Monday, November 29, 2010

Social Security: a third way?

The debate (and by debate I mean scream-fest) on social security has largely been between people who want to cut benefits and people who want to raise tax rates or do away with the cap on how much income is subject to the tax, with each side disparaging the other.

But, there is another alternative. Social security takes $$ from current workers and gives it to the current elderly. We are in trouble partly because the ratio of elderly to workers is rising (and also because benefits have been increasing).

No, people, I am NOT suggesting euthanasia. Shame on you!

I am suggesting getting more workers via immigration!

It's win-win-win. Grandma gets her check, tax rates don't rise, and more people get to come to America and better provide for themselves and their families.

Let's take some baby steps. How about tripling the quotas on H1-B visas and easing the path to permanent residence from them? How about making an easy path to permanent residence for anyone who graduates from a US university. If that's too "liberal" for you how about anyone who gets an advanced degree from a US university?

There are a lot of things we can do to let wealth generating people "in".

And so I say unto you: tear down that wall! Grandma needs the money!


Tom said...

Tearing down that wall is good for many reasons. I had not thought of this one

Mungowitz said...

The proposal has been moved and seconded.

Let's vote! I say, "yay!"

Dirty Davey said...

I've been saying this for years.

John Thacker said...

I wholeheartedly approve of more immigration, but this doesn't solve the long-term problem at all. It actually makes the program's long-run shortfall worse.

The fundamental problem is an accounting one. Workers are collectively promised much more in benefits than they pay.

People who had low income throughout their lives are promised significantly more than they put in (plus inflation/wage growth), because that's the only way that they can actually get enough to retire on (I'm okay with this, and just increasing welfare for the non-aged poor isn't as good a solution).

People who had higher incomes are promised that they'll get at least as much as what they put in (plus inflation/average wage growth.)

Together that means that collectively, workers are promised more than they put in. The program is not sustainable.

I'm all for letting more people in, but all this does is keep the pyramid scheme going. The new immigrants would *also* be promised more than they put in, by the benefits formula.

This solution only works if you can keep up a very high rate of growth of young workers. Otherwise you're just trading a temporary solution now for an even larger problem in the future.

All proposals to bring more people in the system suffer from this. Short-term benefit, but long-term just makes the program less actuarially balanced.

Simply raising the taxes on the program doesn't "work" either, unless you alter the benefit formula (the effective tax brackets on benefits) so that the extra benefits promised don't increase faster than the extra taxes collected. Otherwise, again you're getting a short-term fix that makes things worse in the long-run.

John Thacker said...

This solution just doesn't work in the long run.

Immigration of adult labor can actualy be even *worse* in some respects, because Social Security uses only the 35 best years of your income to determine your promised benefits. Someone who immigrates to the US and starts working at 30 gets the same benefit as if they were in the US and working from age 18, even though they may have paid into the system 10 fewer years.

John Thacker said...

In what sense is bringing more people into an unsustainable Ponzi scheme a "solution," except in the short term?

Don Taylor said...

This one got me more than the avg number of hate emails....just seems a small practical step to me. said...

The government serves as a bank that saves your taxes for your future use. After years of religiously paying for it, you'll reimburse it in your SSDI. However, we know that you have to pass a long process. That's why it's better to consult lawyers to learn more about disability law so that you can be sure that getting your claim approved will, more or less, be a sure thing.