The American Bar Association invited me this weekend to speak with lawyers and law professors about Social Security. He had two major questions that I think are shared by nearly all Americans.
Question 1: Does spending more on Social Security mean we’ll spend less on children?
To think that increasing or maintaining Social Security benefits means children will have less perception of inter-generational warfare in the budgeting process. Public finance doesn’t work that way. in a study of In more than 163 countries, I found that when the generosity of a country’s social security system rises to 10%, payments to the education system – which is heavily correlated with other income and government support for children – increase by 7%. goes. This result makes sense because when a political system supports a vulnerable group, the elderly, you have political support for other children as well. The revenue comes from somewhere else.
Social security for children is also important. It provides more child poverty relief than any other US government program other than the EITC. social security removed 1 million children out of poverty while EITC lifted 3 million children in poverty. In comparison, families need temporary support. is far behind, Social Security helps 38% of the elderly to live below the poverty line. Taking into account the poverty alleviation impact on children and adults with disabilities, social security Lifting more Americans out of poverty than any other government programme.
The second most frequently asked question about Social Security is:
Question 2: If people live longer, can we really afford to fully fund and expand Social Security?
The inquiry continues: instead of increasing revenue, should we make people work longer? There are five points that dispute this proposal:
First, not everyone is staying healthy and long. Research The past 15 years have shown that longevity benefits barely increased for the bottom half of the income distribution. The greatest gains in life expectancy have been for the highest-income groups. There are also wide differences between socioeconomic groups that have retirement time And who doesn’t. Men are more likely to die without retirement than women. African Americans and women with low educational qualifications tend to retire less often and spend the bulk of their time in retirement needing some form of support.
Second, cutting Social Security benefits can reverse some of the longevity benefits. For some people, working older kills. When Social Security was introduced and expanded in the 70s, the life expectancy and health of the elderly increased further for the elderly. Some researchers He attributed this difference to the elderly working less and having higher incomes, which helps a larger body live longer.
Granted, work may be good for the health of some workers in old age. This is more likely to happen in the case of people like me (university professors) who actually choose to work longer hours in jobs where we control the pace and content of the work. But research from the past ten years shows that for those who are subordinate to others and where one cannot control the pace and content of work, working older can hasten death.
Third, cutting Social Security benefits to encourage work won’t work because most retirements are involuntary. This discovery stems from both of our Work Richard Johnson of the New School and Urban Institute, which estimates that about 66% of retirees were fired earlier than they expected.
Fourth, the benefits of deduction will move us further away from practices in similar nations in terms of working years, expected retirement, and aged poverty levels. Since the Americans have a Young Life – 65 Longevity We have a much shorter retirement period than any other country in the G7 and have the longest working hours. Our The age to collect full retirement benefits is so high—age 70—that a 22-year-old American has to work 48 years to get maximum benefits. In France it is 41 years; In Britain and Germany, a little over 43 years. America is at number two and Italy, where a 22-year-old should work for 44 years.
Fifth, Social Security is a significant source of income. About two-thirds of beneficiaries age 65 or older receive 50% or more of their total income from monthly Social Security checks. For a third of elderly beneficiaries, Social Security provides 90% or more of their income.
We can afford to strengthen Social Security
Some big simple reforms are needed to strengthen Social Security. Overall, we must raise revenue to increase benefits in Social Security.
To bridge the gap needed to fully fund Social Security-3.54% Of payroll, up from 12.4% is now split equally between workers and employers – we can only raise FICA taxes and still live well below typical international rates.
Experts recommend a combination of revenue growth, which includes raising payroll taxes slightly in the future and raising the Social Security income threshold to tax higher earners, as did Peter Orszag and Nobel laureate Peter Diamond. suggested 20 years ago. Others have proposed partial funding from general revenue by taking inheritance taxes and a portion of capital gains. Representative John Larson has one of the most promising bills in Congress today — promising because it can pass and promising because it will likely work.
The bottom line is that only minor changes to the budget are needed to keep Social Security financially sound over the next 75 years. There’s plenty of room in the budget to expand Social Security – provided we’re willing to increase revenue – and the population needs a lot more.