Thursday, September 13, 2012

Bullshit argument about Social Security


A lot of people like to talk about the increase in life expectancy since Social Security started as a reason we need to reform Social Security and Medicare but it’s bullshit.  They cite an increase of more than 19 years.

The average life expectancy of a US citizen in 1930 was 59.2 years of age.
The average life expectancy of a US citizen in 2009 was 78.5 years of age.

However, consider this.
The average life expectancy of a US citizen who reached age 65 in 1930 was 77.2 years of age.
The average life expectancy of a US citizen who reached age 65 in 2009 was 84.2 years of age.

The increase in life expectancy of a retiree was only 7 years.

Not to mention that the actuaries who worked on Social Security in the 1930s considered an increase in life expectancy when they calculated the funding needed for Social Security.  They even got the population distribution by age in the 21st Century right to within a few percentage points.

You know what they didn’t figure on?  They didn’t think that we would have the income inequality that we have today.  They thought that a larger percentage of the income in the country would be funding Social Security.  But today a large part of that income is exempt from Social Security taxes.  That’s why the funding scheme had to be changed in the 1980s.

But you see, the Social Security tax rates were changed and the retirement age was raised back when Reagan was president.  And those changes made Social Security, well, secure, well into the 21st Century.

A very minor change, raising the cap on taxable income so that income over $106k is subject to FICA taxes, would fully fund Social Security pretty much forever.

It isn’t really funny that no one ever mentions this solution to any problems, however minor they might be, that exist with Social Security.  It’s interesting, but it isn’t funny.  Despicable is more the word that comes to mind.  Especially when there is talk of cutting benefits because life expectancy has increased so much and no one ever foresaw that so our only option is to make reforms that cut Social Security benefits which is in fact complete and utter bullshit.

It is bullshit.  I want to emphasize that.  No one who uses that argument is being serious and they should not be taken seriously.  Look at the numbers again.  The life expectancy of a retiree hasn’t increased by 20 years, it has increased by 7 years.  That was all figured in 80 years ago and income inequality was corrected for 30 years ago.

The life expectancy argument is bullshit.  It is only ever used to argue in favor of cutting benefits.  And it is bullshit.

Did I mention that it is bullshit?  Well, it is.

And Social Security has never added one cent to the deficit.

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