Bryan Caplan and David Henderson

Social Security

A Category Archive (190 entries)

Vanguard's Strange Assumption

Finance
David Henderson
I'm a big fan of Vanguard. All of my IRA-type assets are in Vanguard funds. And when I mistakenly claimed in a Wall Street Journal that John (Jack) Bogle, who started Vanguard, had learned from work by Eugene Fama, Bogle... MORE

How Big of a Deal Is Social Security?

Political Economy
Bryan Caplan
Karl Smith of Modeled Behavior has moved to DC, and yesterday he honored the GMU lunch with what will hopefully be the first of many visits.  During lunch, I asked Karl about a puzzling-to-me line from his latest post:Social Security... MORE

Happiness for All

Social Security
Alberto Mingardi
Here's an interesting development, from Venezuela. Last week President Nicolas Maduro, who is following on the footsteps of Hugo Chavez, presented a new government department, the Deputy Ministry of Supreme Social Happiness. Actually, this new government unit appears to be... MORE

Fun Facts on Disability Insurance

Cost-benefit Analysis
Bryan Caplan
The new Cato Policy Analysis on Social Security Disability Insurance is full of fun facts. (footnotes omitted)The U.S. disability rate fell 25% between 1977 and 1987, then more than doubled.  The staunchest health care skeptics should be baffled.  Unless, of... MORE

Social Security and Time Horizons: Reply to Krugman

Social Security
David Henderson
As regular readers of my posts know, I'm not someone who dismisses Paul Krugman or who thinks that he has nothing worthwhile to say. Indeed, I think he's one of the smartest bloggers around. So that's why his post yesterday... MORE

Obama's Mistake on Social Security

Social Security
David Henderson
There he goes again. If congressional Republicans refuse to pay America's bills on time, Social Security checks, and veterans benefits will be delayed. That's a statement President Obama made at today's press conference. See here for transcript. It's not true,... MORE

Commentator Floccina, writing about my post on Social Security yesterday, states: SS is a way for the recipients (old people) to tax workers, therefore the more people getting SS the stronger the program is. That seems obvious, but let me... MORE

Blahous on Social Security

Social Security
David Henderson
Charles Blahous, a research fellow with the Hoover Institution, a senior research fellow with the Mercatus Center, and the author of Social Security: The Unfinished Work, is a "public Social Security trustee." He has an excellent piece laying out how... MORE

Civil War Watch: Sentences to Ponder

Social Security
Arnold Kling
John Mauldin writes, some people get so angry when you challenge their beliefs. You are literally taking away the source of their good feeling, like drugs from a junkie or a boyfriend from a teenage girl. Keep that in mind... MORE

Paul Krugman Chooses a Word Carelessly

Social Security
Arnold Kling
He wrote, Your federal government is basically an insurance company with an army. You and I would read that as an insurance company backed by coercion. Frances Woolley took it that way, and started into the pros and cons of... MORE

Gillespie and de Rugy on Generational Warfare

Social Security
David Henderson
I get some of my best uninterrupted reading done on long flights and on a recent flight I read the latest issue of Reason magazine (August/September) cover to cover. It's excellent. I found virtually every article valuable. The highlight was... MORE

David Stockman's Time Horizon

Social Security
David Henderson
"I'm just not going to spend a lot of political capital solving some other guy's problem in 2010." --David Stockman, in William Greider, "The Education of David Stockman," Atlantic, December 1981. One of the biggest "inside politics" articles in 1981... MORE

Replies on Means-Testing

Economic Philosophy
Bryan Caplan
I'm happy to see all the feedback on my latest means-testing post, but I wish more readers engaged my original question.  After presenting one simple means-testing formula, I asked:In the new political equilibrium, how much do you predict the full... MORE

Means Testing Isn't "Awesome"

Fiscal Policy
David Henderson
Over two years ago, Bryan Caplan posted on why means testing is "awesome". He didn't actually make that case, though. The case he actually made is that means testing is a good idea. "Awesome" is a step above "a good... MORE

Means-Testing and Political Economy

Behavioral Economics and Rationality
Bryan Caplan
Why not means-test Social Security and Medicare?  On the surface, this seems like a perfect liberaltarian reform.  Libertarians should favor drastic cuts in government spending, liberals should favor drastic cuts in government spending on the rich, and both should favor... MORE

Planning for the Unpleasant Future: Private vs. Public

Behavioral Economics and Rationality
Bryan Caplan
Thinking about being old and sick is no fun.  It's tempting to simply refuse to ponder the unpleasant future.  But notice: Whether people give into this temptation depends heavily on whether they're thinking personally or politically.Personally, almost everyone at least... MORE

My Hoover colleague Paul Gregory has an interesting op/ed on how things would look if the media treated Republican congressmen the way they treat Democrats. He takes a New York Times story and rewrites it the way people who oppose... MORE

My "Occupy Monterey" Talk, Part IV

Social Security
David Henderson
This is the last installment in my recounting of my "Occupy Monterey" speech. For the earlier parts, see here, here, and here. When my talk ended, we went to Q&A. One of the first questions was about my preferred presidential... MORE

From National Affairs

Monetary Policy
Arnold Kling
The current issue (fall 2011) looks quite interesting. Some of the pieces you can now access on line: 1. On means testing for entitlements, Andrew Biggs writes, There is an alternative approach -- one that achieves many of the ends... MORE

Andrew Biggs on Means Testing

Social Security
David Henderson
While Heritage cites the current taxation of Social Security benefits and progressive Medicare parts B and D premiums in defense of its reforms, the effects of its proposed means tests would be more than an order of magnitude larger. Even... MORE

More on Social Security and Ponzi

Social Security
David Henderson
In his comment on my previous post on Paul Krugman and whether Social Security is a Ponzi scheme, "wintercow20" writes: Would it not have made sense from the outset to argue something like, "Professor Krugman also recognizes the problems with... MORE

Universal Social Programs vs. Cost-Benefit Analysis

Cost-benefit Analysis
Bryan Caplan
Economists habitually mock protectionism for its high cost-benefit ratio.  "$265,000 per job saved!  How ridiculous."  But when you propose means-testing Social Security and Medicare benefits, these same economists usually protest, "A program for the poor will always be a poor... MORE

Krugman on Ponzi: I Was Being Cute

Taxation
David Henderson
Many people have quoted an article Paul Krugman wrote 15 years ago in which he said that Social Security has a "Ponzi game aspect." So how does Krugman respond? He now claims that he said it because Paul Samuelson had... MORE

The Outlook for Social Security

Social Security
Arnold Kling
Charles Blahous writes, population aging will remain a bigger financial challenge even than health cost inflation for decades to come. The vast majority of long-term cost growth in Social Security and Medicare, for example, is projected to take place by... MORE

The Age of Government Dependency

Economics of Health Care
Arnold Kling
Timothy Taylor writes, moving back the retirement age could have a large effect in addressing the financial problems of Social Security, but would have a much smaller effect in helping Medicare. Read the whole thing. The reason that raising the... MORE

Social Security Facts

Social Security
Arnold Kling
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.... MORE

Timothy Taylor Does Have a Blog

Finance: stocks, options, etc.
Arnold Kling
He started it a while ago. Two weeks ago (his first post?), he wrote, This graph needs a short explanation of what net lending is (that is, new lending minus repayments and charge-offs). But seeing a graph that goes up... MORE

The Extra Burden of Childless Elders

Family Economics
Bryan Caplan
Contrary to popular opinion, it has always been rare for people to financially support their aged parents.  In earlier times, people died too soon to "collect their pension" from their kids.  Nowadays the elderly live long enough to collect, but... MORE

A Bet I Will Make

Finance: stocks, options, etc.
Arnold Kling
Some comments on my post on Social Security challenged me to bet. Here is a bet I am willing to make. It concerns the following proof. 1. national output = national income (note that is true by definition in a... MORE

Martin Feldstein writes, With a 3% payroll deduction, someone with $50,000 of real annual earnings during his working years could accumulate enough to fund an annual payout of about $22,000 after age 67, essentially doubling the current Social Security benefit.... MORE

New from the NBER

Behavioral Economics and Rationality
Arnold Kling
1. (no ungated version found) Kevin S. Milligan and David A. Wise on factors affecting labor force participation of the elderly, an important issue relative to Social Security. 2. Justine Hastings and Olivia S. Mitchell on how savings behavior and... MORE

Political Morality and the SS Trust Fund

Social Security
Arnold Kling
John Holbo writes, it's perfectly reasonable to worry about how the US is ever going to manage to pay for stuff it needs/wants. But accusing the Social Security Trust Fund of being a mere accounting fiction does not 1) do... MORE

Budget Myths and Reality

Social Security
Arnold Kling
This paper on the long-term budget outlook was just released. My guess is that I will refer to it often in the future. I encounter a number of arguments that purport to explain why we do not have to restructure... MORE

A Must-Read on Social Security

Books: Reviews and Suggested Readings
Arnold Kling
A Well-Tailored Safety Net should be read by every policy wonk or would-be wonk who is focused on the long term fiscal outlook in general and on Social Security in particular. There are two reasons to read it. 1. Author... MORE

Peter Diamond on Social Security

Social Security
David Henderson
In 1977, President Carter proposed that Social Security benefits be indexed, not to the price level as had been the case, but to wages. Because real wages tend to rise, this wage indexing would be expected to cause Social Security... MORE

Are Social Security Commitments a Sunk Cost?

Social Security
David Henderson
In a word, No. In a comment on my post yesterday, Jim Glass writes: This $15 trillion transfer owed to pre-2010 participants is a sunk cost. He goes on to explain: Whether it was a good idea or bad one... MORE

Pension Fact of the Day

Social Security
Bryan Caplan
I took three reads to get Robin's point, but it's profound:While the ratio of folks over 65 to younger adults (OADR) will almost double in 45 years, the ratio of disabled to healthy adults (ADDR) will hardly change at all.In other... MORE

What I'm Reading: 1

Books: Reviews and Suggested Readings
Arnold Kling
Boomergeddon, by James A. Bacon. He sent me a copy after he saw my piece on guessing the trigger point for a sovereign debt crisis. Years ago, I read Boomernomics by William Sterling. That book also raised the issue of... MORE

Stop Calling it the Retirement Age

Social Security
Arnold Kling
Ezra Klein writes, there is one thing that both parties increasingly seem to agree on: You should work longer. Klein's thinking is that people do not want to work longer, so raising the Social Security "retirement age" is a bad... MORE

Payroll Tax Holiday and the Trust Funds

Social Security
Arnold Kling
Megan McArdle writes, Politically, this has one major drawback: it's going to put huge holes in the Social Security and Medicare trust funds. Since I think those trust funds are meaningless accounting devices, I don't think this has any practical... MORE

Retirement Risk

Social Security
Arnold Kling
Megan McArdle quotes Jonathan Cohn: To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too... MORE

Social Security and Kids

Social Security
David Henderson
In the comments on my post on retirement last week, Chris Koresko asks a good question, writing: Would it make sense to link the size of a retiree's Social Security payment to the number of kids he has in the... MORE

Retirement Policy

Social Security
David Henderson
Co-blogger Bryan Caplan asks: Is there any country on earth that partly bases retirement benefits on the retirees' number of children? I was waiting for one of the commenters to mention the obvious example but no one did. So I... MORE

Retirement Policy Question

Cross-country Comparisons
Bryan Caplan
Is there any country on earth that partly bases retirement benefits on the retirees' number of children?... MORE

Saving the U.S. Budget

Fiscal Policy
Arnold Kling
In this paper, I describe an approach that relies on cuts to future entitlement spending. The most important idea is to transform Medicare into a combination of a voucher and extreme catastrophic insurance. Under the proposal here, as the U.S.... MORE

Gokhale on Social Security

Social Security
Arnold Kling
As I mentioned, I have been reading Social Security, by Jagadeesh Gokhale. He has developed a forecasting model for Social Security that is more fine-grained than the one used by the system's own actuaries. Some excerpts below.... MORE

What I'm Reading

Books: Reviews and Suggested Readings
Arnold Kling
Social Security, by Jagadeesh Gokhale. He gave me a copy when we had lunch today, so I'm just getting started. I'll write more when I've read more. Meanwhile, we can deem it self-recommending for someone who wants to be conversant... MORE

The Social Security "Trust Fund"

Social Security
David Henderson
The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration. It's time to start cashing them in.... MORE

But Voters Might Run With Their Feet

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
I'm convinced that in case of fiscal crisis, voters will indeed "sit on their hands."  I'm willing to believe, however, that voters might still run with their feet.  As Tim Kane puts it, "What if they had a fiscal crisis,... MORE

Yes, Voters Will Sit on Their Hands

Social Security
Bryan Caplan
David quotes my long-time friend Veronique de Rugy:Unless we believe that younger voters will sit on their hands while their future payouts are slashed and their taxes are hiked to pay for the benefits of current retirees, then entitlements will... MORE

The Commission, the Deficit, and the VAT

Fiscal Policy
Arnold Kling
Greg Mankiw writes, let's suppose that you are a conservative and you want the fiscal commission to succeed. You will have to agree to higher taxes as part of the bargain. But what should you aim to get in return?... MORE

Question for David

Social Security
Bryan Caplan
Don't higher age cut-offs cause most or all of the problems associated with means-testing?  Why are you for the former, yet ambivalent on the latter?... MORE

Anti-AARP?

Social Security
Arnold Kling
How snowed in are we? So snowed in that we had the television on when this Charlie Rose interview with David Brooks came on. It was quite good. I agreed with Brooks on many things, and even when I did... MORE

Proposal for a Moral Budget

Fiscal Policy
Arnold Kling
I claim that it is immoral for government to make promises that it does not expect to keep. Today, on the CBO Director's blog, there is in analysis of a proposal that would satisfy my criteria for morality. The Roadmap,... MORE

Life Extension and the Budget

Fiscal Policy
Arnold Kling
The Chicago Sun Times reports, Life expectancy for Americans by 2050 will surpass government projections by as much as eight additional years for women and five for men, This is good news. The trend is not just for death to... MORE

The Entitlement Outlook

Economics of Health Care
Arnold Kling
Andrew Biggs writes, Over the next 30 years, population aging is our main entitlements problem and it makes sense to seek solutions that are based on the problem we have, not the problem we want to have. Beyond 30 years,... MORE

Good News for Social Security Taxpayers

Social Security
David Henderson
Among the guidelines the IRS issued yesterday was allowing investors to claim their losses from a Ponzi scheme as a theft loss rather than a capital loss, a personal casualty loss or a personal theft loss. This is from here.... MORE

Is Europe Insolvent?

Cross-country Comparisons
Arnold Kling
Jagadeesh Gokhale writes, By 2020, the average EU country will need to raise the tax rate to 55 percent of national income to pay promised benefits. In other words, their Social Security systems are in worse shape than ours.... MORE

Insurance or Mass Delusion?

Social Security
Arnold Kling
Robert Solow writes, It is plausible that a state-run universal social insurance system would be better able than a private company to detect and prevent exploitation of the system by malingerers. Maybe success would depend on the creation of a... MORE

Can our Government Default?

Social Security
Arnold Kling
Continuing our discussion, Felix Salmon doesn't think so. And yes, Uncle Sam will always be able to borrow. That's what "risk-free rate of return" means. Is it possible to conceive of scenarios where the US defaults? Yes -- but under... MORE

When Your Uncle sets up a Trust Fund

Social Security
Arnold Kling
Felix Salmon writes, the obligations of the [Social Security] trust fund aren't tangible obligations fungible with other government debt. But at the same time they are obligations: they oblige the government to issue debt in the future, insofar as its... MORE

Government Dependency

Social Security
Arnold Kling
John B. Shoven and Gopi Shah Goda touch the third rail. the Normal Retirement Age for Social Security in 2004 would have to be at least 71 (using lowest number in the table) and more likely 73 or 74 (using... MORE

Questioning a Talking Point

Social Security
Arnold Kling
Andrew Biggs writes, First, Sen. Obama says, "Social Security has lifted millions of seniors and their families out of poverty. Without it, nearly 50 percent of seniors would live below the poverty line." This is a common talking point, but... MORE

Your Planners at Work

Social Security
Arnold Kling
Andrew Biggs writes, Over the next twenty years, fully 60 percent of total entitlement spending increases will stem from population aging. It is not until 2045 that per-capita health care spending growth becomes the majority factor. (See figure 3, which... MORE

What's Bad for General Motors...

Social Security
Arnold Kling
Roger Lowenstein writes, But none of G.M.’s management miscues was so damaging to its long-term fate as the rich pensions and health care that robbed General Motors of its financial flexibility and, ultimately, of its cash. Whether General Motors was... MORE

The Long-Term Budget Outlook

Fiscal Policy
Arnold Kling
From the Congressional Budget Office: How would the economy be affected if the projected rise in primary spending under CBO’s alternative fiscal scenario (from about 18 percent of GDP in 2007 to about 35 percent in 2082) was financed entirely... MORE

Climate Change vs. Entitlements

Energy, Environment, Resources
Arnold Kling
Megan McArdle writes, Certainly, the long-term economic outlook is extremely uncertain, but I’m not sure what “who knows!” is a better answer to cumulatively worsening climate problems than to cumulatively worsening fiscal problems. Her point is that ignoring climate change... MORE

Real Change in Domestic Policy

Fiscal Policy
Arnold Kling
From a web site put together by Congressman Paul Ryan, It is a real plan, with real proposals, real numbers to back them, and real legislation to implement it. Based on the analysis of government actuaries, this plan is projected... MORE

Fiscal Reality

Social Security
Arnold Kling
Some numbers from the proposed Budget for 2009 for the Federal government. I try to divide non-security spending crudely into necessary spending (courts, justice, Treasury, the mysterious "other" mandatory spending) and "worthy causes" (things that are really discretionary). Update: Figures... MORE

Two Graphs About Dependency

Social Security
Bryan Caplan
People who are freaking out about the rise in the dependency ratio will normally point to the fact that the ratio of retirees to the working-age population is going to sharply rise. The following graph, taken from Social Security Administration... MORE

The Real Dependency Ratio

Social Security
Bryan Caplan
Most economists will tell you that the real problem with Social Security is demography. (Here's William Poole). The fraction of people over 65 will keep rising, implying a growing dependency ratio. The problem is that this is only the ratio... MORE

Furman on Social Security

Social Security
Arnold Kling
Jason Furman writes Indexing benefit levels for longevity, the retirement age, or the payroll tax rate goes in the right direction – delivering larger adjustments as people live longer – but only captures a small part of the uncertainty about... MORE

Promising Abstract, Disappointing Paper

Social Security
Arnold Kling
Elizabeth M. Caucutt, Thomas F. Cooley, and Nezih Guner write During the period from 1880 to 1940 pay-as-you-go social security systems emerged in most advanced economies. In this paper we describe a model economy in which demographics, technology, and social... MORE

Reality-Based Retirement Club

Social Security
Arnold Kling
In an audio file, Russ Roberts interviews Greg Mankiw. Toward the end, Mankiw endorses raising the retirement age for entitlements--what I call the age of government dependency. Welcome to the yet un-named club! (not that Mankiw's membership is new). My... MORE

Name This Club

Social Security
Arnold Kling
Greg Mankiw crows that Robert Samuelson has joined the Pigou Club, calling for an energy tax. I would crow because Samuelson writes, Raise the eligibility ages for Social Security and Medicare gradually to 70 by 2029. At 65, people would... MORE

Social Security Crisis Worldwide

Social Security
Arnold Kling
A report by the Center for Strategic and International Studies says, The UN projects that the ratio of working-age adults (aged 15 to 64) to elderly (aged 65 and over) in the developed world will drop from 4.5 to 1... MORE

Dr. Doom

Social Security
Arnold Kling
Jagadeesh Gokhale writes, As reported by its trustees, Social Security's total imbalance has increased from $10.4 trillion in 2004 to $13.4 trillion in 2006 - a jump of $3.0 trillion in just two years. And Medicare's imbalance has grown from... MORE

State and Local Unfunded Liabilities

Social Security
Arnold Kling
Chris Edwards and Jagadeesh Gokhale write, According to the Federal Reserve Board, state and local credit market debt has risen rapidly in recent years, from $313 billion in 2001 to $568 billion in 2005. But unfunded obligations from state and... MORE

Real Social Security

Social Security
Arnold Kling
Jeremy Siegel writes, The reasons why retirees cannot turn their savings into consumption is because wealth can only be transformed into goods and services if they are sold to those willing to defer their consumption. In a modern economy, wealth... MORE

Risk and Pensions

Social Security
Arnold Kling
Jane Galt takes on Malcolm Gladwell: he attributes pension problems to higher productivity, which allows manufacturers to make more stuff with fewer people, and thereby increases their dependency ratio. This is daft. Increasing productivity also increases profits, allowing companies to... MORE

The Kotlikoff Budget Plan

Fiscal Policy
Arnold Kling
Laurence J. Kotlikoff writes, the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments... MORE

Jason Furman x 2

Economics of Health Care
Arnold Kling
I had never heard of Jason Furman until today, when I encountered him twice. First, he shows up on Greg Mankiw's blog, where Greg touts this paper. In fact, if we turned our irrational health tax subsidies right-side up–by curbing... MORE

Good Sense on Fiscal Policy

Social Security
Arnold Kling
I commend Greg Mankiw's op-ed in today's Wall Street Journal. Even a generous set of excerpts will leave out a lot of well-phrased analysis. let's start with a fact about which every serious policy analyst agrees: The government budget is... MORE

QED.... MORE

Solving the Entitlement Problem

Social Security
Arnold Kling
I claim that it is not hard. The solution, as I have argued for several years, is to raise the age of government dependency for workers now in their 30's and 40's. This is a painless solution, because (a) it... MORE

Slate Produces Two Good Columns

Social Security
Arnold Kling
William Saletan writes, The point of Social Security was to subsidize those who couldn't work, not those who could. The program's founding document said it would support old people who were "dependent," "beyond the productive period" and "without means of... MORE

Strange Comment on Social Security

Social Security
Arnold Kling
Calculated Risk writes As a mental exercise, imagine if we eliminate SS spending and the SS payroll tax - what happens? The General Fund deficit stays exactly the same and we would need to address the significant General Fund shortfall.... MORE

Calculated Risk writes, The debate should be focused on the two major issues: Health Care and the General Fund deficit. Without addressing those issues first, reforming Social Security is irrelevant. Even if one were to accept the premise that the... MORE

Centrist Social Security Plan

Social Security
Arnold Kling
Andrew Samwick writes The plan contains four primary elements: a gradual reduction in future benefits; an increase in the payroll tax cap; an increase in the retirement age; and the establishment of personal retirement accounts. The plan puts great emphasis... MORE

Kotlikoff Anecdote

Social Security
Bryan Caplan
Arnold's post on Kotlikoff and Ferguson's proposals for Social Security and health care reform reminds me of a short exchange I had with Kotlikoff in grad school. (I was a Ph.D. student at Princeton, and he was our guest speaker).... MORE

Hard Heads, Soft Hearts

Social Security
Arnold Kling
Niall Ferguson and Laurence J. Kotlikoff, writing in The New Republic (subscription required), propose to tackle the fiscal mess three ways. First, they suggest replacing existing Federal taxes (personal income, corporate income, payroll, and estate) with a consumption tax that... MORE

Social Security Opt-out?

Social Security
Arnold Kling
Kyle Markley writes, Social Security should be a voluntary program. Every individual should have the right to opt out, without any restrictions on eligibility and without any requirement to justify their decision. ...Would individuals who opt out be reimbursed for... MORE

The Case for Social Security Reform

Social Security
Arnold Kling
Allan Sloan praises General Motors. the company traded that implicit pension obligation for explicit debt with an interest rate of 7.5 percent and an average maturity of 19 years... GM says that without the big 2003 deal, it would have... MORE

Retirement Age in Play?

Social Security
Arnold Kling
Bruce Bartlett says it is. He refers to Congressional testimony by Eugene Steuerle, who said, Increase the early and normal retirement ages. We should do this even if there were no long-term imbalance and even if all the saving were... MORE

Economists on Social Security

Social Security
Arnold Kling
The latest issue of Economists' Voice is devoted to Social Security. Note the dates on the articles--some of them are not new. Barbara Bergmann writes, What raising Social Security taxes in advance of higher spending on benefits does is to... MORE

Social Security

Social Security
Arnold Kling
In this essay, I write Imagine that Social Security had been structured to phase out, so that only those workers now over the age of 30 are required to be in the system. Under this assumed scenario, workers under age... MORE

Boskin on Social Security

Social Security
Arnold Kling
Michael Boskin writes, First, we should switch from wage indexing to price indexing, but raise benefits more rapidly for those with low earnings. This would eliminate most of the long-term insolvency, but do so in a manner that leads to... MORE

Et tu, Barro?

Social Security
Arnold Kling
Robert Barro writes, A serious analysis with asking why we have Social Security. If we were not so used to it, we would find it odd for the government to collect money from young workers and give it to the... MORE

Measuring Shortfalls in Entitlement Programs

Social Security
Arnold Kling
How big? So-o-o-o-o big. Ask the Concord Coalition. If added to the rates needed for Social Security, the implied payroll tax rate necessary to cover the future costs of both Social Security and Medicare would be 32 percent in 2040... MORE

The Three Percent Solution

Social Security
Arnold Kling
The Washington Post had a story about a new paper by Robert Shiller, which can be found here. He says that the recommended "life cycle account," which mixes stocks and bonds in proportions that change as one gets closer to... MORE

Social Security and Intransitivity

Politics and Economics
Arnold Kling
Bryan's post on the doubtful empirical usefulness of social intransitivity is probably right. Nonetheless, suppose that on Social Security there are three political viewpoints--Democratic, Republican, and nonpartisan--and three policy options--status quo, private accounts, and fiscal medicine. By fiscal medicine, I... MORE

Actuarial Scoring Errors

Social Security
Arnold Kling
In this essay, I take off on "actuarial scoring" of Social Security plans. In fact, at a 3 percent real interest rate, it would be irrational for me to switch to using personal accounts! I have some of my portfolio... MORE

Yesterday's Washington Post had a fascinating history of proposals for Social Security privatization. Admittedly, it's probably more fascinating to me than to most people, because I know most of the people mentioned in the article! Some highlights: Twenty-five years ago,... MORE

Social Security Political Economy

Social Security
Arnold Kling
Tyler Cowen writes, Why might you think that the elderly deserve a greater share of resources in society? Here are some options... 2. The relevant political alternative is lower marginal tax rates for the well-to-do. Transfer resources to anyone but... MORE

Social Security Risk

Social Security
Arnold Kling
I did not take away much from the first day of Cato's Social Security Bash. I guess my views on the subject are pretty well settled, so that for me the session served to illuminate what other folks are worried... MORE

The Three Percent Solution?

Social Security
Arnold Kling
This briefing on the Administration's proposals for Social Security personal accounts cleared up a number of issues, such as the way that accounts would be administered and the type of investment options available. In both cases, the Federal Employees' Thrift... MORE

Social Security Deal?

Social Security
Arnold Kling
Brad DeLong proposes 1. Shift responsibility for maintaining actuarial balance off of the Congress and onto the Social Security Administration--have it gradually raise (and lower) the retirement age or the benefit-rule bend points in order to keep the system in... MORE

Social Security Incrementalism

Social Security
Arnold Kling
On the new pro-reform group blog, Kerry Kerstetter makes a case for incremental privatization. Allowing private control over retirement money that would otherwise go to the Social Security bureaucrats in DC is no different than what we have long had... MORE

Social Security Debate

Social Security
Arnold Kling
The Washington Post presents a wide range of viewpoints. Mark Weisbrot and Dean Baker write, The bottom line is that Social Security is more financially sound today than it has been throughout most of its 69-year history, according to Social... MORE

Lifespan, Social Security, and Medicare

Social Security
Arnold Kling
Continuing to peruse Brad's reading list (see preceding post), I came across an article on the topic I raised in my Lifespan essay. The article is by Ronald Lee and Jonathan Skinner. We find that the prospects for longevity are... MORE

Social Security Debate Online

Social Security
Arnold Kling
The Wall Street Journal has posted one of their periodic Econoblogger Celebrity Death Match thingies. This one features yours truly and Max Sawicky, on the topic of Social Security Reforms. I'll use this forum to respond to some of Max's... MORE

Lifespan Calculations

Social Security
Arnold Kling
In this essay, I discuss the esoteric but important topic of longevity calculations. How do we calculate the longevity of a person born in, say, 1950? The analogy would be to look at how many people born that year died... MORE

Private Investment is Dangerous

Social Security
Arnold Kling
This article by Norma Cohen, which Paul Krugman and others think is very important, strikes me as proving too much. Cohen writes, Britain's experiment with substituting private savings accounts for a portion of state benefits has been a failure. A... MORE

Social Security Indexing Debate

Social Security
Arnold Kling
Bill Sterling argues that the debate is long overdue. If there was a substantive debate on wage indexation in 1976 it seems to have been entirely an inside-the-beltway affair. Fearing to step on the dreaded third rail, President Ford ignored... MORE

Social Security Ad Nauseum

Social Security
Arnold Kling
I have an essay that looks at recent writing by Brad DeLong and Paul Krugman. To economists, raising the retirement age is the obvious fix for a system that otherwise faces an ever-declining ratio of workers to retirees. Unfortunately, it... MORE

Feldstein on Social Insurance

Social Security
Arnold Kling
I recommend David Warsh's coverage of this year's American Economics Association meetings, which just concluded. Among other things, he mentions Martin Feldstein's Presidential Address, Rethinking Social Insurance. Feldstein writes, The impetus for broader social insurance reform comes from the recognition... MORE

Social Security Wage vs. Price Indexing

Social Security
Arnold Kling
The Democratic National Committee accused the Bush Administration of trying to cut Social Security benefits by shifting to price indexing from wage indexing. I suggest that the administration should plead guilty. Future benefits that are promised under the current system... MORE

Bartlett and Krugman

Social Security
Arnold Kling
National Review's Bruce Bartlett and New York Times columnist Paul Krugman appear to be singing from the same song sheet on Social Security. Bartlett writes, It is not clear what is driving the urgency of Social Security reform. It is... MORE

Social Security and Indexing

Social Security
Arnold Kling
William Sterling writes, Price indexation should save the government trillions of dollars in the long run because of the magic of compound interest. Wage growth has historically outpaced consumer price inflation by about 1.1% per annum. That means that the... MORE

Nobel Laureate Edward Prescott thinks that we need mandatory saving to solve a time inconsistency problem. The reason we need to have mandatory retirement accounts is not because people are irrational, but precisely because they are perfectly rational -- they... MORE

Kinsley on Social Security

Social Security
Arnold Kling
Here is the crux of the issue in Kinsley's argument: if [privatization] contemplates reducing Social Security payments proportionally to the reduction in taxes -- and counting on people to make up the difference with their new investments -- people will... MORE

No Entitlements Crisis?

Social Security
Arnold Kling
Now that President Bush is proposing to reform Social Security, opponents are arguing that there is no crisis. They might wish to read Laurence Kotlikoff. continuing to ignore the problem will simply let more generations, particularly older ones off the... MORE

Adequacy of Personal Savings

Social Security
Arnold Kling
In a research paper, John Karl Scholz says that over 80 percent of households are saving at least as much as is optimal. However, much of their result is based on counting Social Security wealth in their analysis. Private net... MORE

More on Privatization

Social Security
Arnold Kling
Paul Krugman makes a generous concession to privatization supporters. For the record, I don't think giving financial corporations a huge windfall is the main motive for privatization; it's mostly an ideological thing. I don't recall MIT having a course in... MORE

Social Security Privatization

Social Security
Arnold Kling
In response to this post by Michael Kinsley, I wrote this. Michael Kinsley is correct to be skeptical that privatization will generate a bonus large enough to eliminate the gap between the promises made to future recipients and the likely... MORE

In this essay, I wonder why the Left and the Right do not reverse their positions on Social Security privatization. However, there is one important difference between keeping Social Security as it is and switching to privatization. Under the current... MORE

Social Security Transition Cost

Social Security
Arnold Kling
Responding to a comment on the previous post, I write, Suppose that your house has a very dilapidated roof. The next big winter storm is likely to cause huge damage unless it is repaired. So you borrow $20,000 and fix... MORE

Social Security Reform

Social Security
Arnold Kling
The New York Times has two relevant op-eds. John Kasich writes, benefits are growing faster than inflation. First-time Social Security benefits are now tied to wage growth, and wages are rising faster than prices. The result: over the next 75... MORE

Kotlikoff's Social Security Plan

Social Security
Arnold Kling
Lawrence Kotlikoff has a long description in today's Boston Globe. One way to make up for the loss in revenue from privatization as well as cover the existing revenue shortfall is dramatically but gradually to cut Social Security benefits. Such... MORE

Debating Forced Saving

Social Security
Arnold Kling
Tyler Cowen writes, First, how much can our government force people to save in the first place? You can make them lock up funds in an account, but they can respond by borrowing more on their credit cards, taking out... MORE

Prescott on Social Security

Social Security
Arnold Kling
2004 Nobel Laureate Edward Prescott does not care for paternalism. let's begin by dismissing the notion that individual savings plans are somehow dangerous to U.S. citizens. Some politicians have vilified the idea of giving investment freedom to citizens, arguing that... MORE

Taxes and Social Security

Fiscal Policy
Arnold Kling
Laurence J. Kotlikoff proposes to replace the payroll tax with a sales tax. replacing the payroll tax with a sales tax is the same as (a) eliminating the payroll tax ceiling, (b) taxing wealth at the payroll tax rate, and... MORE

Debating Social Security

Social Security
Arnold Kling
It's Tyler Cowen vs. John Irons at the Wall Street Journal on line. (WARNING: the WSJ to override the article with a new article, which means that the link will not take you to the social security debate) [Cowen:] Social... MORE

Social Security Privatization

Social Security
Arnold Kling
UPDATE: I thought this was more recent, but it's an older column that Winterspeak pointed to. Still worth reading. Jeffrey A. Miron and Kevin M. Murphy write, privatization has no effect on the solvency of the Trust Fund; it reduces... MORE

Social Security Myths

Social Security
Arnold Kling
My latest essay on Social Security says, The transition cost myth is one of four Social Security misconceptions that I want to address here. The others are the misconception that Social Security is a pension, the misconception that the Baby... MORE

Social Security Arithmetic

Social Security
Arnold Kling
Tyler Cowen points to the Bruce Webb comment on Brad DeLong's post on Social Security. Webb says, in part If privatization will work, it won't be necessary. If privatization will be necessary it won't work. And exactly no one has... MORE

The Budget Debate

Social Security
Arnold Kling
Jagadeesh Gokhale and Kent Summers. point out that for entitlement programs, "pay as you go" is actually bad Budget policy. Pay-as-you-go in this context usually implies benefit increases -- for which retirees obviously don't pay -- and tax increases for... MORE

The Need for Savings

Social Security
Arnold Kling
In this essay, I argue that because people live longer and consume more health care, we should be saving more. Suppose that 50 years ago the expectation for a 45-year-old man was that he would live to age 70, and... MORE

Forced Savings vs. Social Security

Social Security
Arnold Kling
Brad DeLong endorses privatized Social Security, if what you mean by that is forced savings. Too many households are myopic: they do not save enough. Households resist increases in Social Security taxes--they see no link between the taxes and their... MORE

Social Security and Real Production

Social Security
Arnold Kling
Don Lloyd decries the accounting approach to Social Security. The common flaw in all of the proposed remedies above is that they focus on dollars and money. This is too narrow and ignores the fact that the primary end goal... MORE

Entitlement Arithmetic

Social Security
Arnold Kling
According to Thomas Saving, an economist who is one of the trustees of Social Security and Medicare, we are already taking money from general revenue to fund the deficits in those programs. This year, for the first time in recent... MORE

The "Cost" of Privatization

Social Security
Arnold Kling
The Washington Post adds up the cost of President Bush's campaign proposals. They include this: An estimate from the Social Security actuary's office, included in the 2001 report of a Social Security commission appointed by Bush, put the cost of... MORE

Third Rail Issues

Social Security
Arnold Kling
Robert J. Samuelson writes, The central distributional issue of our time is not between rich and poor. It is between retirees and non-retirees. In fiscal 2003, Social Security and Medicare cost $744 billion. All federal retirement and disability programs now... MORE

Policy Specifics

Economics of Health Care
Arnold Kling
In my latest essay, I look at the specifics of the President Bush's economic proposals. Overall, I am afraid that the President's concept of the "ownership society" owes more to David Brooks than it does to Stephen Bainbridge. But the... MORE

Economic Policy Analysis

Growth: Causal Factors
Arnold Kling
Whoever is writing the lead editorials for the Washington Post (I suspect Sebastian Mallaby) on economic policy issues in this year's election is providing pieces that are highly educational. Today's editorial is called The Growth Mystery. we don't know how... MORE

Domestic Policy Issues

Economics of Health Care
Arnold Kling
I argue that on domestic policy, President Bush should focus on Social Security and health care. Our existing system was designed when reaching the age of 65 meant that your active life was probably over, and you were likely to... MORE

Hours Worked In the U.S. vs. Europe

Labor Market
Arnold Kling
The OECD looks at total hours worked in its member countries. The performance of US labour markets also looks quite strong when assessed in terms of hours worked per capita, a more comprehensive measure of “labour utilisation” than the employment... MORE

The Economics of Immortality

Social Security
Arnold Kling
Aubrey de Grey reviews a Brookings volume on the economics of increased longevity. Aubrey has a more optimistic vision than the authors. rejuvenation research...will anticipate and remedy the life-threatening degenerative changes appearing at newly achieved ages with ever-increasing efficacy and... MORE

Inappropriate Annuities

Social Security
Arnold Kling
Are annuities appropriate for the elderly? The Securities and Exchange Commission and the National Association of Securities Dealers say not necessarily. The SEC also today issued an alert to remind investors that variable annuities are not suitable for all consumers,... MORE

Demographics

Social Security
Arnold Kling
The International Economy Magazine collects twenty opinions on the issue of demographic change in one issue. For example, Michael Boskin writes, The United States is in far better shape to deal with these issues than the bulk of the developed... MORE

Social Security a Diamond in the Rough?

Social Security
Arnold Kling
In this essay, I examine at length Peter Diamond's arguments for Social Security as it exists currently. An excerpt: I doubt that elderly people who maintain their assets in lump sum format rather than as annuities are as irrational as... MORE

Welfare State Free Lunch?

Fiscal Policy
Arnold Kling
In his New York Times column last week, Jeffrey Madrick referred to the work of Peter Lindert on the ability of countries to grow in spite of welfare state distortions. Lindert's argument can be found in Why the Welfare State... MORE

Defending Social Security

Social Security
Arnold Kling
In the March 2004 issue of the the American Economic Review, Peter Diamond defends the structure of Social Security. (I cannot find the article on the web, unfortunately.) He argues that in the absence of Social Security, individuals would save... MORE

Social Security and Demographics

Social Security
Arnold Kling
Zimran ("Winterspeak") Ahmed points to a survey article by The Economist of issues raised by the aging of the population. This survey will argue that the promises governments have made to people retiring today are too large to be met... MORE

The Budget Menu

Fiscal Policy
Arnold Kling
In the essay I referred to in my previous post, I also write A President who has only added to future entitlement obligations ought to be judged as having acted to increase taxes. To call this Administration a tax cutter... MORE

Economists as Heretics

Social Security
Arnold Kling
In this essay, I argue that Congress treats economists the way the Inquisition treated heretics. Why do the Inquisitors have it in for economists? Ultimately, politicians tell the people what we want to hear. They think that we want to... MORE

Greenspan's Concerns

Social Security
Arnold Kling
Federal Reserve Chairman Alan Greenspan tries taking on some sacred cows. In a logical assessment of the Social Security's future financial condition, he suggested ways to curtail the growth in future benefits. The response was predictable Sen. Arlen Specter, R-Pa.,... MORE

Social Security Reform

Social Security
Arnold Kling
Michael Tanner of the Cato Institute has a proposal for weaning young workers off of the Social Security system. workers who chose the individual account option would receive a bond in recognition of their past contributions to Social Security. That... MORE

Social SecurityAnalysis

Social Security
Arnold Kling
The 2004 Economic Report of the President also discusses Social Security. One issue is measuring the Social Security shortfall. Most economists reject the so-called "actuarial shortfall" as a measure. One alternative is the Gokhale-Smetters present value estimate. The 2004 Economic... MORE

Collective vs. Individual Benefits

Social Security
Arnold Kling
I have a new essay that argues that we over-estimate the value of collective benefits. Contrary to my training as an economist, I believe that at least some of the preference that workers have for in-kind benefits reflects flat-out irrationality.... MORE

Social Security Privatization

Social Security
Arnold Kling
In this piece, I argue that the "transition cost" argument against privatizing Social Security is bogus. I also make my usual case against what I call the Stock Market Scenario. Finally, I conclude by saying that privatization is the ultimate... MORE

Long Run Stock Returns

Social Security
Arnold Kling
Because the stock market figures into most Social Security privatization plans, the Social Security Administration commissioned economists to estimate long-run returns from stocks. This analysis is three years old, but since I've brought up the issue on several occasions it... MORE

Social Security Reform

Social Security
Arnold Kling
The Social Security Administration has evaluated a proposal by Peter Ferrara for private social security accounts. This plan would establish voluntary, progressive individual accounts for workers who are under age 55 on January 1, 2005 and would provide for a... MORE

Comments on Science and Social Security

Social Security
Arnold Kling
Many interesting comments on my suggestion that science could bail out social security. First, Andrew writes, Social Security pays retirees a benefit based on their pre-retirement wages, targeting a 'replacement rate' rather than a real benefit level. If GDP grows... MORE

Science vs. Social Security

Growth: Consequences
Arnold Kling
In an essay called Will Science Save Social Security?, I write, Overall, if events play out over the next quarter century as the technology optimists predict, then GDP will be so astronomical that the costs of Social Security and Medicare... MORE

Aging Europe

Social Security
Arnold Kling
The aging of Europe is not a problem, according to Dominic Standish. On present trends of rising productivity, employing the same number of people in 2040 as now would produce over double the amount of wealth we currently have to... MORE

Economics vs. Populism

International Trade
Arnold Kling
In this essay, I argue that economists face an uphill battle in dealing with populist beliefs about international trade, entitlements, and consumption versus saving. In my view, international trade is only one aspect of the overall phenomenon of Progress and... MORE

Kotlikoff on Social Security

Social Security
Arnold Kling
Steve Verdon points to a speech by Laurence Kotlikoff with a plan for saving Social Security and Medicare. The Personal Security System 1. The accrual of additional Social Security retirement (OAI) benefits is eliminated. 2. Current retirees and current workers... MORE

Libertarian Redistribution

Income Distribution
Arnold Kling
In an essay called Bleeding-Heart Libertarianism, I sketch a system for using a consumption tax with a negative-income-tax feature to replace government-provided health care, education, and income security. Does the bleeding-heart libertarian approach seem harsh? Actually, the Welfare State is... MORE

Friedman Interview

Economics of Education
Arnold Kling
John Hawkins' interview of Milton Friedman touches on many subjects. Friedman is not terribly worried about Social Security. we're a very strong country, lots of able people, lots of active entrepreneurs, and so the Social Security system will be a... MORE

The Budget Debate

Social Security
Arnold Kling
The Congressional Budget Office provides an analysis of the long-term Budget outlook. The projections also assume for analytical purposes that aggregate federal revenues will level out at 19 percent of GDP in 2020, reflecting the higher end of the range... MORE

The Long-term Budget Outlook

Social Security
Arnold Kling
In testimony before the House Budget Committee, William Gale of the Brookings Institution says, there is another big part of the problem: namely, the sunsets that are in the tax code. If all of those sunsets were removed, revenue would... MORE

The $44 trillion shortfall

Social Security
Arnold Kling
'Jane Galt' links to a paper that was notorious before it was released. Some news outlets reported that the measures of fiscal imbalance created by Jagadeesh Gokhale and Kent Smetters were suppressed by the Bush OMB department because they showed... MORE

Boskin Scenario, Revisited

Social Security
Arnold Kling
Will deferred taxes on IRA's and similar savings plans save the Federal Budget, as a recent draft paper by Michael Boskin seemed to suggest? Not according to William G. Gale , Alan J. Auerbach , and Peter Orszag. Boskin's projections... MORE

Social Security Privatization Debated

Social Security
Arnold Kling
Here is Peter Ferrara's comeback to me on Social Security privatization and stock market scenarios. The views advanced by Kling, however, are not peculiar to him. They reflect what personal account reformers are calling these days the "pain caucus" approach... MORE

Perspectives on Social Security

Social Security
Arnold Kling
Last year, Stanley Fischer discussed Australia's Social Security system. He found several aspects to be admirable. Australia has already undertaken the key pension system reforms that most of the rest of the industrialized world is now struggling with. The World... MORE

IRA's to the Rescue?

Social Security
Arnold Kling
Asymmetrical Information points to a paper by Michael Boskin. Roughly $400 billion a year is contributed to various tax-deferred saving vehicles, and the amount is likely to grow with nominal income growth and the increased limits on tax-deferred contributions recently... MORE

Social Security Privatization

Social Security
Arnold Kling
Peter Ferrara claims that Social Security could be gradually privatized and the future deficit eliminated without reducing benefits. This is a free lunch of staggering dimensions. Among other things, it relies on the following assumption. The long-term real rate of... MORE

Paris in the Springtime

Social Security
Arnold Kling
Two recent opinion pieces discuss the French ritual of strikes in May. The Wall Street Journal writes, Four workers financed each pensioner in 1960 and two in 2000. By 2020 the ratio will be one-to-one. Mr. Raffarin has told the... MORE

Growth and Demographics

Social Security
Arnold Kling
Steven Nyce and Syl Schieber analyze the likelihood that the size of the labor force will start to decline in many developed countries. It now appears that many of the developed economies will experience periods in which the numbers of... MORE

Social Security Tax Cut?

Fiscal Policy
Arnold Kling
A proposal from former Labor Secretary Robert Reich: The best and the fastest way to get more money into the pockets of people who are likely to spend it quickly is to cut the taxes of average working people. Most... MORE

The Budget Debate, IX

Fiscal Policy
Arnold Kling
Jonathan Rauch has a nice summary of the issues in the Budget debate. The economists note that if tax cuts are paid for through higher deficits instead of lower spending, the government borrows back from the economy the capital that... MORE

The Budget Debate, VII

Social Security
Arnold Kling
I want to follow up on the attempt by the Center for Budget and Policy Priorities to compare the future bulge in entitlement spending to the Bush tax cut--see this thread. The CBPP was able to shrink the gap between... MORE

The Budget Debate, VI

Social Security
Arnold Kling
[Update: Bernard Yomtov convinced me that the CBPP did not make the error I suggested below. Instead, the way that they accomplished the swindle is explained in this post.] As a share of GDP, increases in future Medicare and Social... MORE

The Deficit Argument, V

Social Security
Arnold Kling
David Warsh gives one of the more sober overviews of the debate over tax cuts, the deficit, and Social Security. There are two basic issues in US tax policy — the question of the size of government and the health... MORE

Milton Friedman on Social Security

Social Security
Arnold Kling
My choice for last week's comment of the week generated a lot of comments! It refers to this article by Milton Friedman, who describes a conceptual scheme for transitioning out of Social Security. Based on the comments, I can tell... MORE

Comment of the Week

Social Security
Arnold Kling
Because the comments that people are submitting here are unusually good, I think I'll feature at least one every week. This week's "comment of the week" is from Jim Glass on the Deficit Argument IV thread. He links to an... MORE

The Deficit Argument, IV

Social Security
Arnold Kling
Hal Varian gives a clear account of the concern with long-term deficits. A recent study by the economists Alan J. Auerbach, William G. Gale, Peter R. Orszag and Samara R. Potter, "Budget Blues: The Fiscal Outlook and Options for Reform,"... MORE

The Budget Debate

Macroeconomics
Arnold Kling
Columnist Robert J. Samuelson describes the Budget debate as each side trying to embarrass the other, without ever confronting the truly important budget issues What both sides are trying to avoid discussing, according to Samuelson, is the anomalous structure of... MORE

The Deficit Argument, II

Social Security
Arnold Kling
Liberal and conservative economists are not as far apart on the issues of fiscal policy as it might first appear. Both sides share a concern that government growth could outstrip GDP growth. The position of liberal economists on the U.S.... MORE

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