Selling Increasing The Cap : Separating Out The Noise

There are a number of reasons that people want to increase the cap on wages subject to payroll taxes.  Some reasons are good, some bad, and some noise. 

Supporters falsely claim that Social Security is a regressive tax, when the system is as a whole highly progressive.  It is intentionally designed to be progressive. 

They also claim that wage inequality has caused the problems of Social Security.  The data is cherry-picked to mislead the reader.  The changes occurred mostly in the mid-80s.  I think we can all agree that wage inequality in 2016 has nothing to do with how wages were allocated in the 1980s.

http://www.americanthinker.com/articles/2016/06/soaking_the_rich_to_pay_more_than_their_fair_share_for_social_security.html 

Myths About Social Security And Counting Beans

I love Social Security.  I hate reading myths about it.

Everyone has a fact that is someone else’s myth. The arguments for and against quickly devolve into academic waterboarding in which how we count the beans becomes more important than the actual number of beans. In every myth, there is invariably some technical definition hidden in the nomenclature. 

The only way to sort out the difference is to conduct the research yourself to sort out what the myth is actually saying. Last month, the Committee for a Responsible Federal Budget released a list of 9 myths. Weeks later, Alicia H. Munnell rebutted that list in a MarketWatch piece. 

This piece (“The Dueling Myths of Social Security”) explains what is hidden in the lexicon.

How Not To Fix Social Security

There is a wide spread idea that changing the way Social Security calculates its COLA is a painless way to fix the program. It is neither painless nor sufficient. It is a sign that what the program costs is more important than what the program does. Things to consider

1. Chain-CPI is not a better measure of inflation. It is not even a measure of inflation. It is a measure of Cost of Living - which includes the behavioral response to inflation.
2. The switch from protecting buying-power to protecting the cost of living is a reduction in benefits that grows over time. We are fixing old-age insurance with a solution that progressively lowers benefits as we age. That is like fire insurance which decreases in value based on the number of rooms in the fire.
3. Old-age insurance is important. As we age, our work options narrow and our savings is depleted. The older we get the more we need the program.

How Not To Fix Social Security

Social Security Losing Traction

The media has reported multiple articles that say the interest in Social Security in politics is shrinking while the interest in the voter base is growing.

Jed Graham is a great writer on the issue of Social Security. His article (“Social Security Woes Deepen As Talk Of Fix Recedes”) is here.  Russ Wiles produced a similar article for The Arizona Republic, here. Russ provides more detail on how little the politicians are doing.

The big difference in the articles is the source of information.  Jed normally relies upon CBO.  Russ is using SSA.  One program two completely different views. Here is Jed’s closing – emphasis added.

New projections from the Social Security Trustees may put Social Security higher up on the agenda. Last year, Social Security actuaries projected that the trust fund wouldn’t run dry until 2034, but that estimate built in a far more optimistic economic outlook than the White House, Federal Reserve or CBO expect. This year’s report could deliver a dose of reality.

The take-away is that there are two different pictures of the system that will come together over the next decade.