What should we do about Social Security?
Let me draw your attention to a new public policy blog, Vox Baby by Andrew Samwick.
Samwick is an economics professor at Dartmouth, Director of the Rockefeller Center for Public Policy and the Social Sciences, and served as Chief Economist on the President's Council of Economic Advisors. He specializes in Social Security issues, and has been posting on them freqently.
He highlights a new book by Peter Diamond of MIT and Peter Orszag of the Brookings Institution, in "What Social Security Reform Should Democrats Propose?" . The links include summaries of the book.
If taxes are going to be increased to make up the Social Security deficit, he'd like to see the additional money used for privatization: "How to Reform Social Security, Part I".
- "...most people who have proposed a specific reform have added new revenues. Once new revenues are being added to the system, then it becomes important to figure out where they should go--the Trust Fund or personal accounts.
Confronted with that choice, I opt for personal accounts. For me, an immediate and permanent contribution of 3.5 percent of taxable payroll into personal accounts for all workers, in addition to the 12.4 percent payroll tax that they and their employers already pay, is preferable to the current system. The contributions are 3.5 percent because that is the amount that the Social Security actuaries say is required to restore solvency even if invested entirely in Treasury bonds..."
- "...There are two reasons why there will be about 80 percent more beneficiaries relative to workers in the future: lower fertility rates and lower mortality rates (see this table for the history and this one for the projections). There is probably no easy way to link a reform of the system to changes in fertility rates, but it seems straightforward to base reform on changes in mortality rates.
Failing to index the retirement age to life expectancy implies an increasing portion of adulthood spent collecting benefits. Policy makers could craft a sensible justification for raising these ages. Consider how much easier it is to explain why retirement ages have to increase than it is to make sense of, say, an effective switch from wage indexing to price indexing in the calculation of the benefits (the centerpiece of Commission Model 2)..."