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Monday, November 15, 2010

COLA for benefits but not COLA for property taxes?


If benefits are to be indexed to COLA, shouldn't revenue caps be indexed as well, things like distortionary property tax caps? (cf Orzag on Social Security).

The immediate problem with social security isn't the long-term actuarial shortfall. It is that the trust is going to need hard cash for its enormous mountain of IOUs, soon; and, rather than prepare for that day, we've been spending social security receipts and compounding the risk of that by indulging in tax-cuts and tax-cut rhetoric. This is why the Catfood Commission's 50-year phase in on new revenues is far too risky, almost laughable. Do it now (and phase it out over 50 years, if that is the political compromise needed to get it done).

If Gore had done his "lock box", we wouldn't face nearly the same risks as those brought down by Bush's profligacy. It's amazing that GOP-Tea folks, some of them, wanted a balanced budget amendment, but they refused to follow rules-based commonsense, in terms of financial risk to the social security program.

As for cutting benefits, the wisest thing is to put pressure on employers to design jobs that are suitable to seniors and to those 55+, who don't get a fair shake, often, in the current job market. Surprisingly, a lot of people would like to work - just ask them - if they can get a job that is tailored to their needs. After that, the first benefits to cut are those that aren't needed to alleviate poverty in old age. Clearly, healthcare is a key cost consideration in hiring older employees, so do something with that.

Last, benefits, perhaps even retirement age, should be tied to the actual performance of the economy. That's very complicated, but it seems that some formulas could be worked out, so that one wouldn't have to rely on Congresscritters to take corrective action. Such formulas would tie actuarial assumptions with actual experience in those variables and make revenue adjustments and benefits changes.