Why doesn't media use 2/7/05 SSA Actuary Report that "NO WAGE CAP IS BEST"

[papau]

The president says he does not want to threaten the guaranteed benefits - which means not decreasing the portion of wages replaced (the replacement rates). The replacement rates for workers who retire at age 65 for a low-wage earner retiring at age 65 in the year 2001 was about 53 percent, and for a relatively high-wage worker the replacement rate was about 32 percent. As a Result of the 1983 Reagan Law’s increase in the “normal retirement age” from 65 to 67 in 2027, replacement rates for individuals who retire at age 65 will decline in future years. Although individuals will continue to be eligible for early retirement benefits at age 62, those who elect to receive benefits at that age in the future will have their benefits actuarially reduced by more than early retirees now do.
Percent Replacement for… Low Wage …….Average Wage…..High Wage
IN 2001 46% 34% 28% with age 65 normal retirement age
IN 2030 41% 30% 25% with Reagan Law age 67 “normal” retirement age

The Social Security Administration has reviewed 18 proposed solutions to the long range, 75 year, possible financing problem under the current intermediate (1.9% GDP annual growth rather than our prior 40 year average of 3.0% annual GDP Growth?). ONLY THE REMOVAL OF THE WAGE CAP MEETS THE PRESIDENTS RULE OF NO TAX INCREASE BUT MAKE FULL 75 YEAR YEARS OF PROJECTION “SOLVENT” WITH TRUST FUND HOLDING BONDS AT END OF 75 YEAR PERIOD. The result of “making all earnings subject to the payroll tax (but retaining the cap for benefit calculations)” beginning in 2005 is a 2.20% estimated change in Long-Range OASDI Actuarial Balance (as a percent of payroll – currently we are negative 1.89%) and 2.93% the estimated change in Annual Balance in 75th year (as a percent of payroll), with the fairer “Make all earnings subject to the payroll tax and credit them for benefit purposes achieving a change of 1.75% and 1.95%, respectively, with the Trust Fund under no wage cap/no benefit cap in 2078 being still positive but at only 7% of that years benefit payouts (a little low but that is 74 years from now. Intermediate uses 1.6% annual productivity. 1,8% GDP growth in the out years (The "Low Cost" projection uses 1.9% productivity and 2.6% GDP growth in the out years - still conservative relative to historical GDP Growth - and find that NEVER is there a problem with the Social Security System - but the President prefers the crisis is coming "intermediate projection"



http://www.ssab.gov/financing/2004_update.pdf
SOCIAL SECURITY MEMORANDUM
Date: February 7, 2005 Refer To: TCA
To: Stephen C. Goss, Chief Actuary
From: Chris Chaplain, Actuary
Alice H. Wade, Deputy Chief Actuary

Table A—Estimated Long-Range OASDI Financial Effects of Several Individual Provisions1 Using the Intermediate Assumptions of the 2004 Trustees Report
Number Provision
Estimated Change in
Long-Range OASDI
Actuarial Balance2
(as a percent of payroll)
Estimated Change in
Annual Balance in
75th year3 (as a percent
of payroll)
1
Reduce the COLA for OASDI benefits by 0.5 percentage points
beginning December 2005................................................. 0.79 1.25
2
Reduce the COLA for OASDI benefits by 1 percentage point
beginning December 2005................................................. 1.51 2.39
3
Increase the number of years used to calculate benefits for
retirees and survivors (but not for disabled workers) from 35 to
38 (phased in 2005-2009); i.e., 36 for 2005-06, 37 for 2007-08,
and 38 for 2009 and later ................................................ 0.26 0.40
4
Increase the number of years used to calculate benefits for
retirees and survivors (but not for disabled workers) from 35 to
40 (phased in 2005-2013); i.e., 36 for 2005-06, 37 for 2007-08,
38 for 2009-10, 39 for 2011-12, and 40 for 2013 and later .............. 0.42 0.67
5
For each year from 2005-2035, multiply the 32 and 15 percent
benefit formula factors by 0.987, reducing the factors to 21 and
10 percent respectively, for new eligibles in 2035 and later............. 1.61 3.36
6
Reduce benefits across the board by 3 percent for those newly
eligible for benefits in 2005 and later .......................................... 0.37 0.55
7
Reduce benefits across the board by 5 percent for those newly
eligible for benefits in 2005 and later ........................................... 0.61 0.91
8
Eliminate the hiatus in the normal retirement age (speed up the
increase to age 67) ............................. 0.14 0.00
9
Eliminate the hiatus in the normal retirement age (speed up the
increase to age 67) and then index the normal retirement age
(by 1 month every 2 years) until the NRA reaches age 68 ............... 0.52 0.79
10
Eliminate the hiatus in the normal retirement age (speed up the
increase to age 67) and then index the normal retirement age
(by 1 month every 2 years) until the NRA reaches age 70 ............... 0.68 1.73
11
Raise payroll tax rates (for employees and employers combined)
by 2.0 percentage points in 2005 and later................................... 1.96 2.00
12
Raise payroll tax rates (for employees and employers combined)
by 2.1 percentage points in 2020-2049 and by an additional 2.1
percentage points in 2050 ........................ 1.97 4.21
13
Tax Social Security benefits in a manner similar to private
pension income beginning in 2005. Phase out the lower-income
thresholds during 2005-2014. ..................0.33 0.27
14
Make all earnings subject to the payroll tax (but retain the cap
for benefit calculations) beginning in 2005 ...................................2.20 2.93
15
Make all earnings subject to the payroll tax and credit them for
benefit purposes beginning in 2005 ..................................... 1.75 1.95
16
Make 90% of the earnings subject to the payroll tax and credit
them for benefit purposes (phased in 2005-2014)............................. 0.75 0.85
17
Cover newly hired State and local government employees
beginning in 2005 .......................0.21 0.01
18a
Invest 40% of the Trust Funds in equities (phased in 2005-2019),
assuming a 6.5-percent real rate of return on equities (standard
assumption)..................................... 0.91 0.00
18b
Invest 40% of the Trust Funds in equities (phased in 2005-2019),
assuming a 5.5-percent real rate of return on equities .............0.66 0.00
18c
Invest 40% of the Trust Funds in equities (phased in 2005-2019),
assuming an ultimate 3 percent real rate of return on equities, the
same as the expected yield on Treasury bonds .......0.00 0.00

1)All estimates are for individual provisions, as if each were enacted alone. The combined effect of several provisions together would involve complex interactions that can result in quite different effects from those implied by simply adding the effect of the individual provisions.
2)Under the intermediate assumptions of the 2004 Trustees Report, the 75-year actuarial balance is -1.89 percent of taxable payroll.
3)Under the intermediate assumptions of the 2004 Trustees Report, the annual balance in the 75th year of the projection period is -5.91 percent of the taxable payroll for that year.

[Us vs Them]

1. I watched members of the house question John Snow on C-SPAN

And this question was raised. Snow et al. stand by the belief that lifting the cap will put undue strain on the wealthy Americans with 'expendable income.' Welcome to Reganomics. Apparently we're into another trickle-down era. However, what Snow and his buddies fail to realise - the top 2% of income earners are not really boosting the American economy much, as they are in the market to buy luxury items from multinational companies that utilise cheap labour overseas.

Quite frankly, we will never see this option presented in the media because it is in direct opposition to the administration's policy.

[papau]

2. I know the Actuaries at SSA - and am quite proud that they spoke truth

Only the half qualified "Chief Actuary" political appointment Steve Goss (he is an "Associate" rather than a "Fellow" of the Society of Actuaries because he failed his exams) is pushing the Bush vision.