It's August 14 and that means it is Social Security's birthday! The program has been around for 78 years, providing retirement security to the elderly and support for the disabled. But the demographics have changed over the past 78 years and financial projections clearly show that reforms will be needed to ensure the program can continue to provide those benefits.
Over at Calculated Risk, Bill McBride has created an animated chart showing America's age distribution evolve, as far back as 1900 to the current day to the projected age distributions through 2060.
While everyone is focused on tax reform developments these days, we cannot forget about the need for entitlement reform. In an attempt to devise a solution, the Ways and Means Committee held a bipartisan hearing series on reforms to entitlement programs in April. They have since opened the floor up to the public by encouraging the submission of comments on any of the plans and have also released discussion drafts from each of the hearings.
A recent report from Scott Lilly at the Center for American Progress (CAP) makes the case that policymakers have only two real choices to respond to the future growth in debt levels: slash retirement benefits or raise taxes. The CAP paper rightly identifies the source of debt growth as the continued growth in Social Security, Medicare, and Medicaid, not discretionary or other mandatory spending.
The 2008 recession substantially altered the enrollment and operations of many government programs, particularly those providing financial benefits. The Urban Institute further explored one of these programs in a recently released report analyzing the recession's effects on Social Security claiming.
Last week at Knox College, President Obama gave the first of a series of speeches on the economy. He called on Washington to pass policies that would give middle class families a "better shot" in the global economy, emphasizing education, investments, and research.
Is Social Security a distributionally regressive system overall? Some people may have this conception due to a few features of the program: higher-income people retire later and therefore qualify for larger annual benefits than if they retired earlier, they live longer and so collect more Social Security checks, and some of their income is exempt from the payroll tax, which is capped at $113,700. When considering only this evidence, there might appear to be some credibility to the claim that Social Security is a regressive program.
Should Social Security cost-of-living adjustments (COLAs) be trimmed? In a recently released CQ Researcher Report focusing on government spending, CRFB Senior Policy Director Marc Goldwein answers yes, if that means that COLAs better reflect inflation.
Both the Social Security Chief Actuary and the CBO have already weighed in on the Senate's immigration reform bill, showing that it would give a short-term boost to Social Security and a slight cost to the rest of the budget. Now that the bill has passed the Senate, the CBO and the Chief Actuary have put forth more in-depth analyses of the legislation.