"Walter indicated that the percent of payroll taxes received by young families in the form of non-retirement benefits is very small. In fact, data from the Social Security Administration (see the Annual Statistical Supplement, 1998) show that 17 percent of all Social Security benefits distributed are survivors and disability payments to individuals under age 65. This is a substantial share of total benefits, therefore, it is important to think about what will happen to the Survivors Insurance and Disability Insurance programs under an individual accounts system."
Surprisingly, or perhaps not, your 17 percent figure corresponds exactly with the numbers I have presented. For the year we've been looking at, 10.7% represented the Old Age and Survivors' Insurance (OASI) and 1.7% of payroll represented the Disability Insurance (DI) portion of the total 12.4% of payroll OASDI tax. Add the 1.7 DI to .411% of OASI payroll (this is the payroll percentage that I calculated as going to fund a benefit that might actually be paid to a younger worker or his family) and you get a total of 2.111% of payroll going to younger workers in the form of DI and OASI benefits. 2.111% represents 17 percent of the 12.4% of payroll.
Viola! Our numbers agree.
I agree with you that it is important to consider Survivors Insurance and Disability Insurance programs under an individual accounts system. The questions you raise about continuation of disability insurance for the disabled elderly are valid. These are insurance functions that should be evaluated thoroughly in any reform.
I do not agree, however, that these survivors and disability considerations should control our decisions as to how the retirement benefit aspects of Social Security reform should be determined.
