— Kendall Harmon (@KendallHarmon6) October 12, 2017
Category : Social Security
Mr. [John] Cogan has just written a riveting, massive book, “The High Cost of Good Intentions,” on the history of entitlements in the U.S., and he describes how in 1972 the Senate “attached an across-the-board, permanent increase of 20% in Social Security benefits to a must-pass bill” on the debt ceiling. President Nixon grumbled loudly but signed it into law. In October, a month before his re-election, “Nixon reversed course and availed himself of an opportunity to take credit for the increase,” Mr. Cogan says. “When checks went out to some 28 million recipients, they were accompanied by a letter that said that the increase was ‘signed into law by President Richard Nixon.’ ”
The Nixon episode shows, says Mr. Cogan, that entitlements have been the main cause of America’s rising national debt since the early 1970s. Mr. Trump’s pact with the Democrats is part of a pattern: “The debt ceiling has to be raised this year because elected representatives have again failed to take action to control entitlement spending.”
A faculty member at Stanford’s Public Policy Program and a fellow at the university’s Hoover Institution, Mr. Cogan, 70, is one of those old-fangled American men who are always inclined to play down their achievements. The latest of his is the book that draws us together in conversation. To be published later this month by Stanford University Press, it is a 400-page account of how federal entitlement programs evolved across two centuries “and the common forces that have been at work in causing their expansion.”
Today some 60% of Americans age 65 or older rely on Social Security for 50% or more of their family income”“the average payment is a modest $1,300 a month. For some 33% of families, the benefit makes up 90% to 100% of their income.
There’s a lot at stake for the overall federal budget as well, since entitlement programs are grabbing a larger and larger overall share of federal expenditures. Social Security alone accounts for $1 out of every $4 spent, and Medicare and Medicaid spending make up another 25%. Together these entitlement programs account for most of the future growth in spending, not including interest payments on debt, says MacGuineas.
The surge in Social Security spending is chiefly driven by the aging of the U.S. population. The leading edge of the baby-boom generation of 75 million began heading into retirement just as Obama took office. Back in 2009, the nation’s worker-to-retiree ratio stood at 3.0 to 1. Today, with more boomers having exited the workforce, the ratio has dropped to 2.8 to 1, and by 2035 it is projected to shrink to 2.1 to 1.
Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.
Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war.
Unfortunately, despite a brief discussion during the final presidential debate, neither candidate has put forward a convincing plan to restrain the growth of the national debt in the decades to come.
Read it all. For a very important background on this, please see this 2011 post and the comments thereon, in which Boston University’s Laurence J. Kotlikoff makes clear that the true figure of our actual indebtedness is in excess of 200 Trillion dollars–KSH.
But much more important is the steep upward trajectory of our long-term debt ”“ which remains as dangerous as ever. In its latest long-term outlook, released in June, CBO projected that the federal debt will climb to 141 percent of GDP by 2046 ”“ by far the highest level on record.
Europe’s growing army of robot workers could be classed as “electronic persons” and their owners liable to paying social security for them if the European Union adopts a draft plan to address the realities of a new industrial revolution.
Robots are being deployed in ever-greater numbers in factories and also taking on tasks such as personal care or surgery, raising fears over unemployment, wealth inequality and alienation.
Their growing intelligence, pervasiveness and autonomy requires rethinking everything from taxation to legal liability, a draft European Parliament motion, dated May 31, suggests.
In reality, however, many working Americans simply can’t afford to retire. Fewer workers today than in the past say a pension will be a major income source in retirement, and many have been unable to save sufficiently during the economic slowdown of the past decade. Seven in 10 employed adults told Gallup in April that they are worried about not having enough savings for retirement. As a result, they now need to work as long as possible to build up their retirement nest eggs.
At the moment, most workers are forgoing any thought of retiring before 62, the minimum age to receive partial Social Security retirement benefits, while nearly a third are planning to hold off until after age 67.
Human life has reached an inflection point””one that matters a great deal for those planning for retirement.
One hundred years ago, the average lifespan was about 42. That’s now doubled. People are living longer and trying to stretch their income to make ends meet and stay ahead of inflation, but that’s not the inflection point financial advisors are really concerned about””that’s just the everyday blocking and tackling on behalf of client portfolios. The emerging challenge goes way beyond that.
Scientists have found the mechanisms that govern aging and are already doing experiments in rats on how to reverse it. They’ve found species that do not die of old age, such as the jellyfish Turritopsis.
Americans have major doubts about the financial health of Social Security.
A new survey by Pew Research Center finds that 41 percent of Americans think there will be no Social Security benefits for them when they retire and nearly a third expect reduced levels of benefits. (Tweet This)
Some of those fears may be overblown. “People who think they will get zero benefits from Social Security are wrong and they should look at the facts,” said Andy Landis, a former claims representative for the Social Security Administration (SSA) and author of “Social Security: The Inside Story.”
There are concerns that benefits may be reduced, however.
Social Security Act is signed into law, assuring retirement income for all working Americans. Payroll taxes…are set at 1% (Courtesy of Barry Ritholtz)
The $2.8 trillion Social Security Trust Fund is on track to be totally spent by 2030, the Congressional Budget Office said Tuesday.
That’s one year earlier than projected in 2013 and a decade earlier than the CBO estimated as recently as 2011.
The CBO delivered the warning in a gloomy long-term budget outlook that shows federal debt reaching 106% of GDP in 25 years, up from 74% now.
We start with this reality: Social Security and Medicare are practically sacrosanct. Nearly nine-in-ten Americans say they’re good for the country. That’s an amazing number. But the popularity of these programs really isn’t all that surprising. People love them because they do what they were created to do. They ease many of the frets and dreads of old age ”“ a blessing not just for seniors but for everyone who loves, supports and depends on seniors. Which is to say, everyone.
But the status quo is unsustainable. Some 10,000 Baby Boomers will be going on Social Security and Medicare every single day between now and 2030. By the time everyone in this big pig-in-the-python generation is drawing benefits, we’ll have just two workers per beneficiary ”“ down from three-to-one now, five-to-one in 1960 and more than forty-to-one in 1945, shortly after Social Security first started supporting beneficiaries.
The math of the 20th century simply won’t work in the 21st. Today’s young are paying taxes to support a level of benefits for today’s old that they have no realistic chance of receiving when they become old. And they know it ”“ just 6% of Millennials say they expect to receive full benefits from Social Security when they retire. Fully half believe they’ll get nothing.
Treasury Secretary Jacob J. Lew warned Congress on Wednesday that the government would most likely exhaust its ability to borrow in late February, setting up yet another fiscal showdown with Republicans, and this time earlier than congressional leaders had anticipated.
In a letter to Speaker John A. Boehner and the other top three congressional leaders, Mr. Lew said a surge of February spending, mainly tax refunds for 2013, would leave the Treasury with little room to maneuver after the official debt limit is reached on Feb. 7.
The letter amounts to an early alarm bell, coming just weeks after Congress passed its first bipartisan budget and comprehensive spending bill in years. Those bills were supposed to serve as a cease-fire in the budget wars that have rattled the country and the economy since Republicans took control of the House in 2011.
True to their “live to work” reputation, some baby boomers are digging in their heels at the workplace as they approach the traditional retirement age of 65. While the average age at which U.S. retirees say they retired has risen steadily from 57 to 61 in the past two decades, boomers — the youngest of whom will turn 50 this year — will likely extend it even further. Nearly half (49%) of boomers still working say they don’t expect to retire until they are 66 or older, including one in 10 who predict they will never retire.
While plenty of baby boomers, born from 1946 to 1964, have become affluent and many elderly around the U.S. face financial hardship, the wealth disparity of this father and daughter is emblematic of a broad shift occurring around the country. A rising tide of graying baby boomers is less secure financially and has a lower standard of living than their aged parents.
The median net worth for U.S. households headed by boomers aged 55 to 64 was almost 8 percent lower, at $143,964, than those 75 and older in 2011, according to Census Bureau data. Boomers lost more than other groups in the stock market and housing bust of 2008, and many also lost their jobs in the aftermath at a critical point in their productive years.