Options for Saving Social Security
The Center for Retirement Research argues that over 50 percent of today’s workers will not have adequate income when they retire, and this number will jump to approximately 66 percent if you take health and long-term care costs into account. The contention is that hourly wage earners will not have the ability to replace disappearing pensions and lower net Social Security benefits (primarily because of health care and drug costs) with private savings. This is attributable primarily to the fact that median household incomes have been stagnant over the past 40 years. At the same time, many core expenses such as housing, health care, and education have grown substantially.
According to a recent report released by the trustees of the Social Security Trust Found, the Social Security Administration is spending more each year in benefits than it is taking in regarding payroll taxes and money earned on trust fund reserves. As a result, Social Security reserves are projected to be exhausted by 2034.
Congress, ready or not, will be forced to address this issue shortly because the first generation of workers affected by these converging trends — the decline of employer pensions, phased-in cuts to net Social Security benefits, and decades of slow and unequal wage growth-are just now starting to retire. What options are available to avert potential retirement woes of working-class individuals who will be retiring over the next two decades? Among the policy options now being considered are:
- Raising payroll taxes,
- Increasing the annual wage ceiling on which payroll taxes are paid. The ceiling for 2023 will be $160,200
- Basing the annual cost-of-living increase on a less-generous measure of consumer prices than is now used,
- Implementing an across-the-board decrease in retiree’s benefits,
- Reducing benefits for higher-paid earners,
- Raising the retirement age, or
- Increasing taxes on high-income wage earners.
The impact of these proposed changes on Social Security System is available from an interactive “Social Security Tool” that has been developed by the Wharton School at the University of Pennsylvania.* This tool, allows an analyst to make change in six program features (with three possible changes to each feature).
The Wharton School took down its budget modeler on Social Security. Too bad. It was an interactive tool which enabled the user to enter various policy proposals –increase the wage base, decrease benefits, modify the cost living adjustment, increase retirement age, etc.– and the model would estimate the impact on the projected Trust Fund deficit, on SS recipients, and the GDP.
So—the assignment is modified as follows:
There are competing proposals on how to “fix” Social Security to avoid the depletion of the Trust Fund and the subsequent potential reduction of benefits. The proposal come from policy think tanks, and advocacy groups.:
PWBM Budget Contest: A Flat Benefit for Social Security — Penn Wharton Budget Model (upenn.edu)
Policy Options: Raising the Social Security Taxable Maximum — Penn Wharton Budget Model (upenn.edu)
You are the policy expert on retirement security for Senator Rawson, Chair of the Welfare and Social Security Committee.
In your policy analysis memo to Senator Rawson, please compare and analyze the proposals made by the Heritage Foundation and the Center on Budget and Policy Priorities. You can also reference the two proposals analyzed by the Wharton School—Raising the taxable wage and changing the benefit to a flat dollar amount.
Based upon your analysis of the various possible changes to Social Security which options would you recommend that Senator Rawson pursue as a way of shoring up the Trust Fund and lessening the retirement woes of millions of working-class Americans over the coming decades? In your five-seven (5-7) page report (see instructions below) to Senator Rawson be sure to specify the evaluative criteria you will be used in making your assessment and also justify your recommendations in terms of whether the options you choose are cost-effective, politically feasible, socially acceptable, and/or equitable.
Instructions: Your response to the questions/issues raised in Application Exercise 3 must be written in an essay format.
All papers must be each student’s individual work product. Consultation between students or with other third parties regarding this exercise is prohibited. The rules relating to plagiarism apply fully to this paper, as they do to all other student work products. The papers will be run through Turnitin. Please cite when relying on or paraphrasing another person’s work. Use an appropriate citation style (APA or MLA preferred). If needed, put the bibliography at the back of the paper.
Papers are to be typed, double-spaced, and utilize an easy-to-read font-size (Times Roman 12 point preferred). Papers should be approximately 6-7 pages in length. Under no circumstance may the paper be longer than seven (7) pages. Pages that exceed the seven (7) page limit will not be graded. The title page, endnotes, bibliography, charts, graphs, or appendices do not count toward the page limit.
Tips
What is a Policy Issue/Analysis Memo?
A policy analysis memo (approximately 5-7 pages) is designed to provide information, guidance, and/or recommendations regarding a public policy problem to a decision-maker. The content of the memo should be directed toward convincing your “target audience” about the accuracy of your analysis and thereby the validity of your recommendations. A policy memo should be well-organized and well-written. It should be easy to understand, and free of jargon. It should contain the following sections: (1) an introduction that defines the policy problem, (2) a description of the methods utilized to identify and locate the information on which the memo is based, (3) an explanation of how you went about examining the issue and how your analysis contributes to the policy debate, (4) a brief review of the various alternatives you assessed (noting the criteria by which you examined an compared different policy options), (5) a description of what you recommend as the “best” course of action to be taken, (6) an explanation of of specific measures that should be taken to implement the recommendation(s), (7) a discussion of the limitations of your analysis. The recommendation made in your policy analysis memo needs to be “evidence-based” as well as technically, financially, and politically feasible.
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