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June 13, 2005

Why Oh Why Can't We Have a Better Press Corps? (Life Expectancy and Social Security Edition)

Roughly, if you take the Congressional Budget Office's forecasts, to close the expected 75-year Social Security deficit requires one of (a) raising the share of payroll subject to Social Security taxes from 85% to 95%, (b) raising the Social Security tax rate from 12.4% to 13.6% on its current tax base, (c) cutting benefits by a tenth, (d) raising the retirement age at which you can start collecting Social Security by 18 months, or (e) some combination of things. (Of course, this would be expected to leave the system in considerable deficit after 2080.)

Today Robin Toner and David Rosenbaum have a front page New York Times article about rising life expectancy and Social Security. Yet they manage to convey only four pieces of information: (i) people are living longer, (ii) that means that Social Security has to pay out more money to them over their lifetimes, (iii) Social Security's payouts could be reduced by raising the retirement age, but (iv) raising the retirement age is politically unpopular.

No useful numbers at all--not even a clue about the *size* of the increase in the Social Security retirement age that Republican committee chairs are contemplating.

No placing of the "longevity issue" in the context of the other factors affecting Social Security finances--the population growth issue, the population aging issue, the productivity growth issue, the income distribution issue, et cetera. No hint in the article that if you don't raise retirement ages, you are committed thereby to either (a) hoping that economic growth will speed up by a lot, or (b) tax increases or some other form of benefit cuts.

Why oh why can't we have a better press corps?

In Overhaul of Social Security, Age Is the Elephant in the Room - New York Times by ROBIN TONER and DAVID E. ROSENBAUM: WASHINGTON, June 11 - Americans turning 65 this year can expect to live, on average, until they are 83, four and a half years longer than the typical 65-year-old could expect in 1940... by 2040, the average 65-year-old will live to about 85.... Policy experts... have told Congress... adjusting benefits, raising the retirement age, increasing taxes or creating new incentives to work longer.... Senator Charles E. Grassley, Republican of Iowa, the chairman of the Finance Committee, says the retirement age will be addressed in the solvency plan.... 'We've got to deal with reality,' said Senator Trent Lott, Republican of Mississippi.

But the politics are treacherous.... The most direct way to deal with the financial strain of greater longevity is simply to raise the retirement age.... But... in a New York Times/CBS News Poll earlier this year, nearly 8 out of 10 respondents said they would oppose raising the age when people are eligible for Social Security benefits. Political strategists say this issue is viewed very differently by policy experts, who may see nothing wrong with working longer, and average Americans, with jobs that may be uninteresting, stressful or physically demanding, who are often eager to retire and doubtful of their employment prospects in their mid-to-late 60's....

'In Washington, the focus is on the demographic reality that people live longer, and most of the people who are having this conversation wouldn't mind working well into their 70's and 80's,' said Geoff Garin, a Democratic pollster.... Glen Bolger, a Republican pollster, agreed: 'Forty might be the new 30, but they don't necessarily believe that 70 is the new 65.'

Lawmakers in both parties have acknowledged that many people not only want to but also need to retire at 62 or 65. Representative Bill Thomas, Republican of California, the chairman of the Ways and Means Committee, recently reflected, 'I know my father, in terms of his plumbing activities, was pretty - the phrase, I guess, would be pretty used up by the time he was 65.' Representative Earl Pomeroy, Democrat of North Dakota, a committee member, said, 'I represent a lot of people doing some pretty hard labor out there on those farms.'... protections for low-income workers in physically taxing fields.... Workers can take earlier retirement at 62, as most do, but their benefit checks are reduced as a result - 20 percent or more every month for the rest of their lives, depending on how early they retire....

C. Eugene Steuerle, a senior fellow at the Urban Institute and a former official in the Reagan administration, notes that Americans already retire, on average, for close to one-third of their adult lives, and argues that Social Security 'has morphed into a middle-age retirement system.'... Edward M. Gramlich, a governor of the Federal Reserve Board and an authority on Social Security, says that if the architects of Social Security 'had known about the explosion in life expectancy, they would have put in some adjustment in the retirement age.'...

For individuals... indexing for longevity, would be little different from a direct increase in the retirement age or a specified reduction in benefits, said Douglas Holtz-Eakin, director of the Congressional Budget Office. But for the system, Mr. Holtz-Eakin said, it would make a big difference because the changes would be automatic.... It might also be politically attractive because politicians would be relieved of the responsibility of periodically voting to raise the retirement age or to cut benefits.... [O]ver 75 years and longer, he said, it would have an important effect...

Posted by DeLong at June 13, 2005 04:42 PM