Thursday, June 27, 2013

What Are the Options to Make Social Security Sound?

Here’s an interactive tool from the Committee for a Responsible Federal Budget.

Do note that the first page only contains the big movers. The smaller ones are all under the “Other Benefits” tab.

Note the huge benefit from moving to cost-of-living-adjustments based on CPI minus 1%. This does nothing to improve the calculation of the CPI (as the chaining finally promoted by President Obama this past spring). But, it does make a rough move to correct for the fact that the CPI, as a Laspeyres index, systematically overstates the rate of inflation. Whether the 1% is too much or too little is open to debate, but this can take care of a huge chunk of the problem right off the bat.

Also note that the bugbears of reducing fraud and waste (a Democratic favorite) and going after disability (a Republican favorite) are really minor players. The huge focus on these in the political arena and legacy media should be your first clue that those people are more serious about name-calling and scoring easy political points than actually addressing the problem.

Lastly, in politics, it’s often easier to get a small package of more unpopular things that hurt everyone done, than to nitpick over a large basket of things that individually don’t hurt that much. According to this tool, we can solve the entire problem by switching to CPI minus 1%, and raising the retirement age to 69 and then indexing it to grow with longevity.

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