Subject: RE: What "values" created the existing system?
I will go with my model of OASI over the governments model any day, any week, year, etc. As for the tax rate, the required tax rate at the begining should have been 4%. However it was not. The 12.4% tax rate is incorrect becuase you include DI. Looking strictly at OASI, the tax rate was reduced to 10.3% in 1999 by shifting .1% to DI to make it last longer. Smart people?
OASI will not go broke in 2034 or 2035 as your reference material states, but 2037 with OASI broken out. The worker-retiree ratio referenced is wrong when it is adjusted by using a weighted average. Why use a weighted average? The reason is simple. If I begin a program and state those you participate may begin drawing benefits in 20 years, then they pay only a fraction of the time required. These taxes paid do not have time to grow as much as others (mathematical fact) yet their benefits as paid by the OASI formula is not based on what is paid, but is paid on what was made. To make matters worse, the benefit formula makes the OASI program a divergent series.
You truly believe OASI will pay 75% of benefits in the future past 2032? Have you seen the cash flow for each year past it? If economic growth stays high, it will be a lot less than 75%. I will let you figure this out.
As for life expectancy, what I mean by killing off another 16% of the people is simple. Picture two groups of people. One is living longer, while the other is seeing little growth in life expectancy. Group "A"lives to 90 while group "B" lives to "72". The average life expectancy is hten 81. If group "A" adds another 1 year while group "B"adds none, the life expectancy increases to 81.5.
There are two distinct groups of people reaching 65. Those who will live only a few more years and those who will live longer. By raising the age to 70, you basically eliminate the first group who will never see 70 and never receive benefits. This is the group I say you will die before ever receiving a dime. You basically kill them off before they can receive benefits.
Second, the current requirement for paying OASI benefits if based on US savings bonds or US treasury rates, is 4% retiring at 65 and living to 90. Therefore, raising the age to 70, should reduce the tax rate to about 3.3%. Therefore, why is the OASI tax rate 10.3%? The simple reason is no one paid enough for so long into OASI as to create fund to pay benefits. In 1970 Social Security estimated their OASI fund would have just over $1 Trillion in it. They could not fathom such a number and did away with any reason for having a trust fund. This is the reason behind the very large benefit increases in the early 70's as well as COLA being enacted. However, the oil embargo put them in their place quickly, but it was too late.
What you call minor changes to the system are not minor at all. These changes have reduced Federal Income taxes to the point where we do not raise enough revenue for general expenses. In other words Social Security squezed out Federal Income taxes and created a $5.4 Trillion debt.
If you belive Social Security can pay only 75% of benefits past 2032, then you must also reallize the average ROR for all will be negative. If you believe in raising the age to 70 or higher, then you must also realize, the ROR becomes very negative. Pay more years, receive fewer years.
