Fix Social Security

biochem wrote:Various ideas that have been suggested by politicians and others to fix the coming social security collapse. Which ones will work?

1. Raise the retirement age.
2. Means testing
3. Increase payroll tax
4. Lift payroll tax cap
5. Increase employer contribution portion of the payroll tax
6. Change the cost of living adjustment
7. Add more years to the income average
8. Lower spousal benefits
9. Progressive indexing
10. Privatize
11. Ignore it and when money "runs out" drop benefits to match the current payroll tax input

1. Nah, that wont fix anything. It could even make things worse, by trying to force people that are "spent" to continue working.

Might get a small effect by making it easier or beneficial to work longer, as long as you don´t make it so beneficial that it costs more than it saves of course.

2. Can make some difference certainly, but as it would be a lot on the unfair side of things, not the best of ideas perhaps. In a pinch, this works but it´s going to be really hated if made useful enough, as then it will hit a very large portion of the population.
Still one of the better solutions.

3. Works. Those taxes are 31.4% here. And trying to use a lower tax here to generate jobs have effectively shown to be rather wasteful, IIRC, less than 1/4 of the lost tax revenue could be made up for by the additional jobs generated.

4. Should work, but needs to be applied all over.

5. Here this tax is completely paid for by the employer, and it´s not until recently that it was even normal for it to be clearly shown.
The rightwing keep trying to use it to show off how horribly high taxes are and forced through that it must be shown so that everyone knows just how much they´re being ripped off and yada yada yada... Worst kind of dishonest politics. Nothing has become better from having this tax blatantly shown, it worked just fine before that when it was totally hidden.

6. Haven´t the faintest clue how this works so i wont even try to seriously comment.

7. Works like biochem says, it´s a dishonest way of reducing benefits. Technically it has no problems, but it´s not a nice thing to do.

8. Sets up for another empoverished group in society? Eh no thanks. I´m sure it works quite well on a technical level, but the disadvantages are huge. Among other things it would make a bunch of "spouses" even more dependant. At best, that doesn´t matter, but there´s always a lot of this that isn´t "at best".

9. Don´t know enough of how it´s supposed to work.

10. The most stupid attempt at a solution. Would be a disaster waiting to happen.

11. Not nice, but works.

Yet another US retirement disaster is in the making, preventable now but only if the politician actually do their jobs and fix it.

The Federal Pension Benefit Guaranty Corporation insure pensions for US companies/unions that still have them (mostly union shops at this point, the vast majority of pension plans in non-union companies have been scrapped in favor of 401Ks). Basically the company/union goes bankrupt and then the Federal PBGC takes over and pays a (usually reduced) benefit to the affected workers. So that if you're 92 when your company/union goes bankrupt you can still continue to get something. Think Freddie Mae and Fanny Mac of the pension world.

The problem is that a lot of these pension plans have been doing the same kick the can down the road funding as some of the municipalities have. So the odds of the pension plans failing have been escalating as their liabilities increase faster than their ability to pay. And naturally the PBGC hasn't been collecting anywhere near enough in premiums to pay off its expected liabilities (which vary depending on how pessimistic the analyst in question is about the % of pension plans failing).

Now this is fixable. Similar to social security the biggest problems aren't expected for years. So how to fix it, if only the politicians get up the courage to do so.

1. Force unions to tell the truth about the problem to their members. Right now the members are being fed the propaganda that in the worst case scenario your pensions are guaranteed by the government. The truth is:

A. The pensions are only partially guaranteed by the government right now let alone in the future. Payouts are capped and failed pension plans usually result in benefit cuts.

B The government insurance is currently underfunded for future liabilities.

C Once the government insurance runs out of assets it is dependent on the good will of congress in the future. So you are basically trusting some guys elected 20-30 years from now (who may or may not care about pensions) to spend tax dollars to bail you out.

D The worst case scenario isn't the government paying you a reduced pension, the worst case scenario is the government walking away and paying nothing.

2. Increase premiums on the unions/force unions to add premium increases to future contract negotiations as a condition of coverage. Basically a little pain now to save a lot of pain in the future. The longer they wait the higher the premium increases will need to be. It's a whole lot easier on the employees in the long run to spread it out.

- Unions will scream bloody murder at this. They're solution for the problem is for someone else (aka the US taxpayers) to pay for it.

The unions response is going to be similar to any politician. It's not our fault it's theirs.
Well, they are politicians after all.