Quote:
Originally Posted by shmessy
The key phrase in your post is "at least at this moment". Yes, if one is living only for the moment, then what Europe did last week is a success.
Throwing sugar at a kid gets him a sugar high for a few moments, then there's a crash.
Same thing with throwing money at a situation without simultaneous austerity measures and higher taxes. Same thing with willy-nilly tax cuts without austerity measures.
In this way (not all ways) economics IS like physics. You can't naturally changed the laws of gravity.
What Europe did last week will come back to bite them big time.
In the meantime, we better raise the age for social security for folks who are currently under 50 and who have time to adjust their expectations. I'm 45 and if the gov't raised the early soc sec age for me from 62 to 65, and the normal ret age (NRA) from 67 and 2 months to 72, then I would agree with it totally. In the meantime, LOWER the ss tax from 6.2% to 3% and make it a tax on all (not just under $106,800 workers' incomes). This would be a boon for employers (who pay the other half of FICA) and reward WORKING people. The trust fund babies can easily deal with the extra 3%, although I'm positive the whining would be operatic.
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Pretty much the right approach, though I'd probably split hairs and argue for a mix of the tools available - I don't know whether you ran numbers on the above scenario, but it seems reasonable from the prospective retiree's point of view, given that longevity and health improvements have bought us all at least a total of 5 years since SS was first instituted. However, the retire-later fix has a built-in drawback: it assumes a higher grand total of available work, an assumption that must be accompanied by robust economic growth if higher unemployment is to be avoided. Call me a pessimist on that one... I have just tired of approaches that rely on magical markets behaving like they did during the American boom century (the 20th), particularly in the absence of much activity to capture future market segments Americans could do well, including alternative energy.
The good news is, I don't think 3 additional years from you and me (47 years old,) plus taxation after the carve-out, are all necessary.
Here's a page of SSA policy briefs that examine various approaches to fixing the system, as well as other issues touching on the present retirement landscape:
Research, Statistics, & Policy Analysis: Policy Briefs
This one is SSA's specific policy brief on raising the max earnings that are OASDI-taxable, as you also mentioned:
http://www.socialsecurity.gov/policy.../pb2009-01.pdf
Everything's in play, and the whining will be a chorus and an electoral football whenever the fix is adopted. Probably the best time for it will be after the "throw the bums out" crew are thrown out and Obama is reelected in '12. Of course, waiting that long has a few disadvantages:
1) The throw-the-bums-out bums might get reelected;
2) Unlikely as it would seem, a Republican may be elected president; and
3) If unemployment is significantly down by then, the crisis will once again appear to be receding. People love to forget that downturns can occur in the future as well as the past.
I just like having the reading available, myself. The Social Security issue can be solved a number of ways or through a combination of measures, but it takes political will. I'm afraid that the American habit of voting against anybody who takes an austerity measure of any kind is likely to doom any such proactive measure, and it will simply be a matter of waiting until the trust fund - yes I know, it's full of IOUs - is exhausted.
When this happens, the statute says Social Security stops paying promises, and instead starts paying based on what it is taking in. The last estimates I saw said that would mean each payment would take somewhere in the neighborhood of a 25% haircut, so if you're relying on 2000/mo. and you're 80 or something, you suddenly would be relying on 1500/mo.
That would probably occasion some last-ditch effort through taxation to soften the blow, but it would be too late. They'd probably immediately freeze the benefit level (i.e., do away with COLAs,) and fund some amount above the 75% through additional taxation.
Far better to get ahead of it, but as has been so recently demonstrated here, we all think we should get stuff free, never pay taxes, and above all never do our homework.
PFnV
Re: Galbraith: The danger posed by the deficit ‘is zero’
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