House Committe Hearing On Social Security Reform

by JoeTheEconomist May 24, 2013 9:14 AM

The debate about Social Security reform isn’t serious.  It is noise filled with statistics that paint a picture of convenience.  This piece comes from testimony in a hearing about Social Security reform before the Ways And Means Sub-Committee.

Despite Social Security’s great success, its growth in lifetime benefits over time has been decreasingly targeted at its major goals. Even while programs for children and working families are being cut, combined lifetime benefits for couples turning 65 rise by an average of about $20,000 every year, so that couples in their mid-40s today are scheduled to get about $1.4 million in lifetime benefits, of which $700,000 is in Social Security.

What Are The Major Goals Of Social Security?

Social Security is suppose to be old-age insurance, and has virtually nothing to do with other programs for the children and working families.  What is really meant here is that the system does not serve the major goals of the person testifying.

What About The Growth Of Benefits?

In all honesty, this couple does not expect to collect $700,000 or anything close to it.

  1. When he says ‘scheduled’ he ignores the fact that this couple expects to retire after the Trust Fund is exhausted which means that they will be subjected to benefit cuts. 
  2. These people would likely trigger means-testing that would claw back benefits at more than 10% per year  
  3. These people may die before collecting a penny

But the number sounds impressive.  Well, until you consider how much this couple has contributed.  In all honesty, the couple depicted probably deserves more than $700,000.  Someone born in 1970, making 2/3rds of median income (roughly 34K in 2010) will lose about $600,000 in savings to Social Security.  In case of this couple, two people were contributing, and both made more than median income.

 

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