The authors of the Simpson-Bowles plan released an update to their plan. Changes to Social Security appear in Appendix A. system. The key phase is : "Unfortunately since the Fiscal Commission proposal was released, the 75 year shortfall actuarial shortfall has increased significantly" So they will need increase more revenue and cut benefits more than planned.
This plan is as bad as anything in the market. We oppose raising taxes – it does. We oppose cutting benefits – it does. We believe Social Security is not well equipped to distribute welfare – this plan increases the welfare component of the system. We oppose arbitrarily expanding the coverage to more workers– this plan forces more workers into the system.
How Does It Work?
Simpson-Bowles is a mix of lower benefits and higher taxes. It pushes the vast majority of the cuts unto high-income workers and increases the base payment for all covered retirees. It forces more workers to join the system.
This plan has not one redeeming value. It takes the worst aspects of Social Security and makes them bigger. This plan throws out the baby and keeps the bathwater.
This plan repeats most of the mistakes of 1983. We are looking to preserve the system today at the expense of people who do not have a vote today. It did not work well in 1983, and it will set a stage for an unplanned end to the system. (see side blog)
We do not believe that rising the cap is a good idea. The research that we have found on the subject is based on faulty logic, see our side blog. It is at best a bad idea, but one that potentially could be fatal for Social Security. We see this idea as diverting taxes away from debt control. And we feel that the debt is the primary threat to the Social Security system.
This plan is based on the idea that the system works, and the problems are 75 years away. The plan fixes nothing, and seeks mainly to pay for the system today.
We criticize welfare component of Social Security because the system has no insight into need. Simposon-Bowles takes what Social Security does not do well, and seeks to significantly increase it. Here is the consequence: this plan will take money from people in poverty and give it to people who are well above poverty.
The plan will also lower the economic returns for high-income workers. This approach will only encourage high-income Americans to avoid the system. It will make our products less competitive in the world markets, costing the country jobs. Fewer jobs aren’t a solution.
This plan perpetuates pushes the worst myths about the system.
“In 1950, there were 16 workers per beneficiary; in 1960, there were 5 workers per beneficiary. Today, the ratio is 3:1 – and by 2025, there will be just 2.3 workers 'paying in' per beneficiary.”
Today there are workers who contribute as much as 77 workers did in 1955 on an inflation-adjusted basis. Today we have a Trust Fund which would add about a full worker if it were well invested.
“When Franklin Roosevelt signed Social Security into law, average life expectancy was 64 and the earliest retirement age in Social Security was 65. Today, Americans on average live 14 years longer, retire three years earlier, and spend 20 years in retirement.”
The number 1 reason for increasing life expectancy is decreasing infant mortality. So the logic here is that we should cut the benefits of those who have put in the most because fewer babies are dying at birth.
How can anyone ask more of American workers and gives retirees less so that the money in the Trust Fund can be invested at 2 7/8%?