Thursday, August 26, 2010

Two quick thoughts prompted by the preceding

1. In discussing the future of Social Security, we keep hearing how in 2037 the system will be "broke" and thereafter will only be able to pay out 75% of scheduled benefits. Leave aside the question of how a system that can continue to pay such benefits for as far out as projections go can be called "broke" and note the particular modifier "scheduled."

Social Security benefits are given a Cost Of Living Adjustment (COLA) yearly connected to inflation. Your initial benefits at any given retirement age are based on your earnings. While it hasn't been true of late, historically, over the long term, wages tend to rise faster than inflation. Which means in turn that over the long term, initial benefits tend to rise in real terms, that is, after adjusting for inflation. Thus, those "scheduled" benefits, over time, provide new retirees a higher and higher standard of living as compared to those who retired in earlier years.

What all that ultimately means is that people who retire in 2037, even getting just 75% of "scheduled" benefits, will still retire with a standard of living comparable to people retiring now. Even if we do nothing, people retiring in 2037 will be no worse off than those retiring today. That standard of living is no great shakes - the average benefit is $1164 a month, or just under $14,000 a year - but it doesn't change the fact that the "75% of scheduled benefits" line is deliberately deceptive crap.

2. Another bit of crap is the argument for raising the retirement age based on the assertion that when Social Security was established, life expectancy was just 57, so the idea was that few people would live to 65 to collect benefits. Even assuming the figure is correct, the use to which it is put is bullshit because that figure represents life expectancy at birth. Recall that in addition to the improvements in public health and sanitation over the last several decades, in the mid-1930s there was no vaccine for measles (introduced in 1963), for mumps (1967), for rubella (1969), for influenza (1945), or for chickenpox (1988). Even the vaccine for pertussis ("whooping cough") was just being introduced in the mid-'30s. Many children died young. Life expectancy at birth tells you little about life expectancy for people scores of years older.

I didn't find data for the mid-1930s, but I did find data for 1950 that compared life expectancy at birth with that of people who were 65. At birth, life expectancy was just over 68 years. At 65, life expectancy was 14 years - that is, on average, a person who was 65 in 1950 would expect to live until the age of 79. (As of 2005, the figures were: at birth, just short of age 78; at 65, just short of 84 - the shrinking difference largely due to reductions in infant and youth mortality.)

So for someone like Alan Simpleton to say that retirement age was originally set at 65 because life expectancy was only 57 is either a boldfaced lie (a "lie" being understood as a statement intended to deceive or mislead) or a statement of such staggering ignorance as to disqualify him from any standing to have a further opinion on the subject.

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