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SS lecture 2 - Coggle Diagram
SS lecture 2
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Solutions for fixing social security
What were the financial principles on which SS was built?
was sold on principles of social insurance - dignity and self respect- not on redistribution and welfare
social security redistributes income between generation
pay as you go system
between generations
between cohorts
Progressivity- redistribution
rich to less rich
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fair return on contributions- individual equity
contributions render a fair rate of return over time- US treasury bill rate
benefits in retirement related to contribution- earnings over working life
equal treatment of equals- horizontal equity
equal assessment of payroll taxes on those with equal earnings
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Economic efficiency
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How are these principles working?
social securirty is failing as ati povety
perpetuates intergerrnaional inequiiy
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other solutions:
push back retirement age
universal benefits
Strategies for fixing social security
reducing benefits
ways to ccut benefits: use highest 40 years of inome to set benefits
adjust the bend poinnts to force lowerr PIAs
promises would be broken; lower sandard of living; more povoerty
reducing the cost of living adjustment
Increasing payroll taxes
1.raise SS tax rate on earning above 6.2%
Raising retirement age
NRA- 68; ERA- 62;
keep people in labor force for longer
Argument against
No choice about when too retire- physically demanding jobs
post retirement jobs for elderly are scarce
unfair for people with reduced life expetancy
Could have zero-sum savings- offsetting early
universal social security age
predicted impact of raising taxes
impact of the economy
Criteria for reformingin social lsecurity
maintain savings commpoant of program- alloates income across lifetime
mainntain social inisnurance
do nont impact economic growtth
maitain redisitributive