The Social Security Administration's chief actuary analyzed Republican proposals to overhaul Social Security, and found that they would "substantially reduce expected benefits for people now entering the workforce."
The analysis focused on proposals from Rep. Paul Ryan (R., Wis.) to overhaul the retirement-insurance program. Ryan has proposed raising the retirement age by linking it to life expectancy, and slowing the growth in Social Security benefit pay-outs by changing the way they are indexed.
A worker born in 1985 whose earnings averaged $43,000 would receive 17% less at retirement than promised under current law, as a result of Ryan's proposal to change the inflation index. His proposed increase in the retirement age would reduce benefits by another 8%, according to the actuary's analysis.
The combined effect of the proposals would be to reduce benefits by 24% for someone at the $43,000 income level, according to a separate study released Wednesday by the left-leaning Center on Budget and Policy Priorities.
The GOP proposals the actuary analyzed, at the request of Ways and Means Social Security Chairman Earl Pomeroy, were
raising the retirement age from 67, as scheduled under current law, to a higher level-this reduces benefits for all regardless of when they retire;
flattening benefit levels and reducing replacement rates by tying initial benefit levels to price levels rather than wage levels (sometimes referred to as "partial price indexing" or "progressive price indexing");
adopting an alternative measure of inflation as the basis for the annual cost-of-living adjustment (COLA).
The Center on Budget and Policy Priority's study looks at these specific proposals as well.
Rep. Ryan’s indexing proposal imposes the greatest reductions on those with the highest earnings, and it exempts those with the very lowest earnings, so it is sometimes called “progressive” price indexing. Nonetheless, it would affect fully 70 percent of all Social Security beneficiaries — everyone with earnings above $22,000 in today’s terms. Over time, price indexing would turn Social Security into a program that provides only a small retirement benefit — and one that is largely unrelated to prior earnings.
The second benefit reduction is an increase in Social Security’s full retirement age. The full retirement age was 65, is now 66, and will reach 67 for people born in 1960 and later. Rep. Ryan’s plan would accelerate the increase to 67 and would index the full retirement age to life expectancy thereafter. As a result, the full retirement age would reach 68 for people born around 1983 and higher ages for later cohorts. As shown in Table 1, an increase in the full retirement age amounts to an across-the-board cut in benefits. A one-year increase in the full retirement age is equivalent to a roughly 7 percent cut in benefits for a person retiring at any given age, whether a person retires at age 62 or works to age 70 and does not begin drawing benefits until then....
In addition to cutting benefits, Rep. Ryan’s plan would increase payroll taxes by ending the tax exclusion for employer-sponsored health insurance. By themselves, these benefit cuts and the payroll tax increase would be more than sufficient to bring Social Security into financial balance for the next 75 years. However, Rep. Ryan’s plan uses up much of these savings by diverting payroll taxes into private accounts that would impair Social Security’s financial soundness and require transfers from the general fund to assure the program’s solvency.
And this is what it looks like over time:
http://www.dailykos.com/storyonly/2010/10/21/912142/-Yes,-Republicans-DO-want-to-end-Social-Security
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
