Boots & Sabers

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Tag: Social Security

Biden’s Social Security Plan Would Further Hammer Economy

Why do all of Biden’s policies make things worse? That has to be intentional, right?

In March 2020, the research-driven Penn Wharton Budget Model (PWBM) analyzed the fiscal impacts of Biden’s Social Security proposals and came to the conclusion that it would, ultimately, hurt economic activity. The economists behind PWBM estimate a 0.6% decline in U.S. gross domestic product (GDP) by 2030 and an even greater 0.8% drop in U.S. GDP by 2050.  With a separate report from PwC in 2017 estimating the U.S. will reach $34.1 trillion in GDP by 2050, the implication would be for a $273 billion future cost to America.


PWBM’s economists note two prominent issues with Joe Biden’s plan that would lead to this estimated reduction in U.S. GDP by 2050.


To begin with, switching to the CPI-E would increase COLAs across the board. Though it would offer a lift to low earners and those with little retirement savings who need it most, it would also encourage high earners and those with a lot of retirement savings to retire sooner or work fewer hours. The end result would be lower productivity for the U.S. economy.


The other problem noted by PWBM’s economists is that Biden’s plan would “distort labor supply decisions by more than the current payroll tax.”


In plainer English, there’s the perception of a contribution-benefit link when it comes to Social Security. Even though workers aren’t getting back the same dollar they’re contributing to the program via the payroll tax, there’s the belief that if you pay more into Social Security, you’ll get more out of it.


If Biden’s proposal to reinstate the payroll tax at $400,000 were to become law, high earners, who’d receive no extra benefit yet would suddenly owe a lot more in taxes, would opt to work less, defer their income, or potentially generate their income from alternative sources that aren’t taxable by Social Security.

Senators Evaluate Changes to Social Security

It’s way late, but I’m glad that this is back on the table.

On the table, according to Semafor, is gradually raising the retirement age to 70 and creating a $1.5 trillion sovereign wealth fund, which would invest in stocks.


That fund would be separate from the already existing Social Security Trust Fund. If it underperformed, Social Security would be shored up by increasing the maximum taxable income and payroll taxes.

Raising the retirement age should be a no-brainer. Should be… people are living longer.

I don’t like the idea of a sovereign wealth fund. Leaving $1.5 trillion for politicians to plug into the private equity markets is a recipe for corruption and graft. Not only is it a massive target for corrupt people to direct funds into the pockets of their friends and families, but it is likely to be used for political virtue signaling. Is it difficult to believe that interests like global warming, equity, and reparations might take priority over getting a good return for the retirees? And why not? If the risk of a bad investment will be borne by the taxpayers anyway, there is no penalty for making terrible decisions.

Entitlements Are Still Going Bankrupt

Just a heads up that government spending and entitlements are still a problem that will bankrupt and/or destabilize this country if we don’t do something about it.

New York (CNN)In 16 years, Social Security will have to cut benefits by 21% if lawmakers do nothing to cure the program’s long-term funding shortfall.

That’s what the Social Security and Medicare trustees projected in their 2018 annual report released Tuesday.
The trustees estimate that by 2034 the combined trust funds for Social Security — which help fund the old age and disability programs — will run dry. At that point Social Security will be able to pay only 79% in promised benefits to retirees and disabled beneficiaries.
Those projections are roughly on par with last year’s report, which estimated the combined Social Security trust funds would be tapped out by 2034 and would then only be able to pay out 77% of benefits.
For the first time since 1982 Social Security’s costs will exceed its payroll income plus interest from the $2.9 trillion trust funds. That means it now must start drawing down principal in the trust fund to continue paying promised benefits in full.




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