When given a choice on how to fix Social Security's serious long-term financial problems, 53 percent of adults said they would rather raise taxes than cut benefits for future generations, according to an Associated Press-GfK poll. It's most of my income. And raise the retirement age, if you have to. Both options are preferable to cutting monthly benefits, even for people who are years away from applying for them.
President Clinton endorsed the idea in his State of the Union address, public opinion polls show widespread backing, and prominent Republicans in Congress have expressed their support. The entirety of the small surpluses in the early years can be applied to the Social Security fund, but then as the surplus grows beyond the needs of the Social Security system some of the projected surpluses can be used to finance public needs that were neglected in the era of deficit reduction.
The exact schedule of payments into the fund is described in the appendix. The cumulative payments over this period will reduce the projected long-term shortfall in the fund by approximately 1.
One objection to this proposal is that there is no guarantee that these surpluses will materialize. For example, the economy may go into a recession during the next few years, pushing the budget into a deficit. To avoid this problem, the federal government could commit to a schedule of payments independent of its fiscal position in any particular year; in other words, it could add the specified amount to the Social Security fund even if the surplus turned out not to be as large as anticipated.
In these cases, the government would treat this obligation to the Social Security fund just as it would its planned spending for defense and education.
If the resulting spending left the budget in a deficit which economists usually consider desirable during an economic downturnthen the government could borrow to make up the shortfall. At present, the size of the U. The additional funding being proposed here for Social Security averages less than 1.
And the expense involved is manageable even if the surpluses turn out to be considerably less than currently projected.
The second part of step 1 provides an alternative method of closing the long-term funding shortfall. As noted above, the long-term problem facing Social Security is longer lifespans. If we are to spend a longer portion of our lives in retirement, then we will either have to accept lower benefits during our retirement years or pay a higher tax rate during our working years.
Most retirees already have only modest incomes, and so this proposal, rather than reduce incomes further with benefit cuts, would index the tax rate to the projected increases in the length of retirement.
The tax increases needed to finance the projected lengthening of retirements would be relatively modest on an annual basis, just 0.
For example, after 50 year s, the tax rate on both the employee and employer will have increased by nearly a full percentage point. It is possible to solve the long-term shortfall through some combination of the two proposals in step 1.
For example, the amount of general revenue placed in the trust fund can be cut in half if it is combined with an increase in the payroll tax of 0.
Social Security needs to be updated for the 21st century so we can keep the promise we’ve made to future generations. Estimates indicate the program will be able to pay full benefits for the next 20 years but only around 75 percent after that. Previous generations could rely on company pension plans, Can You Really Rely on Social Security in Retirement? United States;. The steps to save social security for future generations in the us People How man has to be governed and abide by laws in rousseaus social contract who accumulate even a modest nest egg often strive to "leave something" to their the steps to save social security for future generations in the us children.
The policy change proposed in step 2 is merely a way of ensuring that we keep the projections consistent through time. The changes in the calculation of the consumer price index are important for Social Security because benefits for retirees are indexed to it.
In the spring ofthe Bureau of Labor Statistics announced changes to the CPI that will reduce the measured rate of inflation by 0. This change means that, if the old CPI would have measured a 2.
As a result of this reduction, the Social Security system will pay out less money over time in benefits, but this change has not yet been included in the projections. Other changes made over the last four years in the way the CPI is calculated have yet to be included in the projections.
The impact of these changes on the CPI is hard to determine precisely, although some experts believe that it has been large. If the trustees were to fully incorporate the CEA assessment, the projected shortfall would fall by approximately 0.
Note that this proposal incorporates only the 0. Step 3 — raising the cap on wages subject to the payroll tax — would counteract the drain on the trust fund that has resulted from the upward distribution of wages in recent years. However, wage income has increasingly shifted upward to those at the top end of the wage distribution.
So that affected workers could see some return on these taxes, the cap on benefit payments would be lifted to correspond to this higher tax rate. Taken together, these three changes using either part of step 1 will be sufficient to keep the trust fund solvent through the year planning horizon.
Three misconceptions A number of proposals have been offered and are continuing to be offered for addressing the long-term funding problem in Social Security. Many prominent proposals, several of which will be examined in the next section, and much of the public discussion unfortunately rest on misconceptions about the returns that can be expected in the future in the stock market, the potential for raising the retirement age, and the accuracy of the consumer price index.
Misunderstandings about future returns on stock A key feature of many recent proposals to shore up Social Security is privatization — investing all or a portion of the trust fund in stocks and bonds or allowing individuals to direct their own investments of Social Security savings.
Projecting the future based on the past usually makes sense, but in the case of stock market returns in the next century there are two problems. First, the trustees, while projecting stocks to continue along their historic path untilexpect that the overall economy and profits will grow only half as fast over the next 75 years as in the previous If one assumes that price-to-earnings ratios will be held roughly constant, then a cut in the growth of real corporate profits, from the 3.
This means that annual dividend payouts the ratio of the annual dividend to the price of a share of stockwhich historically run at about 4. Unless stock prices plummet, they will fall more in the future.
Assuming that price-to-earnings and dividend payout ratios remain near their current levels, then future dividend returns will be 2.You’ve paid into Social Security, and you deserve to know what changes are being proposed and how each might affect you, your kids and generations to come.
The world has changed a lot in 80 years. Social Security needs to be updated for the 21st century so we can keep the promise we’ve made to future generations. Jun 22, · Kotlikoff insists on calculating Social Security’s true cost over an “infinite” time frame, which he says is the only way to see how the program shifts the burden on future generations.
The steps to save social security for future generations in the us People How man has to be governed and abide by laws in rousseaus social contract who accumulate even a modest nest egg often strive to "leave something" to their the steps to save social security for future generations in the us children.
The last time we had a Social Security funding crisis -- back in -- a Republican president worked with a Republican Senate and a Democratic House to adopt a package that was balanced between. Assuming no future change in the law, this question can be answered directly by focusing on the "solvency" of the Social Security trust funds.
Solvency for the Social Security program is defined as the ability of the trust funds at any point in time to pay the full scheduled benefits in the law on a timely basis.
All of these ideas would make meaningful strides toward saving Social Security and Medicare for future generations.