It seems like this blog could use a little bit of a jump start, so I'll start with some food for thought. The issue is Social Security.
Now, we know Social Security has been a hot-button issue for some. In his first term, the Bush administration tried hard, albeit unsuccessfully, to turn the accounts from a community trust fund to privatised accounts. Well, it appears that arguments for privatization are returning. So what's the issue?
Well, some people, mainly conservative Republicans, are saying that we need to overhaul (through privatization) Social Security because of the rising medical costs that we'll see as the baby boomers begin to retire. This seems to be deceptive at best. Here's why.
Currently, federal spending on the healthcare trio (Medicare, Medicaid and Social Security) is 8.5% of GDP. By mid-century, projections from the GAO have this rising by 10%. That could be a problem, yes, but how much of that is due to Social Security? After taking into account the new worker-to-beneficiary ratio that will result when the boomers retire (3-2), the percentage of GDP spent on SS will rise about 2 percentage points to 6% of GDP -- not a huge issue in terms of entitlements.
In 1983, the format was altered to increase the payroll tax and build up a trust fund that, according to CBO estimates, will keep Social Security paying out benefits until 2041.
As for Medicare and Medicaid, a lot of the reasons for the projected increase in these areas are due to rising healthcare costs. The aging population, according to the CBO, actually has a very modest effect that is more than cancelled out by rising costs. So even if privatization of Social Security were a good idea, it wouldn't do anything to address the rise in healthcare costs.
The bottom line is: Social Security isn't the problem.
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3 comments:
I suppose that I'm not the most up to date on the impact of social security, but the facts seem to dictate that the money put into the program could be put to better uses. Social Security for one, seems to barely compensate for any sort of retirement plan, and in doing so, creates a false net for those in need. Is social security the problem for the government on a grand scale as a part of GDP? perhaps not. But comparing it to that percentage is perhaps fallacious. A better analysis relies on comparing the advantages and disadvantages of a no social security system, the system as is, and what new systems can be in place to give incentive to save for retirement.
Michael, what's the bottom bottom line? If the bottom line is that SS isn't the problem, what is the problem?
Scott, this post mainly dealt with the new discussion swirling around Social Security. The problem, as far as I can tell, is that costs are rising in actual healthcare. Costs are rising in Social Security, yes, but it's not enough to account for the expected rise in healthcare costs. The rise in costs is due to Medicare and Medicaid, neither of which I know a great deal about at this point in time. Hopefully I'll be able to follow up later.
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