Greenspan on Social Security

Alan Greenspan just admitted again that Social Security and Medicare is a problem, and that we are promising benefits that we cannot deliver without taxing the crap out of the country. He makes the astonishing statement that we should not promise new benefits that we can't pay for. Its good to see someone vaguely associated with The Government in the public mind being honest about this problem.

I agree with Greenspan a realistic plan for solving it basically has to include longer working lives. Switching to a private, account based system rather than the current Ponzi scheme is a fine way to fix things for the future, but it doesn't address the problem of paying the next few decades of benefits. Since old people vote, defaulting on the benefits is unlikely to be politically feasible. But pushing back the retirement age and perhaps disqualifying those with high income from pension plans or other sources could fly as a compromise to reduce total benefits paid.

An intelligently-privatized health care system with incentives to save money would do the job too, by drastically reducing future Medicare costs. But given that the wind is blowing towards even more stupidy inefficient health care right now, this seems unlikely.

It will be interesting to see how Europe addresses this - as Greenspan notes, America's more open immigration means our problem isn't as bad.

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I had just read a commentary

I had just read a commentary on Greenspan's report elsewhere, but it focused only on making him out to be an evil bastard for suggesting people work longer before collecting SS. As if it's his fault that the money just isn't there.

ISwitching to a private,

ISwitching to a private, account based system rather than the current Ponzi scheme is a fine way to fix things for the future, but it doesnĆ¢??t address the problem of paying the next few decades of benefits.

The great thing about a private solution is that the current social security system won't pay the next few decades of benefits either. I have always thought that the key to a private solution would be to allow workers to invest up to a certain percentage of their payroll taxes (say two thirds) in private accounts while forcing them to pay the remainder (one third in this case) into the general fund.

The general fund, then, would pay the benefits of current retirees from the one-third contributed by current workers and (obviously) also accumulate a lot of debt. No worries, though. Workers will continue to pay the compulsory one third into the general fund for years to come until this debt is paid off. And the instant that it is paid off (which it eventually must be because the current and future generations of workers will retire on their own private investments and not out of the general fund), we kill the social security fund all together.

Now, I know that this plan assumes that the Congress won't dip into the social security fund for other projects and that they'll actually let it die when the time comes, but I think that any plan must also assume the same.

The Cato Institute has, of course, come up with a plan similar to this in ther 6.2% Solution. I think that any libertarian who even deems it conscionable to work through our current government should get behind such a plan.

We are, perhaps, 40 or 50

We are, perhaps, 40 or 50 years away from the "event horizon" where medical improvements will begin to outpace age damage, and being old will in effect cease to be fatal. So yes, longer working lives are probable.

I would assume everybody's

I would assume everybody's familiar with the paper Fixing Social Security and Medicare for Good by Laurence J. Kotlikoff?

I would assume

I would assume everybodyĆ¢??s familiar with the paper Fixing Social Security and Medicare for Good by Laurence J. Kotlikoff?

Aparently this paper is buy an economist who doesn't know how to use a simple analysis tool like graphing. It reads more like an op-ed piece than like research. One of his three (three!?!) citations is from George Will. Do you have any links to research papers on the matter?

What ever happened to the

What ever happened to the 1983 Greenspan Report and its recommendation, most notably, recommendations to roll the Government sector retirement into SS. What about senators, congress, president and judge retirements as well. OOPS that may cause something to get solved. Lets face it the public and union sector doesn't really care about SS as well as the Federal elites they have a general fund retirement, or thrift retirement plans. Greenspans address to the Banking committee and also to member banks, called for an end to the tricky math used in the SS senate committee. None of these projections include the exponential increases in health care and the already straining medicare crisis. The out of control health care costs in the U.S. are already driving jobs overseas and to outsourcing. Then there is the totalization agreement with Mexico, approximately 3 billion a year in SS to illegal aliens in Mexico over the next five years, with initial payments of around 20 to 50 billion for illegal workers who used false or stolen SS numbers. On top of 45 million aborted tax payers, 8 million would begin paying this year alone.
Even the small business sector has been affected. With only five employees we were forced to outsource 2 jobs to who knows where, but we couldn't afford the state and federal costs for these employess, nearly $8,000.00 each + $425.00 per month health care. I really feel these 2 employees could could have done beter for themselves if they had the money we paid in taxes and health care in their own pockets. We paid out more for the younger employee per month than he took home. He like a lot of others his age was ready for it and went back to his opt-out generation attitude. These kids don't care if their boomer parents ever see a dime of retirement. Hey let my folks reverse mortgage their home, its more important than anything else to them anyway.
We really could be in trouble in the next 10 years from some of the more realistic figures I've seen. The best plan is to just let it fold, then some of the more sizable problems would take care of themselves.