Friday, November 16, 2007

Social Security -- crisis??? (

Something like one-tenth of one percent a year hike in payroll tax until sometime around 2040 (after which S.S. outgo forever flattens) would cover the baby boomers -- as average income increases an average of two whole percent a year: a crisis?

Under the current setup an equivalent amount of income tax will go to cash in Trust Fund bonds to cover the payroll tax shortfall -- beginning sometime around 2017. If we are back in Clinton style surplus mode by then no one will notice. If we are in deficit we will face the choice of either raising the income tax (or some other on-budget tax -- tarrifs? :-]) just a mite or selling just a few more bonds to cover the TF bonds we are cashing -- some crisis.

By 2040, by current projections, we will be paying S.S. retirement about three-quarters out of payroll tax and one-quarter out of income tax -- clunky but, hey, this is government. At whatever point the TF bonds are all cashed in we can decide whether to go on with the same clunky setup or whether to add a few points to payroll tax (at a point in time when average income will have doubled) while making an equivalent chop in the income tax (who cares).

Cutting benefits to avoid doing either will be about as sane a possibility then as would be today (less so -- there will be relatively more seniors). What a crisis.

posted 11/16

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