Economics, Entitlements

Similarities between Social Security and global warming

The New York Times columnist Paul Krugman blogs that, despite seeming similarities, the policy choices we face on Social Security’s aren’t similar to those on global warming. In a speech back in 2007, I argued that entitlements and global warming are similar in two important respects:

Both climate change and entitlements are a relatively benign issue for current generations but potentially severe for future ones, with considerable uncertainty regarding the potential effects.

I don’t find Krugman’s counter arguments all that persuasive. First, he says, Social Security might not turn out to be all that big a problem. Sure, but it also might turn out to be a REALLY big problem. People value bad outcomes more than good ones, which is why we take out insurance on everything from our homes to our TV sets. Early action on entitlements is like an insurance policy.

Second, Krugman says, if the risk is that Social Security will run out of money and force large benefit cuts, we won’t ameliorate that risk by cutting benefits today. But actually we do: Under current law, benefit cuts could be both large and focused on distinct groups of people, including the very poor and the very old. By implementing benefit cuts (or tax increases) gradually, we smooth the problem over a larger number of people and can impose larger cuts on those better able to handle them. One of the policy merits of pre-funding Social Security, such as through personal accounts, was a greater ability to smooth funding costs over time and among people.

14 thoughts on “Similarities between Social Security and global warming

  1. Mr. Biggs, Social Security is not broke — yet. In fact, it is still in surplus — just calling in its IOU’s — which it can continue doing until the 2030′s, when it will be in deficit. Even then, if we did nothing to fix it, it could pay out around $.75 to $.78 on the $1.00. The Social Security costs will increase between now and then around 25% — and there are many small steps that can be taken to make it financially secure without drastic measures. We have twenty-five years to come up with the 25% — the longer we wait to fix it, the harder it will be. After the babyboomers are gone, the Social Security financing will ease for the next generation of retirees and the younger ones who contribute.

      • re: ” So I’m paying over 13K/year for disability insurance?”

        for disability, survivors AND an inflation-indexed annuity.

        go shopping for a private annuity with those options and see what it costs.

        • re: “the 100 billion”

          was to pay for the temporary 2% payroll reduction.

          it was essentially stimulus.

          FICA pretty much covers SS outlays and will for a number of years to come.

          Of all the issues that we have right now with the current budget and deficit – the SS issue is a gnat on a dogs butt.

          given it’s almost non-existent impact on the current budget, what is it a priority?

          • “FICA pretty much covers SS outlays and will for a number of years to come.”

            Actually FICA was already short of covering SS outlays before the tax holiday.

          • re: FICA already short.

            nope. remember FICA money is what went into the Trust FUnd and it is legitimate debt just as the debt we owe to the public who bought Tnotes from us.

            the thing to remember is that the FICA TAX did create that fund – not general revenues.

            but even then if you want to discount it – and that would be wrong to do so – how much “short” are you talking about ? and what percent of the current deficit is that amount?

            why is this a priority right now when other things are a much larger percent of the deficit?

            why SS instead of those things?

            see if you really do support the concept of SS – then you look at this in terms of what the problem really is and is not and what it will take to fix it whereas if you are opposed to SS as a concept then all of this becomes just a list of reasons to further oppose it.

      • not when you also have 800+ billion dollars in annual revenues… by your definition, every holder of US Tnotes is also “broke”.

  2. as long as the FICA tax is collected why would SS “run out of money”?

    and when people are polled – about 80% support keeping SS and when asked about future shortfalls 53% say increase FICA taxes and 36% say reduce benefits.

    the reality is that by a very large majority, people support Social Security AND they support reforms to it to retain it and strengthen it – despite the best efforts of those who are opposed to the concept of it.

    SS is not a retirement pension. It’s primarily insurance to provide disability and survivor income as well as a minimal
    income to live on in retirement if you have no other income.

    Nothing keeps people right now from build their own supplemental pension fund that they own and they can invest.

    Why is there such advocacy to do away with SS in the first place since the American people want it and it serves a vital purpose because people who live on minimal SS benefits are not indigent wards of other taxpayers? It’s an individual mandate that DOES WORK!

    • “SS is not a retirement pension. It’s primarily insurance to provide disability and survivor income as well as a minimal
      income to live on in retirement if you have no other income.”

      So I’m paying over 13K/year for disability insurance? Life insurance? Considering I pay $400/year for a term life policy that would pay my family much more than SS survivor benefits and approximately $25/month for a good disability policy this seems bizarre. Imagine if I could have invested the difference between my life/disability insurance payments and the 13K I pay to SS. At 7% my retirement fund would be worth 2.7 million in 40 years.

  3. The problem is that social security is already broke. We are already spending more money than we are taking in. The future will just make it worse. Every few years the government plays with the benefits and rates to maintain its levels, but there is no way it can survive without huge changes.

    The sad thing is that SS could have been a viable option that could have provided Americans a reasonable retirement. Just think if you put 15% of your life’s earnings into a legit retirement account, 401k, pension plan, etc. Instead, you are forced to put it in SS where you will rarely receive your original investment– let along a reasonable return.

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