Social Security – Page 2

Protecting Social Security for All: Making the Wealthy Pay Their Fair Share Testimony by Stephen C. Goss, Chief Actuary, Social Security Administration United States Senate Committee on the Budget

July 14, 2023July 14, 2023 Mary Pat Campbell

Link:https://www.budget.senate.gov/imo/media/doc/Mr.%20Stephen%20C.%20Goss%20-%20Testimony%20-%20Senate%20Budget%20Committee.pdf

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First, the 1983 Amendments were an interim solution to the well-understood changing of the age distribution due to the drop in birth rate after 1965. These Amendments were expected to extend the ability to pay scheduled benefits from 1982 to the mid-2050s, with the clear understanding that further changes would be needed by then.

Second, the redistribution of earned income to the highest earners was not anticipated in 1983. This shift resulted in about 8 percent less payroll tax revenue by 2000 than had been expected, with this reduced level continuing thereafter. The severity of the 2007-09 recession was also not anticipated.

Third, with the passage of 40 years since 1983, we clearly see the shortcomings of the 1983 Amendments in achieving “sustainable solvency” for Social Security. We are now in a position to formulate further changes needed, building on the start made in 1983.

Fourth, the long-known and understood shift in the age distribution of the US population will continue to increase the aged dependency ratio until about 2040, and in turn increase the cost of the OASDI program as a percentage of taxable payroll and GDP. Once this shift, which reflects the drop in the birth rate after 1965, is complete, the cost of the program will be relatively stable at around 6 percent of GDP. The unfunded obligation for the OASDI program over the next 75 years represents 1.2 percent of GDP over the period as a whole.

Author(s): Stephen C. Goss, Chief Actuary, Social Security Administration

Publication Date: 12 July 2023

Publication Site: Senate Budget Committee

Adverse Effects of Automatic Cost‐of‐Living Adjustments to Entitlement and Other Payments

June 27, 2023June 27, 2023 Mary Pat Campbell

Link: https://www.cato.org/policy-analysis/adverse-effects-automatic-cost-living-adjustments-entitlement-other-payments

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COLAs for Social Security’s OASDI have had an additional significant fiscal effect. Until recently, the payroll taxes paid for Social Security each year have usually exceeded the cost of benefits paid in that year. This balance was transferred to the general fund of the U.S. Treasury, which in turn issued special Treasury bonds to the Social Security Trust Fund to be redeemed later when taxes collected were less than the benefits paid. The fund balance reached $2.9 trillion at the end of 2020. Then in 2021, the Social Security Trust Fund had to redeem $56.3 billion of those bonds to pay OASDI benefits. Social Security actuaries have calculated that increasingly larger withdrawals will continue until the Trust Fund is fully depleted in early 2035.³⁶ Under current law, once the Trust Fund balance is fully depleted, payments to beneficiaries must be reduced to the level supported by current Social Security taxes.

If Social Security COLAs had been calculated using the combination of C‑CPI‑U and PCEPI, then the Trust Fund balance in 2020 would have been $3.5 trillion, and full depletion of the Trust Fund would have been delayed two more years to 2037. If the price indexes had also been improved to minimize new‐item bias (the best‐practices index), the balance in 2020 would have been $4.4 trillion, and full depletion of the fund would have been delayed until 2039 (see Figure 1).

Author(s): John F. Early

Publication Date: 22 Jun 2023

Publication Site: Cato

MBTA retirement fund is headed for a financial reckoning

June 20, 2023June 20, 2023 Mary Pat Campbell

Link: https://www.bostonglobe.com/2023/06/19/opinion/mbta-retirement-fund-finances/

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The MBTA Retirement Fund is going over a cliff, and the reasons why are well known. But neither the T nor its unions are in a hurry to do anything about it.

The new MBTA Retirement Fund Actuarial Valuation Report shows the fund’s balance as of Dec. 31, 2022, was $1.62 billion — about $300 million less than what it was just 12 months earlier. Its liability — the amount it will owe current and future T retirees — is over $3.1 billion, meaning the fund is about 51 percent funded. In 2006, it was 94 percent funded. A “death spiral” generally accelerates when retirement system funding dips below 50 percent.

In April, the Pioneer Public Interest Law Center got the MBTA to hand over an August 2022 arbitration decision regarding a pension dispute between the T and its biggest union. It contained a critical win for the authority: Arbitrator Elizabeth Neumeier decided that most employees would have to work until age 65 to earn a full pension, saving the MBTA at least $12 million annually.

But the Carmen’s Union sued to invalidate that portion of the decision, and the parties returned to the bargaining table. The new pension agreement they hammered out doesn’t include the historic retirement age victory; T management negotiated it away.

….

As of Dec. 31, 2022, 5,555 active employees paid into the fund, but 6,783 retirees collected from it. The biggest reason for the mismatch is the age at which T employees retire. Those hired before December 2012 can retire with a full pension after 23 years of service, regardless of age. Those hired after December 2012 can retire with a full pension at age 55 after 25 years.

The arbitrator finally gave the MBTA the win it so desperately needed, and T management promptly gave it back. Many MBTA managers have long opposed changing the age at which employees can earn a full pension, fearing the reaction of T unions.

….

Hard as it may be to believe, the T retirement fund’s financial outlook is even worse than it appears. Financial projections assume the fund’s assets will earn 7.25 percent annually. Over time, actual returns have been more like 4 percent to 7 percent.

These misleading projections are based on other faulty assumptions. In her 2022 decision, Neumeier refused the MBTA’s request to use newer actuarial tables, ruling that changing would be costly and that there was no compelling reason to update the tables. The ones in place are from 1989 — so old that they assume all T employees are men. Since women tend to live longer, the tables materially understate the retirement fund liability.

Author(s): Mark T. Williams, Charles Chieppo

Publication Date: 19 Jun 2023

Publication Site: Boston Globe

Pension reform in France: Which countries have the lowest and highest retirement ages in Europe?

April 19, 2023April 19, 2023 Mary Pat Campbell

Link: https://www.euronews.com/next/2023/04/06/pension-reform-in-france-which-countries-have-the-lowest-and-highest-retirement-ages-in-eu

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The gap between women and men in expected years of retirement varies from 2.0 years in Ireland to 7.5 years in Cyprus.

By 2020, European women typically can expect to live 4.3 years more than men after they exit the labour market.

While the EU average is 4.6 years, in France, the gender gap stands in favour of women by a total of 3.6 years.

Interestingly, life expectancy in retirement for both highly varies across Europe. For men, it ranges from 14 years in Latvia to 24 years in Luxembourg.

For women, it varies from 18.9 years in Latvia to 28.4 years in Greece. Women are expected to have 26 years or more to spend while retired in Belgium, France, Greece, Italy, Luxembourg and Spain.

Author(s): Servet Yanatma

Publication Date: 6 Apr 2023

Publication Site: euronews

China Is Facing a Moment of Truth About Its Low Retirement Age

April 19, 2023April 19, 2023 Mary Pat Campbell

Link: https://www.wsj.com/articles/china-is-facing-a-moment-of-truth-about-its-low-retirement-age-5ed9b57f

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China has one of the lowest retirement ages among major economies. Under a policy unchanged since the 1950s, it allows women to retire as early as at age 50 and men at 60. Now, local governments are running out of money just as a wave of retirees hits. That is leaving Beijing with little choice but to ask people to work longer—a move economists say is long overdue but one still likely to meet with resistance.

China’s version of “baby boomers”—those born after China emerged from devastating starvation in the early 1960s—are retiring in droves. Even with government subsidies, by 2035 China’s state-led urban pension fund will run out of money accumulated over the previous two decades, leaving it to rely entirely on new workers’ contributions, according to projections made in 2019 by the Chinese Academy of Social Sciences, a government think tank.

Former central bank Gov. Zhou Xiaochuan warned in a February speech that China must address its pension shortfall and communicate that many Chinese may need to rely on private pension savings

Author(s): Livan Qi

Publication Date: 11 April 2023

Publication Site: Wall Street Journal

Riots erupt across France as Constitutional Council validates Macron’s pension cuts

April 19, 2023April 19, 2023 Mary Pat Campbell

Link: https://www.wsws.org/en/articles/2023/04/15/mwio-a15.html

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https://twitter.com/ClementAgostini/status/1646927984928907278?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1646927984928907278%7Ctwgr%5E75aaeb79c11e244c2303bd011418b6ddb22ac1c8%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.wsws.org%2Fen%2Farticles%2F2023%2F04%2F15%2Fmwio-a15.html

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At 6 p.m. yesterday, France’s Constitutional Council ruled that President Emmanuel Macron’s pension cuts are constitutional, removing the last legal obstacle to their adoption as law. The Elysée presidential palace announced 15 minutes later that Macron will promulgate the pension cuts as law within 48 hours.

The Council’s predictable approval of a law opposed by 80 percent of the French people, which Macron rammed through without even a vote in parliament, again tears the “democratic” mask off the capitalist state. It imposes the diktat of the banks, which plan amid the NATO-Russia war in Ukraine to massively divert social spending into strengthening the military-police machine. The struggle against the pension cuts can only be waged as a political struggle directed against the entire capitalist state machine.

The Council’s decision also exposes the forces in the union bureaucracy and the pseudo-left parties who, warning of “violence” by protesters, told workers to place their hopes in trade union “mediation” with Macron. Everyone involved, including masses of workers and youth, knew very well that Macron would ignore the “mediation.” On the other hand, two-thirds of the French people supported a general strike to block the economy and bring down Macron.

Author(s): Alex Lantier

Publication Date: 14 April 2023

Publication Site: World Socialist Web Site

Social Security is Running Out of Time and Money, What Do Biden and Trump Propose?

April 19, 2023April 19, 2023 Mary Pat Campbell

Link: https://mishtalk.com/economics/social-security-is-running-out-of-time-and-money-what-do-biden-and-trump-propose

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Please consider the Biden-Trump Plan to Cut Social Security

Joe Biden: “I guarantee you I will protect Social Security and Medicare without any change. Guaranteed,” the president said in March.
Donald Trump: “I will do everything within my power not to touch Social Security, to leave it the way it is.” A pro-Trump super PAC launched an ad attacking Florida Gov. Ron DeSantis for his efforts as a member of Congress to restructure benefits.

While Trump promised to not touch SS, Biden said he would protect SS “without any change“.

Biden’s “guarantee” is impossible, by existing law.

The pledge to not change a thing means automatic benefit cuts starting in 2033 according to the bipartisan Congressional Budget Office (CBO).

Author(s): Mike Shedlock

Publication Date: 15 April 2023

Publication Site: Mish Talk

Can France Escape Its Pension Overhang?

March 29, 2023 Mary Pat Campbell

Link: https://www.city-journal.org/can-france-escape-its-pension-overhang

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In 2021, government spending accounted for 59 percent of GDP in France, compared with 45 percent in the United States. Spending on public pensions accounts for much of that gap: it’s 15 percent of GDP in France, but only 7 percent in the U.S. This greatly inflates associated payroll taxes, which alone took 28 percent of workers’ incomes in France, compared with just 11 percent in the U.S.

President Macron argues that the cost of financing pensions is dragging down the whole economy, and that reform is necessary to make France an attractive venue for investment and employment. Whereas workers’ incomes in 1975 were 46 percent higher than those of retirees, by 2016 they were 2 percent lower. Many economists see it as senseless to redistribute so much from the young to the elderly, who seldom have childrearing expenses and whose mortgages are often paid off.

Pension reform is seen as necessary by 61 percent of French voters, but only 32 percent support raising the retirement age. Macron argues that the only alternatives to his reforms would involve cutting benefit levels, hiking taxes, or cutting public spending on other items such as education, health care, or defense. France already has close to the highest taxes in the developed world.

Median incomes for French residents aged 65 and over ($20,116) are little different than those for Americans ($19,704). The main effects of France’s extra pension spending are to crowd out private savings for retirement (which amount to 12 percent of GDP versus 170 percent in the U.S), and to cause French citizens to retire much earlier (at an average age of 60.4, vs 64.9 in the states).

Author(s): Chris Pope

Publication Date: 28 Mar 2023

Publication Site: City Journal