed… and raise the payroll tax on the workers who will get the benefits just enough to pay for their expected longer retirement. That would amount to about a 2% tax increase for the worker, but this can actually be reached by raising the tax rate one tenth of one percent (per year) at a time, an amount no one would notice.
Even introducing the 2% ultimate increase in 2035, when it will be needed, would not be a burden anyone would notice after they got over the shock. But a one tenth percent per year increase would keep the Trust Fund fully solvent…and save us from having to pay back the money it borrowed from the Trust Fund, as well as result in a slightly lower payroll tax going forward (because the interest on that trust fund would help pay for benefits). And this way the workers continue to own their own retirement savings rather than rely on the generosity of the rich or their luck on the stock market or personal investments.
There is a lot of misunderstanding about how Social Security works, which I haven’t time to discuss. The remainder of CNBC article is mostly Biggs claiming he is a mere technician and will have no effect on any plan that emerges. So it is hard to understand why Biden hired American Enterprise Institute’s smartest enemy of Social Security to be his advisor.
I am going to stop there for now.
Soc Sec XXXVI: $17 trillion backward transfer – Angry Bear (angrybearblog.com)
Personnel is policy. Anybody who has been paying even nominal attention to Biden’s senate career knows this is his guy.
And no, this is not “hard to understand”. He bragged about his antipathy towards social security to Tim Russert in 2007 on an obscure sunday talking head show called “Meet The Press”. Among many other examples.
It’s probably harder to understand why this didn’t disqualify him for the nomination in 2020, as a popular senator from Vermont noted. But Biden addressed his problematic past the same way another recent president does. By lying about it.
Simple explanation is that the Wall Street wing of the Democratic Party has a vested interest in eliminating all retirement savings competition to the 401K. The US has less severe political division when it comes to the economic interests of the donor class as compared to the social interests of the wage class.
Sure sure. Those presidential libraries don’t build themselves.
But now that the WH has made clear the intended policy choice maybe some activism will move things. There was some success a few decades back when “bipartisan” efforts to privatize SS were characterized as the cat food commission. Maybe it’s time for hashtag #stopTeamCatfood to trend. Maybe the oldsters can get the hang of making tik toks showing their favorite recipes with Fancy Feast or Tasty Vittles. Anything’s possible.
Those activists got it done by realistically connecting the proposed policy change to retirees ability to pay for food. It resonated with decades old stories from the 70s about seniors choosing to eat cat food to survive before the COLA enhancements started protecting retirees against some forms of inflation.
Today with persistent and pervasive inflation and a wobbly stock market you’d think it would be pretty easy to mount an effective pushback against threats to the reliability of Social Security. There is probably a large and even non partisan majority in this country who understand that most people need some kind of basic guaranteed retirement. One that virtually no private organization still offers to employees. Here’s a recent post on Naked Capitalism that provides some recent polling data on the question: https://www.nakedcapitalism.com/2022/08/80-of-us-voters-across-party-lines-support-expanding-social-security.html
But it’s important to acknowledge per the topic of the post that this popular program has enemies within the current governing party. Including multiple congressional democrats.
Amateur:
I believe what we should do is get AARP involved as well as other oldster groups. Biggs is well known for what he intends to do. Those groups may not be. The addition of past costs of legacy costs (Biggs calls this “additional payments made to SS recipients”) to determining the PV of SS or the cost for 100 years instead of 75 years is complete nonsense. Those are sunk costs and not to be considered in determining a capital acquisition viability. Social Security costs should only be determined on present and future costs. I wonder why Bruce did not bring this up in his argument which I linked to in this post.
I am sure Biggs knows this.
Furthermore and if you read what Coberly has to say, Larson is not the man we need. New Jersey’s Fazio is retiring this year according to one commenter. He is the one who presented the Northwest plan to SS. In turn, SS reviewed it and said it could be viable. We have the citation for this.
As far as NC? The last time Yves chose Coberly’s post to present and Coberly was discussing his beliefs, she went on a bender about it. Her whole argument was MMT which would be fine in a separate post. Instead, she chose to rip on Coberly who was defending his commentary. Why post his commentary if you have a different opinion (which it was).
I gave the correct acronym (MMT); Malcolm should arrive soon.
Amateur Dude,
Unfortunately, I am the sole survivor from our local social activist cell from the 60’s. The good die young, which both protects me and makes me lonely for the good old days. I do have one buddy, more militant than most, that was a drive-by protagonists here during the 70’s. He was originally from Texas and moved back there briefly after completing medical school here and then moving on to Phoenix, which he found too much like the lEast coast in personality, finally settling down with a nurse, whose dad was NJ and mom was Mex, in Tucson to raise their family. Of course, he is too disconnected from here after so long and only comes back to visit and I have been disconnected from the mainstream here in central VA all along. At 73, then I am far too old to hang around a university campus starting trouble and besides this is not a kid’s issue.
However, I admire your optimism. My wife retires in May 2025. If she takes interest in SS, then that may give me a jump start. She is far more socially connected here, despite being raised in Enfield CT, than I have ever been when more than one mile off campus. Women here in central VA are much more accessible than men. Men here just want to shoot something, put it in the smoker, and sit around drinking whisky until it is done.
Ron
It is a kids’ issue. SS protects them too. And I understand most kids will become old some time. even though there are highly paid people going around the colleges telling the kids that their grandparents are stealing their future.
Bruce Webb is sorely missed.
Ron
I am sure he is out there. Probably reads AB from time to time.
Run,
Is the Internet carrier in Heaven Verizon or Comcast?
Also, Dale told me that AARP had gone over to the dark side, more interested in revenue from providing access to direct marketers than protecting SS. If one is selling death insurance, annuities, and mutual funds, then SS gets in the way.
There is a critical point which keeps getting missed: Social Security MUST be understood in terms of the individual worker. Thinking of it as “all of us in the same basket” obscures how it works and why it works, and makes it easy for it’s enemies to criticize it or shift the argument so we are talking about Trillions of Dollars and Uncle Sam furiously borrowing from one pocket to lend phony iou’s to anothe pocket. Biggs argument about “legacy debt” shifts our way of thinking so that we can’t keep track of what we are actually talking about: the individual worker needs a safe place to save his own money for his own retirement, or to insure himself in case of his own disability, or his early death with dependents. The government makes this possible, but it does NOT pay for it. Each worker pays for his own benefits…insurance and “interest” on his savings. Start there and you can reach an answer quite simply. Start with “the program” and you get nonsense like “saving it” by cutting benefits. You also run into “saving it” by “making the rich pay” which they will not do except for a very short time to trick us into giving them ownership of our savings so they can cut our benefits and we can no longer say “we paid for it ourselves.”
Yes sir.
I miss Bruce Webb. He was the first person to recognize that I had something to say and introduce me to people who had a forum. Those people were glad to hear a new argument “on their side,” but then someone had a better idea: make the rich pay for it. This is the path to perdition, but it is so attractive to people who think like politicians. what’s not to like: getting someone else to pay for your retirement, and sticking it to the rich who deserve it.
Trouble is, it won’t work that way. Even countries with a tradion of social welfare are always worrying about whether they can afford their retirement program. Shift the argument to whether each worker can afford the program, or afford not to have the program, and the answer become obvious…once you teach the worker to understand that one way or the other he will have to pay for his groceries when he can no longer work. Either by direct “savings” while he is still working, or by hidden payments in the form of higher taxes, lower wages, and higher prices, so the money is filteres through either the great government machine or the great capitalist machine. Neither of these is safe. Direct ownership of his own savings…protected but not paid for by the government…is the saafest and simplest way to manage this.
And this is all just take unless we actually DO something about it. Get the workers to understand it, and stand out in the street if they have to and shout to preserve it AS IT IS…even if it is going to cost them a little more to pay for living longer after they can no longer work… or, since they paid for it themselves, after they no longer want to work for the boss.
You are correct.
Bruce had excellent language and typing skills as well as deep insights.
Peter DeFazio is my Congressman from Oregon. He is retiring this year. He sent my plan to the Social Security Office of the Chief Actuary who said that yes, it will work. But meanwhile Senator Larson came up with the “make the rich pay” plan which won’t even work on its own terms [it only reduces the “deficit” part way], and as i keep saying will not work at all politically: either never get passed, or get passed long enough for the rich to destroy it saying “we have the will but not the wallet,” or “end welfare as we know it.”
Wall Street needs all that cash from workers flowing into 401K plans in order to provide rich people the economic rents that they are entitled to for their part in being rich.
The “activist class” may be dead..sold out to the Larson plan….oooh, free Social Security for everyone. All Larson has achieved is to put “saving Social Security” back on the table, legitimizing the Right’s efforts to save social security by subjecting it to the death of a thousand cuts.
I don’t really know about industries “sunk costs” but the “legacy debt” is a fraud. made colorable by talking about SS as though it were a “collective” plan someting like an investment club. I am going to try to make that clear in another post if I can get the time. Meanwhile I would be glad if Run could make a more detailed and vivid report on “sunk costs.” We may end up disagreeing about whether that is the best way to look at Social Security, but it shouldn’t hurt us to look at both ways while we think about it.
No one has ever not gotten the Social Security benefits they paid for…except for one poor immigrant Communist who was denied his benefits by Congress during the great Red Hate, with a Supreme Court prepared to agree that no American had a “right” to his Social Security. this was a bad decision and one that could never have been used to deny EVERY citizen is right to what he paid for… or at least not until the present SC… and the very real possibility that after Larson and his ile, no one will ever be able to claim he “paid for it himself.”
There are no “sunk costs” in Social Security. The people whose actual cash payments were used to pay for the benefits of those people who were grandfathered in without having paid in advace for their own benefits….the people paying for their own future benfits provided the cash to pay for the retirements of their “grandfathers” but they got their own benefits, based on their own contributions. And the “grandfathers” were justified in collecting their benefits on two counts..they had paid for their own parents in turn through the mecanisms in place before SS was introduced, and before the Depression wiped out their own savings. It is also often forgotten that those “grandfathers” had paid for the needs of that first generation of payroll tax-payers while they were still young: moral.. youcan’t take a sword to human relations or “government programs” and say “before this” you are not entitled to participate in ‘now this’ because you have not paid your share. Life is a continuum… and if I may repeat themselves, no one looking at their own contributions and their own benefits can say they did not get what they paid for… because somehow people like Biggs and Peter Orszag forgot how money works: you “pay for” future needs by buying a claim on future production. I’ll try to say all this more clearly later.
meanwhile who is going to replace those “activists”?
Coberly:
You have Google, yes?
Go and read here at the link: Sunk Costs = Legacy Costs and not to be considered in PV evaluations. PV is future costs alone discounted to today’s costs. Biggs knows this as does his side kick who was agreeing with him on his site.
Yes, there are no sunk costs in evaluating SS. Sunk costs is money already spent (briefly). I am sorry I was not there for that exchange on his site.
Biggs is using past expenditures on SS to make the costs of SS much larger than it appears to be. Also that Congress did not provide for additional funds outside of what was planned expenditures in not the fault of SS. It is Congressional issue.
final note (for now) on grammar.
my native language is English. every language needs words, pronouns, that apply to all human beings, whether male or female. English has gotten along with “his” “him” “he” “man” …for thousands of years as the “gender neutral” word. quite recently in history a few people have decided that is not good enough. they think all those words refer to male person exclusively and as such are sexist. They really have not come up with a good substitute… but hey have pretty much destroyed the ability to write without clumsy circumlocutions…in which the whole idea of “each person” gets lost… as it did here in the final version of this post. i hope the language police will forgive me if I keep using my native language. I mean no disrespect to women.
for what it’s worth, my daughter (child person?) decided very early in life she was going to be a himmit…clearly the opposite of a hermit. hermits being men who did without women, a himmit is a woman who does without men. i love my daughter, even if she is a woman, and i miss the days when people could use words that seemed natural to them without fearing the pc police.
All I know about the Brigg’s appointment is that the position he is to occupy customarily goes to a Republican.
Is it unreasonable to expect a Democrat appointing a Republican to at least find one that is thinking like a Democrat on the issue they will be advising on? Better yet, is it unreasonable to expect a Democrat to pull a Republican and just blow off tradition and appoint a person that will be on the Democrat’s side? You know, like the Republicans do now?
Obviously, Biden has learned nothing from Obama’s experiences ala Comey. Then again we still have Cuffari in place and Dejoy.
Becker
or Obama’s appointment of two anti-SS advocates to his catfood commission? with hopes of jamming it through on a no questions asked up or down vote?
i don’t know what is “too much to ask.” Is it too much to ask to let me point out that Biggs is a dangerous enemy of SS?
as for “thinking like a Democrat,” i tried to point out that that is no longer a safe option. but i don’t think like a politician.
Regarding the post above:
I can’t really tell whether this is run talking or Dale or a mix.
My understanding is that when Bruce sent in his Northwest Plan he attached Dale’s and my names because he thought it was based on ideas that came from us. He did not have me review it. So the Larson on the Northwest Plan is not the same as the senator with the mixed up ideas.
From my back and forth with Biggs I conclude he is focused on the plan that he would like us to have independent of what we have now. He does not like Pay As You Go, but he knows how it works. If the position has to be held by a Republican, Andrew Biggs is a reasonable choice. He would like it if all the money that people “should” have invested for their retirements were invested so that the US would have a bigger economy. If scrapping and replacing SS were a meaningful option, “legacy costs” would be meaningful. One of the things I think interesting is that when you balance the flows for a PAYGO program, the legacy costs must grow every year. This means that for any reform that retains PAYGO, “legacy costs” are mathematically meaningless.
“‘deducted from his paycheck and credited to his account which is maintained by the Social Security Administration” I cringe at this description since to many people it would imply that you could track an account balance for an individual. It is the accounting of annual earnings which determines benefits, not the accounting of taxes paid.
I am convinced that leaving the change to the last year increases the ammunition for naysayers. I would accept some compromises to get it done sooner, but the current proposals are terrible. Nothing out there beats the NW Plan.
Arne:
I start the post (added run75441) and Dale picks it up where you see his name and “ME.” I would lose the term Legacy Costs as it has no bearing of what a newer Social Security plan would be. You do not include past costs when calculating future return of a project or capital investment. Biggs should have been challenged on this from day 1. There is nothing wrong with investing on treasury bills. It is safe, a sure thing, and you can keep rolling them over if you do not have to draw on them.
Right now, the issue is how do we change SS to match returns to the draw on it. The TF does not have to be 10 years solvent, it could be five years. The issue is the adjustment in the tax rate to ensure the funds are still there to pay. If you wish to follow fiscal policy.
The US is monetarily sovereign. The nation is a major global player. The dollar is used by most nations. When the Fed raises rates, everyone pays. We could follow MMT (Modern Monetary Theory) to fund our expenses.
We do not lack for ways to solve this issue.
Who developed the Northwest Plan? I do not know. I was not involved in this. (I saw Biggs remarks on including Legacy Costs, past costs are sunk costs and are not included in PV evaluations.) I thought it was both Dale and Bruce. I also saw your remarks on SS at another site Arne.
I will be out for a bit. Gonna grab a bite with my wife.
When Bruce published the Northwest Plan he attached all three of our names to it. It was his words based on Dale’s spreadsheet, which was based on the Intermediate Cost estimate in the annual report. Bruce was very attached to the idea that the economy was going to perform better than Intermediate Cost and so the concept of “triggers” (tax increases only if actual annual performance showed short term insufficiency) was included. One of my analyses that Bruce saw before he saw Dale’s numbers included the concept, so I think Bruce gave me credit whether I did it first or not.
I pretty much stopped keeping up my spreadsheets since I trust Dale’s.
Arne
this all gets too complicated if everyone has a plan. as far as i know I developed what Bruce called the Northwest Plan on ny own just following a couple of insights i got from reading the Trustees Report with a pencil in my hand, doing the sort of calculations i like to do. then i decided to write a spreadsheet that would reproduce the Actuaries’ calculations…. just to check my arithmetic, and understanding. and then i saw how easy it would be to insert trial tax increases to see what would work. As Nancy Altman said, “there are an infinitoe number of solutions” and as I did not say to her, “yes, but some solutions are better than others.” when Bruce gave the three of us credit for what i thought was my work, i did not complain, because I don’t need “credit” i’d just like to stop the liars from lying and fix social security in the simplest, fairest, and cheapest way possible that does not expose people to market losses, and “damned politicians.” I figured Bruce desrved credit for calling attention to the “northwest plan” to some people who were in a position to publish it. and if he gave you credit, that was fine with me, though it was the first time i had heard of you. you may have helped him. and you and Bruce may even have helped me from conversations where i was not keeping track of who said what. i said at the time i be glad if they put a stature of Bruce on the Mall, and if Bruce thought you should be there too, that was okay with me. it’s not like my insights were stokes of genius. The problem is that… well I won’t go into that. But what we really need is someone smart enough to get the politicians to pay attention, or to get the people to get the politicians to pay attention. that won’t be me.
I don’t think what Bigg’s described as legacy costs is the same as sunk costs. It was a mathematical analysis that he performed to indicate something about what would be owed to existing beneficiaries. I believe that Bigg’s was trying to use his analysis to convince people that PAYGO programs are inherently flawed. I looked closely and was unconvinced.
Arne:
Ok. I understand. However, it should be incorporated already into the timeline of payouts. The issue is not PayGo, it is Congress not allocating funding to cover what was to be additional payout in SS as determined by Congress. Only the House can set a budget. But, ok, I understand.
He is trying to treat it as a sunk cost.
arne
thank you. write it up. i felt the same, but would be very glad to have another opinion or better proof.
Good, More than two of us and someone else out of the past
Arne
i can’t really tell either. it has something to do with new daze punctuation.
a little more seriously, i can tell the parts i wrote because i wrote them, but i often hve trouble with the way AB embeds quotes.
as for the rest of your comments., i would love to have a calm conversation with you on the whole thing. not sure that is possible anymore. may try later. i put in a full days real work today for the first time in three years. i can tell you that i am just as strong as i was when i was four.
i think i said beneftis are based on what you paid in payroll taxes… because your payroll taxes are based on your income and and the calculation of initial benefits is based on your income by a formula that “automatically” calculates “interest” based on inflation and increase in average worker income. it’s a little compicated to take in in one bite, but it’s not so complicated that a person can’t see it if they look at it one step at a time. which i am sure you have done. but i get lost when i try to skip those steps and then am forced to “explain” it in terms the other person “undertands” based on knowing nothing but what he has heard third hand from someone like Biggs.
anyway. better stop now before i dig myself a hole.
I don’t really try to describe how benefits are calculated to anyone. I just say that it is complicated. SS is insurance against running out of funds in retirement and there are so many ways that can happen that the laws (which are Congress’ responsibility) are complicated and not always consistent.
When conditions change Congress needs to do something and anyone with their eyes open can see that raising payroll tax rates makes sense and that doing it sooner also makes sense. We have a representative form of government and it is Congress’ job to understand it well enough to make sensible changes. Sadly SS is too complicated for most of the people we send to Congress and they don’t seem inclined to understand their responsibility to try harder.
Arne
unless you know something i don’t (easily possible) the calcultion of benefits is really simple, add up the best 30 years of earnings (adjusted for inflation and growth of the economy (objective facts, apply to everyone). divide by number of months in 30 years, to get average adjusted per month earnings. first 1000 dollars gets 90% in benefits, next 3000 dollars (or so) gets 30% in benefits), above that up to the cap gets 15%. thing is, and it is beautifully simple, and that’s what makes it good: ‘no means testing” or other folderol…it’s just a straight calulation based on a formula for everyone…though the “input” to the formula is your earnings which are a direct function (inverse) of how much payroll tax you paid.
as for the congress’ job: they have no job except to get elected, it is up to US to make them understand, or at least vote as if they understood.
some oversimplifications here, but they are not material.
if your SS turns out to be not enough (because you did not pay in enough) there is SSI, which is welfare, and is why there is no reason to mess with SS to save the people who otherwise don’t get enough from SS to save them from real poverty.
If you give a worker a list of career wages, a list of Average Wage Index values, this year’s bend points, and instructions on how to calculate their Primary Insurance Amount, most of them will get it wrong. If you fix it and then ask them what their benefits would be if they retire next year instead, they literally do not have enough information.
Arne:
One could approximate; but, it would not be accurate. We used to call Social Security to find out where we were at in terms of monthly benefit. They were helpful.
Arne
i used to teach math to college students. most of them got it wrong.
i am not trying to teach them to become accountants. i am trying to get them to understand that they are paying for their own benefits.
and that matters.