Sunday, March 13, 2005
Social Security addendum: A reader sent me an e-mail the other day regarding my post last week on the supposed "minor" fixes that would cure Social Security's long term solvency problems.
In that post I did some seat-of-my-pants calculations that showed how the demographic problem would translate into the average worker's FICA line on their paycheck.
The reader pointed out that one of the supporting documents I linked to contained some numbers that may have indicated that my seat-of-my-pants math was overly conservative.
Generally, out of every dollar paid in Social Security and Medicare taxes:
- 69 cents goes to a trust fund that pays retirement and survivors benefits;
- 19 cents goes to a trust fund that pays Medicare benefits; and
- 12 cents goes to a trust fund that pays disability benefits
Since the Social Security demographic numbers indicate that you've got two workers for every retiree and only 69 cents of each dollar in taxes goes to retirement benefits, the monthly tax bill per-worker would be $761.59 per month -- not the $525.50 I quoted in my previous post.
But that's just a very rough calculation. We don't know how much the Medicare portion of the the tax will grow. We don't know if improvements in medical science will shrink the amount that goes to pay disability benefits.
There's lots of questions, and the only "answer" that seems to be forthcoming from the Democratic Party is that there is no problem. Every year that reform is avoided makes the cost of fixing the problem greater down the road.