Arnold Kling  

Social Security Facts

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The Congressional Budget Office calls this an infographic. It answers a lot of frequently-asked questions about Social Security. One of the facts is that the number of workers per beneficiary has fallen from 4.9 in 1960 to 2.8 in 2010. CBO sees this number reaching 1.9 in 2035.

In addition to the economic implications of this number, there are political implications. changing the program becomes harder the lower the ratio of people who might potentially benefit from a change relative to those who are most likely to take a hit.


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CATEGORIES: Social Security



COMMENTS (10 to date)
rpl writes:

The bar chart of "federal noninterest spending" seems to suggest that OASDI as a fraction of GDP will be fairly stable (at about 5%) through 2080, despite the falling number of workers per beneficiary. I guess the interpretation is that the falling fraction of workers will be offset by the increasing productivity of the workers that remain. If this is true, then Social Security might not be in as bad a shape as is generally thought. It could probably be fixed by tweaking the retirement age upward modestly, and that seems likely to be politically feasible.

Medicare (and related health programs), on the other hand, looks like a nightmare. I wonder if that's actually the message whoever made the graphic was trying to convey: "We're doing fine. Go bother Medicare instead."

Nathan Smith writes:

re: "changing the program becomes harder the lower the ratio of people who might potentially benefit from a change relative to those who are most likely to take a hit."

Maybe not. Maybe the opposite. Think Mancur Olson's logic of collective actions. "Concentrated benefits and diffuse costs."

Gene writes:

I'm frankly amazed that the workers per beneficiary in 1960 (the year I was born) was in fact so low. I would have guessed it was much higher than 4.9.

Lord writes:

It is changing it that creates winners and losers, otherwise everyone both pays and benefits. Now changes may be necessary, but they should be small and gradual to avoid creating winners and losers.

B writes:

Lord said:
"It is changing it that creates winners and losers, otherwise everyone both pays and benefits. Now changes may be necessary, but they should be small and gradual to avoid creating winners and losers."

That's some impressive status quo bias.

Stan in Sugar Land writes:

Social Security is an unsustainable program, change is required, that change will be painful especially for persons like myself. My total contribution (mine + the so called employer share which was in fact a part of my salary, just not shown as income and tax deductible by my employer) to SS was in excess of $500m, if I make it past 81 I will break even and begin to collect interest. Carefully invested my contribution would likely have grown to more than $1mm with money left over at my death. Here in Texas, Galveston County government workers had a choice years ago of participating in SS or contributing that money to a private retirement fund. They chose the private fund, result is a larger monthly check and money left at death. Several years ago Chile converted from a government run SS type fund to private, don't have much info but have seen reports the Chileans are quite happy with the new system. Be good to find some good research on Chile and Galveston County's funds. Could the US convert to a private system, lots of incompetent and vested pols in the way. But this must be addressed, if the Greenspan Comission (Bob Dole, et al) had been serious in the mid-80's about addressing SS's problems rather than just raising "contributions" (read taxes) we would not be facing this problem, but then "if wishes were horses, beggars would ride." Note: most of the Bill Clinton "surplus" was a result of the SS tax increase.

postlibertarian writes:

Not a bad infographic, although I wish the life expectancy changes were presented a little clearer. On the one hand it seems to support claims that SS is not one of our biggest problems - supposedly we "only" need a 1.6% tax increase to make it solvent for 64 years. But I see it as highlighting the demographic changes that make it unsustainable - in a society with decreasing fertility and an increased percentage of population that are beneficiaries, I'm not sure that even "adjusting" the retirement age to cancel out life expectancy "inflation" will solve the declining worker-beneficiary ratio. (Or can it?)

Besides, shouldn't a sustainable system be infinitely solvent? I.E. possible to have equal revenues and outlays in the long-term? What do you do in 64 years, raise taxes again? Or does that just reflect natural limitations of long-term forecasting?

I've also heard claims of fraud in the disabled part because the numbers have increased so much even though on average American jobs have gotten safer, but I don't have any numbers on that either way.

Don Levit writes:

Stan:
I live in Sugar Land, too!
Maybe that's why we think alike.
All of the trust fund , principal and interest, is phantom, not a real store of wealth.
The trust fund merely indicates the amount of draw on the Treasury without an appropriation.
The principal (excess taxes) have been loaned to the Treasury to pay for Government expenses. The interest is debt, not liquid cash.
When the SS trust fund was tapped last year and this year, they were going after the interest, because outgo exceeded income, excluding interest.
To get to the interest, they had to go to the Treasury, just like for any other expenses, with or without a trust fund.
The entire trust fund is pay-as-you=go.
Any investments which appreciated in value would be worth more than an unfunded Treasury.
Don Levit

Joe Cushing writes:

I don't see the crisis in letting able bodied, able minded people work if they aren't so wealthy that they don't have to work. If you can afford to not work, that means you are rich. I'm not in favor of donating money to the rich--even if I am to get a turn.

Stan in Sugar Land writes:

Don, agree and it is the reason we need to change/revise SS, as I stated earlier it will be painful and the screams excessive.

Joe: FYI, folks can work as long as they want, even wealthy folks work long past 65, obviously folks with tough outdoor jobs may not wish to. My granfather stopped working in the hay fields after a heart-attack at age 72. There is a lot of work out there still, hard but honest. Drilling firms are begging for young, dependable people to do the hard work on rigs. Still lots of illegals on rigs, they show-up and work.

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