Tag: Social Security

Friday Links

  • When is an entitlement not an entitlement, but a command? When a federal judge contradicts herself, of course.
  • As the Arab League’s influence over its own member states wanes, of course they support the creation of an international no-fly zone over Libya.
  • Of course, there’s really no such thing as a “Social Security trust fund.”
  • Should the United States and Saudi Arabia remain allies? Of course—but Washington should probably re-think the terms of the partnership.
  • Of course, when George W. Bush was president, you couldn’t go anywhere in Washington without seeing an anti-war protest. Where have they all gone?

Thursday Links

  • There is a growing gap between Washington policymakers, and the taxpayers and troops who fund and carry out those policies.
  • Why do budget and deficit hawks keep sidestepping growing entitlements?
  • Don’t forget to join us on Monday, March 28 at 1pm ET for a live video chat with Julian Sanchez on the growing surveillance state.
  • The individual mandate in Obamacare is another example of the growing congressional power under the Commerce Clause:

Our Brave Leaders

The Washington Post reports: “Obama has decided not to endorse his deficit commission’s recommendation to raise the retirement age, and otherwise reduce Social Security benefits, in Tuesday’s State of the Union address.”

When I read this, I thought of a song from Monty Python and the Holy Grail:

Brave Sir Robin ran away
Bravely ran away, away
When danger reared its ugly head
He bravely turned his tail and fled
Yes, brave Sir Robin turned about
And gallantly he chickened out
Bravely taking to his feet
He beat a very brave retreat
Bravest of the brave, Sir Robin.

In the movie, Sir Robin and the other knights are galloping along on horseback, except when you look closely you see that their aides are banging coconuts together only simulating the sounds of brave mounted knights.

Isn’t that what’s going on in Washington? A giant fiscal disaster looms over the nation, and our leaders are only simulating leadership. Republican leaders can’t name a single program that they would cut, and President Obama runs away from a reform to the nation’s most costly program that should be a no-brainer.

Rather than chasing the Holy Grail of “investment” spending, the president needs to sit down with his congressional knights at a roundtable and get the kingdom’s finances under control with major spending cuts.

House Vote to Repeal ObamaCare Is More than Mere Symbolism

The symbolism of today’s House vote is striking. Within a year of ObamaCare’s enactment, the House of Representatives has voted overwhelmingly to repeal it.

That didn’t happen with Social Security. It didn’t happen with Medicare. Social Security and Medicare did not face sustained public opposition from the moment they were introduced in Congress. They did not pass by one vote, in the dead of night. They were not challenged as unconstitutional by half the states in the union.  They were not struck down as unconstitutional by a federal court within a year of enactment.

The House vote to repeal ObamaCare is just the latest sign that ObamaCare goes too far, that it creates a more intrusive government than the American people are willing to accept.

But the House vote is not mere symbolism, as the Obama administration would have us believe.  This vote has moved the ball forward on repeal.  This and further similar votes in both the House and Senate will reveal where members stand on repealing ObamaCare.  Voters may use that information to replace pro-ObamaCare members with people who will vote to repeal ObamaCare in the next Congress.  That’s how the political system works.

At the same time, this repeal vote makes it more likely that the Supreme Court will strike down ObamaCare. Like it or not, the Supreme Court follows the election returns. This vote shows the Court that it will not pay a price in the public’s esteem if it overturns ObamaCare.

Today’s vote makes it more likely that someone with the power to scrap ObamaCare will do so – and the Obama administration knows it.  Why else would they come out with both guns blazing against a purely “symbolic” act?

When that happens, it will be a good day for America. Real health care reform is impossible while ObamaCare remains on the books.

The Case for Social Security Personal Accounts

There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely caused by demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.

Social Security reform received a good bit of attention in the past two decades. President Clinton openly flirted with the idea, and President Bush explicitly endorsed the concept. But it has faded from the public square in recent years. But this may be about to change. Personal accounts are part of Congressman Paul Ryan’s Roadmap proposal, and recent polls show continued strong support for letting younger workers shift some of their payroll taxes to individual accounts.

Equally important, the American people understand that Social Security’s finances are unsustainable. They may not know specific numbers, but they know politicians have created a house of cards, which is why jokes about the system are so easily understandable.

President Obama thinks the answer is higher taxes, which is hardly a surprise. But making people pay more is hardly an attractive option, unless you’re the type of person who thinks it’s okay to give people a hamburger and charge them for a steak.

Other nations have figured out the right approach. Australia began to implement personal accounts back in the mid-1980s, and the results have been remarkable. The government’s finances are stronger. National saving has increased. But most important, people now can look forward to a safer and more secure retirement. Another great example is Chile, which set up personal accounts in the early 1980s. This interview with Jose Pinera, who designed the Chilean system, is a great summary of why personal accounts are necessary. All told, about 30 nations around the world have set up some form of personal accounts. Even Sweden, which the left usually wants to mimic, has partially privatized its Social Security system.

It also should be noted that personal accounts would be good for growth and competitiveness. Reforming a tax-and-transfer entitlement scheme into a system of private savings will boost jobs by lowering the marginal tax rate on work. Personal accounts also will boost private savings. And Social Security reform will reduce the long-run burden of government spending, something that is desperately needed if we want to avoid the kind of fiscal crisis that is afflicting European welfare states such as Greece.

Last but not least, it is important to understand that personal retirement accounts are not a free lunch. Social Security is a pay-as-you-go system, so if we let younger workers shift their payroll taxes to individual accounts, that means the money won’t be there to pay benefits to current retirees. Fulfilling the government’s promise to those retirees, as well as to older workers who wouldn’t have time to benefit from the new system, will require a lot of money over the next couple of decades, probably more than $5 trillion.

That’s a shocking number, but it’s important to remember that it would be even more expensive to bail out the current system. As I explain at the conclusion of the video, we’re in a deep hole, but it will be easier to climb out if we implement real reform.

Social Security Disability Benefits Unsustainable

The disability insurance component of Social Security was created in 1956 to provide income support to individuals aged 50 to 64 who were permanently disabled. As is typical with government programs, eligibility and benefits were greatly expanded over the subsequent decades.

SSDI, which is funded through a 1.8 percent payroll tax on all workers, was recently described by the Congressional Budget Office as “not financially sustainable.” The following chart shows that SSDI benefit payments have soared 119 percent since 1995 in real or inflation-adjusted terms:

What was supposed to be a narrowly tailored program to help individuals who could no longer work has blossomed into a gigantic budgetary burden that acts more like an unemployment program. Indeed, the number of individuals receiving SSDI benefits has jumped more than 10 percent in the last two recessionary years. So a large number of people seem to be abusing the system by claiming disability in order to get government handouts. What makes the problem worse is that, unlike standard unemployment insurance, there’s no time limit for how long an individual can receive SSDI.

The long-term upward trend in real benefit payments also suggests abuse because fewer people should be having career-ending injuries.

From a 2006 paper on SSDI by economists David Autor and Mark Duggan:

Adding to the complexity of an expanding program mission, five decades of advances in medical treatments and rehabilitative technologies, combined with a secular trend away from physically exertive work, have arguably blurred any sharp divide that may have once existed between those who are “totally and permanently disabled” and those who are disabled but retain some work capacity. While one might have expected these medical and labor market changes to reduce the incidence of disabling medical conditions and hence lower the relative size of the DI program, this has not occurred.

According to the Washington Post, Autor and Duggan will release a new paper this week that proposes changes to SSDI:

Their proposal would require workers and employers to share the cost of a modest private disability insurance package, which is between $150 and $250 a year, according to the report, which is to be officially unveiled at a Dec. 3 event in Washington.

Workers seeking to go onto the federal disability program would first have to be approved for benefits from the private policy. Those benefits would go toward rehabilitation services, partial income support and other related services, the researchers said.

After receiving private payments for two years, workers would be eligible to apply for Social Security Disability Insurance (SSDI) benefits if they believe their disabilities are too severe for them to remain in the workplace, the report says.

Instead of creating a program on top of a program, why not just completely transition SSDI to the private sector? Workers should be allowed to divert the disability insurance portion of the payroll tax to a private account, the proceeds from which could then be used to purchase private disability insurance. Workers would have an incentive to spend their money prudently, while private insurers would have a financial incentive to make sure they weren’t being gamed.