Social Security

Mandatory E-Verify will Increase Identity Theft

Nancy Berryhill, an Acting Commissioner of Social Security, recently testified in front of the House Subcommittee on Social Security on the widespread use of Social Security Numbers (SSNs) beyond their intended function.  Most of her testimony concerned the history of SSNs, past security procedures, and proposed future ones.  In a bizarre sentence that contradicts much of the rest of her testimony, Berryhill stated that, “Mandatory use of E-Verify by employers would help reduce the incidence of fraudulent use of SSNs.”  That is exactly backward.  Mandatory E-Verify will greatly expand the fraudulent use of SSNs.

E-Verify is an electronic employment eligibility verification system run by the federal government that is supposed to check the identity information of new hires against government databases to verify that they are legally eligible to work.  Congress created E-Verify to deny employment to illegal immigrants and reduce the incentive for them to come and remain in the United States.  E-Verify is not yet mandated nationwide but several states have mandated its use, to various degrees, and many large employers currently use it.

E-Verify builds on the current rudimentary employment verification known as the I-9 form that every new employee must fill out thanks to the 1986 Immigration Reform and Control Act (IRCA).  An E-Verify mandate would add another layer on top of the I-9 whereby employers, after collecting I-9 forms, would enter the information on them into a government website.  The E-Verify system then compares that I-9 information with information held in the Social Security Administration (SSA) and Department of Homeland Security (DHS) databases.  The employee is work authorized if the databases decide that the information is valid.  A flag raised by either database returns a “tentative non-confirmation,” requiring the employee and employer to sort out whatever error has been flagged.  If the employee and employer cannot sort out the errors then the employer must terminate the new employee through a “final non-confirmation.”  The I-9 form and E-Verify have serious problems, including the encouragement of rampant identity theft, but those problems would only grow with an E-Verify mandate.

Support Parental Leave by Saving Not Spending

Some conservative writers are proposing to raid Social Security for the costs of a new parental leave program. Proponents are selling it as a sort-of free lunch. The plan would be “self financing” says the IWF’s Kristin Shapiro because “new parents would agree to defer their collection of Social Security benefits upon retirement for the period of time necessary to offset the cost of their parental benefits.”

But Social Security is not a savings program with a pool of assets to draw on. If the government starts mailing checks to millions of new parents, the only “financing” would be more federal borrowing. What Shapiro calls $7 billion a year in “parental benefits” would be $7 billion more in government spending. What Shapiro calls “self financing” would be more government debt.

In theory, the government would delay retirement handouts for participating individuals three decades down to the road. But, if enacted, lobby groups and politicians would get to work undoing those future savings. And if this sort of accounting trick is used for spending on parental leave, then the flood gates would be opened for Social Security spending on home purchases, job training, and other trendy causes.

What ever happened to personal saving? Humans can look ahead and plan, and they have been doing so since the beginning of time. Personal saving is the most powerful financing tool. But the more the government hands out benefits—for retirement, health care, unemployment, parental leave, and many other things—the more it undermines the innate and responsible saving incentive. The more the nanny state spends, the more it sabotages a culture of savings and the practical ability to save as taxes rise.

Young people thinking about having children should start setting aside some of their paychecks. Young people should be taught that kids are expensive, and they should plan accordingly. Alas, personal responsibility and saving are not the starting points for most policy discussions these days.

Problems with Republican Proposal for Paid Leave

A new federal paid leave idea has been produced, promoted, and endorsed by individuals on the right. And now Republican legislators like Marco Rubio, Joni Ernst, and Mike Lee are getting behind it.

Advocates propose using Social Security as a benefit bank for paid leave – the idea is that parents could withdraw Social Security benefits today if they defer collecting benefits later. Of course, if advocates want to provide paid leave, a better idea is cutting Social Security benefits and payroll taxes so new parents don’t have to ask the government for their money back.

Still, it’s a clever idea and maybe the least-bad proposal for federal paid leave. But that does not mean the Social Security paid family leave (SS PFL) proposal is a good idea on its own merit. As described in The Hill yesterday, government-provided paid leave has harmful consequences and is not politically supported. 

Setting that aside, Social Security is a program with an assortment of problems, and allowing beneficiaries to borrow against future benefits does not improve the current model. Given how integral Social Security is to the current proposal, it’s worth a reminder just how deep those issues run.

Six Sobering Charts about America’s Grim Future from CBO’s New Report on the Long-Run Fiscal Outlook

I sometimes feel like a broken record about entitlement programs. How many times, after all, can I point out that America is on a path to become a decrepit European-style welfare state because of a combination of demographic changes and poorly designed entitlement programs?

But I can’t help myself. I feel like I’m watching a surreal version of Titanic where the captain and crew know in advance that the ship will hit the iceberg, yet they’re still allowing passengers to board and still planning the same route. And in this dystopian version of the movie, the tickets actually warn the passengers that tragedy will strike, but most of them don’t bother to read the fine print because they are distracted by the promise of fancy buffets and free drinks.

We now have the book version of this grim movie. It’s called The 2017 Long-Term Budget Outlook and it was just released today by the Congressional Budget Office.

If you’re a fiscal policy wonk, it’s an exciting publication. If you’re a normal human being, it’s a turgid collection of depressing data.

But maybe, just maybe, the data is so depressing that both the electorate and politicians will wake up and realize something needs to change.

I’ve selected six charts and images from the new CBO report, all of which highlight America’s grim fiscal future.

The first chart simply shows where we are right now and where we will be in 30 years if policy is left on autopilot. The most important takeaway is that the burden of government spending is going to increase significantly.

Obama’s Misguided Reversal On Social Security Expansion

In a speech this week, President Obama called for an expansion of Social Security, saying “it’s time we finally made Social Security more generous, and increased its benefits.” Obama was undoubtedly influenced  to some degree by the developments in the Democratic primary, where both Bernie Sanders and Hillary Clinton have expressed support for some form of expansion.  This represents a reversal in part for Obama. While he had always supported increasing payroll taxes on higher-earning Americans, he had also previously supported a change in the way benefits were adjusted each year that would have reduced the growth rate of benefits over a long timeframe in the interest of improving the program’s fiscal trajectory. Social Security’s long-term oultook has only gotten worse in the intervening years, but in his speech he signalled that he no longer believed “all options were on the table” to address solvency concerns  and instead supports further expansion. This reversal is misguided. If his favored reforms are implemented it will increase the economic distortions introduced by Social Security and do nothing to address its serious fiscal problems.  The more likely result is that with this retrenchment, policymakers will continue to make promises but fail to actually do anything. Younger workers will bear the brunt of the cost resulting from failures to put forward constructive reform.

About Those Social Security ‘Promises’

In the Republican debate last night, former Gov. Mike Huckabee of Arkansas criticized calls for Social Security reform, saying “people paid their money. They expect to have it,” and that the country needs to honor its promises to seniors. There are problems with this line of argument: the Social Security payroll taxes a person pays are not tied to the benefits they receive in a legal sense, and the ‘promises’ made by Social Security are, and always have been, subject to change.

Social Security Technical Panel: 75-Year Shortfall Might Be 28 Percent Larger

A recent report from the Social Security Advisory Board’s Technical Panel found that the 75-year shortfall could be 28 percent (roughly $2.6 trillion) larger than the estimate in this year’s Trustees Report due to changes in some of the underlying technical assumptions. This disparity is more the product of the difficulties related to projecting the trajectory of a program as large and complicated as Social Security so far into the future, with the chair of the Technical Panel taking pains to reiterate that “the methods and assumptions used by the Social Security actuaries and Trustees are reasonable.” Even so, the report reveals the uncertainty related to the long-term projections for Social Security, with relatively small changes to some of the underlying assumptions significantly changing the program’s financial solvency outlook. Social Security is the largest government program in the world, and changes in its fiscal outlook could have a large impact on the government’s overall finances.

The changes in the Technical Panel report that would have the largest impact are concentrated in a few variables:

  • Higher fertility rate
  • Higher life expectancy
  • Higher interest rates

Other changes to inflation and real earnings growth rate assumptions have a small negative impact, while changes to immigration assumptions slightly improve the program’s financial picture.  Some of the changes reflect developments that are good overall but have a negative impact on Social Security’s finances, like higher life expectancy.

 

Some of the panel’s recommendations focus on making the methodology of the Trustees’ Report more transparent and the degree of uncertainty more clear.  While it’s possible that unforeseen changes to underlying variables like the fertility rate could improve the program’s financial outlook, it is much more likely that the trillions in unfunded obligations published in the Annual Trustees’ Report understate the shortfall, if anything.

What Greek “Austerity”?

It’s hard to find anything written or spoken about Greece that doesn’t contain a great deal of hand wringing about the alleged austerity – brutal fiscal austerity – that the Greek government has been forced to endure at the hands of the so-called troika. This is Alice in Wonderland economics. It supports my 95% rule: 95% of what you read about economics and finance is either wrong or irrelevant.

Marriage Policy Is a Mess. Here’s How to Make Sense of It.

Give Rand Paul points for trying: His opinion piece about marriage policy in the wake of Obergefell did better than many other Republicans have done. He did not call for resurrecting the dead – and politically toxic – Federal Marriage Amendment. He would appear to be actually considering the issues at stake, which is a good start.

But contrary to the promise of the headline (which he probably didn’t write anyway), the measures that Senator Paul recommends would not get government “out of the marriage business altogether.” Judging by what he actually wrote, local government would still control entry and exit from civil marriage, and civil marriage itself would apparently still continue to exist. Many federal consequences, like Social Security survivorship and the ability to sponsor an immigrant spouse, would presumably continue to flow from marital status - and they’d still be unavailable in any other way.

This isn’t such a terrible thing, necessarily. Marriage policy is really, really complicated. As long as we have a government, and as long as it’s making important decisions about our families and property, at least some parts of civil marriage may actually be worth saving. Marriage can serve as a protection against the state, one that (among lots of other things) keeps families together and makes the Social Security system run marginally more justly: If anyone deserves to recoup some of what the government takes by way of the payroll tax, it’s the widow of the worker who “contributed.” And if anyone is competent to sponsor a new citizen, it must be that new citizen’s spouse.

Pages

Subscribe to RSS - Social Security