Power And Dollar

What options do they have for Social Security?

CNN has a summary of Social Security proposals among the three candidates here:

http://money.cnn.com/2008/03/25/news/economy/socsec_candidates_trustees/index.htm?postversion=2008032508

The problem with Social Security is similar to any pension plan, GM’s or Chrysler.  The fixes are also similar to those too.  They all revolve the following, like them or not:

1)      Increase the quantity of contributors, i.e. workforce or taxfilers.

2)      Increase the amount of each contributor, i.e. increase taxes or increase income (productivity)

If we only consider domestic options, then the increase in contributor can only be done through 5 things:

1)      Optional retirement instead of mandatory;

2)      Decrease minimum labour age.

3)      Increase the amount of immigrants

4)      Increase the birth rate

5)      Increase the female labour force participation rate

The increase in contribution per contributor can only accomplished through 2 things:

1)      Increase in taxes

2)      Increase the income of the contributors, i.e. productivity

There are only 7 options.  Some of them are not politically viable to any politician, even the Obama type.  Some of them are not really political solutions.

US is not China.  US is not playing a catch-up game.  So, there is no growth of 8% / year to make up the needed funding for Social Security.  So, this one is out.  Increase birth rate takes too long.  Well, it takes at least 16 years for one to join the workforce!  Female labour participation has been around the same for years and probably is difficult to get any more lift.  Decrease minimum labour age?  Out of your mind. 

That is why there are always the same options being talked about:

1)      Optional retirement instead of mandatory;

2)      Increase the amount of immigrants

3)      Increase in taxes

4)      Increase the income of the contributors, i.e. productivity

Increase productivity will have to involve technology improvement.  This kind of things does not come out of a “technology factory”, a gadget / month kind of a deal.  This is either about the mode of production so that each worker can produce more than before, or something others cannot produce.  

We all know how increase in taxes is like politically.  So, do you want immigrants or optional retirement?  

Now look at the voter base. 

Obama will have a huge black voter base.  That may prevent him from enlarging the immigrant pool.  That would leave him with either more taxes and/or optional retirement.  

McCain will have more white voters, and more voters who will get the biggest impact by tax increase.  As long as optional retirement is optional and not affecting their benefits (Go study Canada’s experience since they have a more acute problem), McCain will have to get that option or inaction.  Clinton will have the largest Hispanic voter base of the three, she will be the most likely candidate to enlarge immigration pool.  Then it will be optional retirement for her.

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March 25, 2008 - Posted by | america politics, business, clinton, Current Affairs, Current Events, Democrats, economics, election, finance, Hillary Clinton, mccain, Money, obama, opinion, politics, Republican, Thoughts, US politics, wordpress-political-blogs

5 Comments »

  1. I came across your blog on Technorati. Nice site layout. I will stop by and read more soon.

    Mike Harmon

    Comment by Mike Harmon | March 25, 2008 | Reply

  2. Where’s privatization ? Would increasing taxes or immigrants out pace the insolvency issues ? The immigrant “solution” only delays the inevitable I would think.Sooner or later someone has to pay for something.Good post for thinking on thx for posting it.

    Comment by in2thefray | March 25, 2008 | Reply

  3. the post implicitylu palced an assumption on keeping the current structure in tact. so, you raised a good point regarding privatization.

    i actually have an opinion about this. however, i never did any research about this unpublished opinon. probably someone already wrote it somewhere.

    i will find a time to write this.

    thanks for pointing this out.

    Comment by royho | March 25, 2008 | Reply

  4. 🙂

    Good read! Thank you!

    Trackback by Finance. How To. | March 25, 2008 | Reply


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