More on the Importance of Social Security Benefits

May 17th, 2011 at 3:21 pm

Derek Thompson makes a fair point re my post on Social Security benefits being such an important part of retiree’s income.

He notes that lots of things are important and in a climate of cuts, how is one to chose whether one program is more important than another?  I’ll have more to say about this—it’s obviously an important question.  CBA (cost/benefit analysis) comes to mind, eg, but that’s often harder than it sounds (and less fun too).

But here’s the thing re Social Security.  According to my esteemed CBPP colleague Arloc Sherman, poverty expert extraordinaire, poverty among the elderly goes from 9% with Social Security benefits to 45% without them.

I know, I know, no one is calling for Soc Sec benefits to go away.  But let me suggest that one strong criterion for whether a program is earning its keep relative to other choices should be its poverty reduction impact.  And on that metric, Soc Sec rules.

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6 comments in reply to "More on the Importance of Social Security Benefits"

  1. Ben Miller says:

    Top be fair to all Americans, Social Security should be a unified national system. All federal/state/local/etc. employees who have been able to not pay into the system should be thrown in with the rest of us. It is so ironic that public employees have a pension plan based on private savings while private employees have a public pension system that is “pay as you go.”

    • urban legend says:

      What difference does it make? The state-employee public pension is higher because there will be no Social Security. In very few cases will that be higher than the combined private-sector pension (for comparable jobs) plus Social Security.

      Anyway, I believe most newly-employed state employees will in the future be covered by Social Security — and the pensions will carve that amount out of pension benefits.

    • jason caucutt says:

      Ben: In 2011 Most public employees do pay into SS. Pensions they have are a completely seperate deal and contributed to in additon to paying into SS, just like private 401Ks. It used to be more how you described pre-1980 or so but those folks who didn’t pay into the system are the CURRENT retirees for the most part not the current workers 21-51. So I agree with you but that horse is already out of the barn.

  2. urban legend says:

    It’s a similar perspective on why graduated tax rates are fairer than flat rates: what is the hit to discretionary income? Someone on Social Security only, or even if there is a very modest addition from savings or a small pension, has very little discretionary income. Taking what seems like a small amount may devastate that discretionary income used for the occasional meal out, a movie, in inexpensive trip, etc. Of course, it’s also a 100% dollar-for-dollar hit on that spending that also helps drive the economy.

    Taking an extra 4.6% from taxable income of a millionaire — based on the proposals to move the top rate to 39.6%, with perhaps $650,000 in taxable income after exemptions, adjustments and deductions — will cost that taxpayer an additional $3000, and almost certainly will have a virtually imperceptible impact on that person’s discretionary income. Making even 20 middle income families make up the money in tax obligations that the millionaire would pay will have a significant impact on their discretionary income.

    So what’s the best thing to do, both in fairness and economic policy? How can there even be a question?

  3. Anonymous says:

    It’s sure keeping me out of poverty. I get more in Social Security benefits than I pay in Federal income tax, yet my annual income is in six figures, even without the Social Security, I have a few million in investments, and I live well. Free medical care, too! And most of the people paying the taxes that provide my Social Security benefits make maybe a third of what I make. What is wrong with this picture?

    Being old enough to get this good stuff, I am also old enough to remember when liberals cared about poor people and low-income workers. Today they seem to care mostly about voting blocs, like old people, who will vote for their people in exchange for handouts.