Re: Re: [Pen-l] Social security

[raghu <mraghu01@xxxxxxxxx>]

On Sun, Dec 21, 2008 at 1:05 PM, David B. Shemano <dshemano@xxxxxxxxxx> wrote:
> As long as the present level of ss taxation exceeds ss expenditures, then everything will be hunky-dory.  My understanding is expenditures will exceed revenues starting in 2017, at which point Congress will have to make explicit choices.
>

As I understand it, this projection is mostly the result of a one-time
freak demographic event - the post WW2 population increase - which in
time will correct itself. In the long-term there is no reason, none at
all, why Soc Sec expenditures or revenues need to keep increasing.



> And benefits are not linked to poverty or means tested, as you know, which is why the program retains its popularity with the middle class (they are willing to prepay retirement funds for themselves, but not others).
>

The lack of means-testing is the only essential difference between Soc
Sec and any ordinary insurance. You may argue that this is a very
important difference. This is also apparently why Doug does not
consider Soc Sec as insurance. Fair enough. Whether you want to look
at it as insurance or not is mere semantics.

The important thing is to recognize that Soc Sec acts as an effective
safety net for people who may have suffered some personal misfortune
that left them without resources. For e.g. someone who suffered a
workplace injury or got in an accident or lost their job etc. Thanks
to Soc Sec these people will not starve in their old age.

What about means-testing then? In principle there is nothing wrong
with it. Suppose we decide the top 50% of the wealthy are excluded. It
will reduce expenditures by 50%. That seems nice. Unfortunately it may
also make the top 50% resentful of the system. I suspect this is the
reason why Soc Sec has been presented to the public in a misleading
way. The merits of this can be debated, but I don't think it changes
the economics of the system one way or another.
-raghu.

--
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