October 25, 2010

Does it Make Sense for Anyone Under Age 35 43 55 to Vote for David Cicilline, Part 3

Carroll Andrew Morse

There are multiple proposals for preventing the sudden Social Security benefit cut that is projected to be necessary around the time that people now in the mid 30s to early 40s are ready to retire, under the program’s current structure. This past July, the Congressional Budget Office issued a report where several of the options were analyzed.

One option the CBO analyzed was reducing initial benefits by 15% starting in 2017 (impacting individuals who are 55-63 now), preventing the next sudden change from being required until the 2070s. However, if a decision to cut benefits is not made by 2017, then the first cut will have to be larger in order to prevent second big cut from being required sooner...

If policymakers wanted to implement a benefit reduction in 2027 and still achieve the same improvement in the 75-year actuarial balance as a 15 percent reduction in 2017, the benefit cut in 2027 would need to be one-third larger: 20 percent, rather than 15 percent.
A similar cost-of-delay occurs in the payroll tax-increase scenarios analyzed by the CBO. The CBO looked at gradually increasing the payroll tax by 2 percentage points over 20 years beginning in 2012, ending at about 16% higher than it currently is, and preventing the next major benefit cut or tax increase from being needed until the 2080s. If the start of that same tax-increase schedule is delayed for 10 years, however, then the CBO estimates that the tax increase has to be 20%, instead of 16%, to put off the second tax increase or benefit cut for equally as long from now.

Whether the plan to "protect social security" is to raise taxes or cut benefits, the longer a decision is put off, the larger the tax-increases or benefit-cuts need to be. So all you need to believe that David Cicilline is the right choice for preventing large sudden changes to Social Security taxes and/or benefits is to believe that, once elected to Congress, he will act as quickly as possible to implement a long-range fiscal plan, and not wait until the program is on the verge of running out of money before acting (or moving on to another job).

As a final note, the CBO ran one scenario designed to make the Social Security program permanently solvent, indexing benefits to prices rather than earnings. The effect would be a 40%-45% lifetime benefit cut compared to the current baseline for individuals born around 2000 (i.e. those just starting to work), a 27%-33% lifetime benefit cut for those born around 1980, and a 12%-18% lifetime benefit cut for those born around 1960 -- but it will "protect social security", if all you mean by protecting social security is no structural changes to the program, not now, not ever.