Wednesday, April 13, 2011

More Thoughts on SS

When policy types discuss bringing SS into balance they are really talking about 2047 and beyond when the "trust fund" is exhausted and revenues no longer match benefits. If we did nothing, then in 30 years and benefits simply matched revenues that would effectively be a cut in benefits to about 75% of their scheduled value. That said, in 30 years we should be wealthier and in the intervening decades we at least have the ability to plan accordingly. The elephant in the room is the Trust Fund. Starting this decade we will have to redeem the IOUs (or special issue bonds) in the trust fund to pay out benefits. What will this entail? Raising taxes. So really the issue with social security in my view is not the long term balance but meeting obligations over the next three decades.

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