Archive
How Do the Disabled Cope While Waiting for SSDI?
How Do the Disabled Cope While Waiting for SSDI?
Source: Center for Retirement Research at Boston College
The wait time for a Social Security Disability Insurance (SSDI) award varies from a few months to several years. Little is known about how applicants fund their consumption during this period. Using the Survey of Income and Program Participation (SIPP) linked to the Social Security Administration’s 831 file, this study examines the use of seven different coping strategies on which applicants may rely for resources, including government transfers, intra-family resources, other financial resources, and locational changes. Our results suggest that applicants use some coping strategies more frequently with longer application duration, especially spousal employment, the Supplemental Nutrition Assistance Program (SNAP) and the Supplemental Security Income (SSI) program for the disabled and children. They are also less likely to report receiving Unemployment Insurance benefits, changing their address, and owning a home. Together, these results suggests that some of the studied coping strategies are an important part of funding consumption during the application process, either by sustaining ongoing applications or by making it easier to file an appeal of an initially denied application.
Financial Security of Elderly Americans at Risk
Financial Security of Elderly Americans at Risk
Source: Economic Policy Institute
Policymakers considering changes to social insurance programs such as Social Security and Medicare must consider the economic realities confronting elderly Americans. Many of America’s 41 million seniors are just one bad economic shock away from significant material hardship. Most seniors live on modest retirement incomes, which often are barely adequate—and sometimes inadequate—to cover the costs of basic necessities and support a simple, yet dignified, quality of life. For these seniors, and even for those with greater means, Social Security and Medicare are the bedrock of their financial security. Any proposed changes to these programs must be evaluated not just for their impact on future budget deficits, but for their impact on living standards of the elderly.
In this study, we use the Supplemental Poverty Measure (SPM) from the U.S. Census Bureau to assess the economic health of the elderly population in the United States, overall and by age, gender, and race and ethnicity. Using evidence on elderly economic insecurity from Wider Opportunities for Women (WOW), we identify the share of the elderly population that is particularly vulnerable to changes in social programs. Our analysis enables us to estimate how proposed increased cost-sharing by Medicare beneficiaries or reduced Social Security benefits would impact the well-being of a significant portion of the elderly population.
Social Security’s Financial Outlook: The 2013 Update in Perspective
Social Security’s Financial Outlook: The 2013 Update in Perspective
Source: Center for Retirement Research at Boston College
The brief’s key findings are:
The 2013 Trustees Report shows virtually no change from last year:
- Social Security’s deficit still about 2.7 percent of payroll.
- Deficit as a percent of GDP still less than 1 percent.
- Trust fund exhaustion still 2033, after which payroll taxes still cover about three quarters of promised benefits.
While the shortfall is manageable, it should be eliminated soon to:
- Restore confidence in the program.
- Avoid larger tax/benefit changes that would result from delay.
- More fairly distribute the burden across generations.
And the disability insurance program needs immediate attention, as its trust fund is expected to be exhausted in 2016.
New From the GAO
New GAO Reports
Source: Government Accountability Office
1. Social Security Administration: Long-Term Strategy Needed to Address Key Management Challenges. GAO-13-459, May 29.
http://www.gao.gov/products/GAO-13-459
Highlights – http://www.gao.gov/assets/660/654866.pdf
Podcast – http://www.gao.gov/multimedia/podcasts/654851
2. Human Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce. GAO-13-470, May 29.
http://www.gao.gov/products/GAO-13-470
Highlights – http://www.gao.gov/assets/660/654881.pdf
3. UN Compensation: United Nations Should Clarify the Process and Assumptions Underlying Secretariat Professional Salaries. GAO-13-526, May 29.
http://www.gao.gov/products/GAO-13-526
Highlights – http://www.gao.gov/assets/660/654876.pdf
4. Worker Safety and Health at Department of Energy Sites. GAO-13-497R, May 29.
http://www.gao.gov/products/GAO-13-497R
5. Export-Import Bank: Financing of Dual-Use Exports. GAO-13-628R, May 29.
http://www.gao.gov/products/GAO-13-628R
The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer
The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer
Source: Heritage Foundation
Unlawful immigration and amnesty for current unlawful immigrants can pose large fiscal costs for U.S. taxpayers. Government provides four types of benefits and services that are relevant to this issue:
- Direct benefits. These include Social Security, Medicare, unemployment insurance, and workers’ compensation.
- Means-tested welfare benefits. There are over 80 of these programs which, at a cost of nearly $900 billion per year, provide cash, food, housing, medical, and other services to roughly 100 million low-income Americans. Major programs include Medicaid, food stamps, the refundable Earned Income Tax Credit, public housing, Supplemental Security Income, and Temporary Assistance for Needy Families.
- Public education. At a cost of $12,300 per pupil per year, these services are largely free or heavily subsidized for low-income parents.
- Population-based services. Police, fire, highways, parks, and similar services, as the National Academy of Sciences determined in its study of the fiscal costs of immigration, generally have to expand as new immigrants enter a community; someone has to bear the cost of that expansion.
The cost of these governmental services is far larger than many people imagine. For example, in 2010, the average U.S. household received $31,584 in government benefits and services in these four categories.
The governmental system is highly redistributive. Well-educated households tend to be net tax contributors: The taxes they pay exceed the direct and means-tested benefits, education, and population-based services they receive. For example, in 2010, in the whole U.S. population, households with college-educated heads, on average, received $24,839 in government benefits while paying $54,089 in taxes. The average college-educated household thus generated a fiscal surplus of $29,250 that government used to finance benefits for other households.
Other households are net tax consumers: The benefits they receive exceed the taxes they pay. These households generate a “fiscal deficit” that must be financed by taxes from other households or by government borrowing. For example, in 2010, in the U.S. population as a whole, households headed by persons without a high school degree, on average, received $46,582 in government benefits while paying only $11,469 in taxes. This generated an average fiscal deficit (benefits received minus taxes paid) of $35,113.
The high deficits of poorly educated households are important in the amnesty debate because the typical unlawful immigrant has only a 10th-grade education. Half of unlawful immigrant households are headed by an individual with less than a high school degree, and another 25 percent of household heads have only a high school degree.
Some argue that the deficit figures for poorly educated households in the general population are not relevant for immigrants. Many believe, for example, that lawful immigrants use little welfare. In reality, lawful immigrant households receive significantly more welfare, on average, than U.S.-born households. Overall, the fiscal deficits or surpluses for lawful immigrant households are the same as or higher than those for U.S.-born households with the same education level. Poorly educated households, whether immigrant or U.S.-born, receive far more in government benefits than they pay in taxes.
Sticky Ages: Why Is Age 65 Still a Retirement Peak?
Sticky Ages: Why Is Age 65 Still a Retirement Peak?
Source: Center for Retirement Research at Boston College
When Social Security’s Full Retirement Age (FRA) increased to age 66 for recent retirees, the peak retirement age increased with it. However, a large share of people continue to claim their Social Security benefits at age 65. This paper explores two potential explanations for the “stickiness” of age 65 as a claiming age: Medicare eligibility and workers’ lack of knowledge about their future Social Security benefits. First, we analyze the impact of Medicare eligibility by comparing two groups – one has an FRA of exactly 65; the other, between age 65 and 2 months and age 66. We find that the group with later FRAs who do not have access to retiree health benefits through their employer are more likely to claim Social Security at age 65. We interpret this finding as evidence that Medicare eligibility persuades more people to retire, because they can begin receiving federal health coverage. Individuals without access to retiree health insurance at work are 7.5 percentage points more likely to retire soon after their 65th birthdays and are 5.8 percentage points less likely to delay retirement until the FRA than those with that insurance. This result fits into extensive research showing that access to health insurance is an important component of the retirement decision. On the question of whether misinformation about Social Security benefits may drive individuals to claim at age 65, we find that some individuals are unable to accurately forecast their retirement benefits. However, our analysis suggests that there is no relationship between this confusion and the age 65 peak for claiming Social Security.
New From the GAO
New GAO Reports and Testimonies
Source: Government Accountability Office
Reports
1. Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion. GAO-13-318, March 27.
http://www.gao.gov/products/GAO-13-318
Highlights – http://www.gao.gov/assets/660/653370.pdf
2. VA and IHS: Further Action Needed to Collaborate on Providing Health Care to Native American Veterans. GAO-13-354, April 26.
http://www.gao.gov/products/GAO-13-354
Highlights – http://www.gao.gov/assets/660/654224.pdf
3. Missile Defense: Opportunity to Refocus on Strengthening Acquisition Management. GAO-13-432, April 26.
http://www.gao.gov/products/GAO-13-432
Highlights – http://www.gao.gov/assets/660/654234.pdf
Testimonies
1. Department of Homeland Security: Opportunities Exist to Strengthen Efficiency and Effectiveness, Achieve Cost Savings, and Improve Management Functions, by Cathleen A. Berrick, managing director, homeland security and justice, before the Subcommittee on Oversight and Management Efficiency, House Committee on Homeland Security. GAO-13-547T, April 26.
http://www.gao.gov/products/GAO-13-547T
Highlights – http://www.gao.gov/assets/660/654210.pdf
2. Social Security Administration: Preliminary Observations on Key Management Challenges, by Daniel Bertoni, director, education, workforce, and income security issues, before the Subcommittee on Social Security, House Committee on Ways and Means. GAO-13-545T, April 26.
http://www.gao.gov/products/GAO-13-545T
Highlights – http://www.gao.gov/assets/660/654214.pdf
CBO — How Does Growth in the Cost of Goods and Services for the Elderly Compare to That for the Overall Population?
How Does Growth in the Cost of Goods and Services for the Elderly Compare to That for the Overall Population?
Source: Congressional Budget Office
As discussed in earlier blog posts, our colleague Jeffrey Kling testified yesterday about changing the measure used to index Social Security, other federal programs, and the tax code for inflation. Currently, the tax code and many federal spending programs are indexed to one of two versions of the consumer price index (CPI): the consumer price index for all urban consumers (CPI-U) or the consumer price index for urban wage earners and clerical workers (CPI-W). Some proposals would switch to using the chained CPI, an alternative measure that grows more slowly than either the CPI-U or CPI-W (which produce similar estimates of inflation) and that many analysts consider to be a more accurate measure of the cost of living for the average person. However, increases in the chained CPI may understate growth in the cost of living for some groups.
In particular, the CPI reflects prices paid for the goods and services purchased by an average household, not by any specific individual or by the average person in certain age groups, income groups, or other categories. Therefore, most people experience price changes that are either higher or lower than reported in the CPI. Computing changes in the cost of living separately for each person would not be feasible, but different indexes could be calculated for subgroups of the population or for different policy purposes. For example, the purchasing patterns of disabled Social Security beneficiaries presumably differ, on average, from those of elderly Social Security beneficiaries, which provides a rationale for indexing Disability Insurance benefits differently from Old-Age and Survivors Insurance benefits.
The possibility that the cost of living may grow at a different rate for the elderly than for the rest of the population is of particular concern in choosing a price index for Social Security COLAs because Social Security benefits are the main source of income for many older people. BLS computes an unofficial index that reflects the purchasing patterns of older people, called the experimental CPI for Americans 62 years of age and older (CPI-E). Since 1982 (the earliest date for which that index has been computed), annual inflation as measured by the CPI-E has been 0.2 percentage points higher, on average, than inflation as measured by the traditional CPI-U or the CPI-W. However, since December 2007, when the most recent recession began, inflation as measured by the CPI-E has generally been lower than inflation as measured by the CPI-U or CPI-W (see the figure below).
Does Access to Health Insurance Influence Work Effort Among Disability Cash Benefit Recipients?
Does Access to Health Insurance Influence Work Effort Among Disability Cash Benefit Recipients?
Source: Center for Retirement Research at Boston College
There is considerable policy concern about “DI lock” – that tying public health insurance coverage to cash disability benefit receipt contributes to the low exit rates due to work. This concern led Congress to institute continued health insurance eligibility after disability beneficiaries leave the cash-benefit rolls for work-related reasons. However, unlike the long literature on “job lock,” the importance of the DI lock hypothesis – either before or after these extensions – has remained unquantified.
This paper tests whether “perceived DI lock” remains among disability beneficiaries, and whether state health insurance policies help alleviate the problem and encourage work among beneficiaries. The analysis includes both DI and SSI beneficiaries and tests if there are differential patterns between the two programs. We exploit state variation in the access and cost of health insurance caused by regulation of the non-group market, the existence of Medicaid buy-in programs, and Medicaid generosity, as well as detailed disability and health insurance program interactions. While we find little evidence overall of persistent DI-lock, heterogeneity is very important in this context. Our estimates suggest that increasing health insurance access does increase the likelihood of positive earnings among a subset of disability beneficiaries. We find evidence of SSI lock among beneficiaries with some Medicaid expenditures and find that both non-group health insurance regulation and generous Medicaid eligibility help alleviate the problem. We find evidence of remaining DI lock among individuals who do not have access to supplemental health insurance outside of Medicare. Medicaid buy-in programs alleviate the remaining DI lock.
New From the GAO
New GAO Reports
Source: Government Accountability Office
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EXPORT CONTROLS
CMS INNOVATION CENTER
DOJ WORKFORCE PLANNING
Grant-Making Components Should Enhance the Utility of Their Staffing Models
GAO-13-92
INTERNATIONAL AFFAIRS
Follow-up on the Haiti Earned Import Allowance Program
GAO-13-219R
INMATE REENTRY PROGRAMS
Enhanced Information Sharing Could Further Strengthen Coordination and Grant Management
GAO-13-93
SUPPLEMENTAL SECURITY INCOME
![defense icon, source: [West Covina, California] Progressive Management, 2008](http://www.gao.gov/images/rip/defense.jpg "defense icon, source: [West Covina, California] Progressive Management, 2008")
WEAPONS ACQUISITION REFORM
Reform Act Is Helping DOD Acquisition Programs Reduce Risk, but Implementation Challenges Remain
CRS — Social Security Reform: Current Issues and Legislation
Social Security Reform: Current Issues and Legislation (PDF)
Source: Congressional Research Service (via U.S. State Department Foreign Press Center)
Social Security reform has been an area of interest to policymakers for many years. In 2011, Social Security program changes were discussed during negotiations on legislation to increase the federal debt limit and reduce federal budget deficits. In August 2011, the Budget Control Act of 2011 (P.L. 112-25) established a Joint Select Committee on Deficit Reduction tasked with recommending ways to reduce the deficit by at least $1.5 trillion over the fiscal year period 2012 to 2021. Social Security program changes were among the measures discussed by the Joint Committee. The Joint Committee, however, did not reach agreement on a legislative proposal by the November 23, 2011, statutory deadline. Currently, Social Security program changes may be considered as part of a deficit reduction package under negotiation by policymakers.
The spectrum of ideas for reform ranges from relatively minor changes to the pay-as-you-go social insurance system enacted in the 1930s to a redesigned, “modernized” program based on personal savings and investments modeled after IRAs and 401(k)s. Proponents of the fundamentally different approaches to reform cite varying policy objectives that go beyond simply restoring long-term financial stability to the Social Security system. They cite objectives that focus on improving the adequacy and equity of benefits, as well as those that reflect different philosophical views about the role of the Social Security program and the federal government in providing retirement income. However, the system’s projected long-range financial outlook provides a backdrop for much of the Social Security reform debate in terms of the timing and degree of recommended program changes.
On April 23, 2012, the Social Security Board of Trustees released it latest projections showing that the trust funds will be exhausted in 2033 and that an estimated 75% of scheduled annual benefits will be payable with incoming receipts at that time (under the intermediate projections).
The primary reason is demographics. Between 2010 and 2030, the number of people aged 65 and older is projected to increase by 77%, while the number of workers supporting the system is projected to increase by 7%. In addition, the trustees project that the system will run a cash flow deficit in each year of the 75-year projection period. When current Social Security tax revenues are insufficient to pay benefits and administrative costs, federal securities held by the trust funds are redeemed and Treasury makes up the difference with other receipts. When there are no surplus governmental receipts, policymakers have three options: raise taxes or other income, reduce other spending, or borrow from the public (or a combination of these options).
Public opinion polls show that less than 50% of respondents are confident that Social Security can meet its long-term commitments. There is also a public perception that Social Security may not be as good a value for future retirees. These concerns, and a belief that the nation must increase national savings, have led to proposals to redesign the system. At the same time, others suggest that the system’s financial outlook is not a “crisis” in need of immediate action. Supporters of the current program structure point out that the trust funds are projected to have a positive balance until 2033 and that the program continues to have public support and could be affected adversely by the risk associated with some of the reform ideas. They contend that only modest changes are needed to restore long-range solvency to the Social Security system. During the 111th Congress, four Social Security reform measures were introduced. None of the measures received congressional action. In the 112th Congress, several Social Security reform measures have been introduced; none have received congressional action.
CRS — Addressing the Long-Run Budget Deficit: A Comparison of Approaches
Addressing the Long-Run Budget Deficit: A Comparison of Approaches (PDF)
Source: Congressional Research Service (via U.S. State Department Foreign Press Center)
A small share of federal spending is for direct provision of domestic government services, which many people may think of when considering federal spending. Since this spending is normally about 10% of total federal spending and about 2% of GDP and deficits excluding interest are projected to be as much as 7.7% of GDP by 2037, cutting this type of spending can make only a limited contribution. Transfers and payments to persons and state and local governments constitute most of federal spending, about 70%. Defense spending, currently accounting for about 20% of spending, has declined over the past 35 years, but also tends to vary depending, in part, on the presence and magnitude of international conflicts.
Until the recent recession, most types of nondefense spending have been constant or declining as a percentage of output, but spending for the elderly and health care has been rising. Although some increase in the debt can be attributed to the Bush tax cuts and the conflicts in Iraq and Afghanistan, along with growth in spending on the elderly and health care, the current debt level is not the result of prolonged and significant past deficits. Debt grew during the recession and its aftermath. Federal debt held by the public had actually declined from almost 50% of GDP in 1993 to 33% in 2001; it rose slightly to 36% by 2007. During the three recession/recovery years (2008 through 2010), it rose to 62%, and is projected to continue to grow somewhat, before stabilizing for a while. The problem with the debt is due to growth in spending for health care and Social Security if current policies continue. In addition, much of the pressure on future spending arises from imbalances in Social Security and Medicare A (Hospital Insurance) trust funds; thus, keeping these funds and their financing sources intact is an objective that could constrain choices.
Because contributions from discretionary spending appear inadequate to reduce the deficit to a sustainable level, limiting taxes as a percentage of output or constraining the overall size of the government to current levels would likely require significant cuts in mandatory spending, which includes entitlement programs such as Social Security, Medicare, and Medicaid.
Preserving entitlements would eventually require increases in taxes; by one projection the difference between spending on Social Security plus health and taxes leaves less than 2% of GDP for all discretionary and other mandatory spending. Options include allowing the Bush tax cuts to expire, reducing tax expenditures, increasing other taxes, or introducing new revenue sources.
Tax expenditures may be difficult to eliminate, but if not used to lower rates they may be a source of additional revenue. Addressing the eventual Social Security trust fund shortfall largely with tax increases would smooth burdens of accommodating longer lives across both working and retirement years. This argument might also apply, in part, to Medicare and Medicaid.
Because the federal government provides about a fifth of the revenue for state and local governments, cutbacks in transfers to these governments may, in part, shift the burden of providing services from the national to subnational governments, rather than altering the overall size of government services.
CRS — Social Security: Cost-of-Living Adjustments
Social Security: Cost-of-Living Adjustments (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
To compensate for the effects of inflation, Social Security recipients received cost-of-living adjustments (COLAs) through the legislative process sporadically from 1950 to 1974, and automatically through a trigger mechanism in all but two years from 1975 to 2012. No adjustment was made in 2010 and 2011. Benefits will be increased by 1.7% in 2013, after an increase of 3.6% in 2012. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), updated monthly by the Department of Labor’s Bureau of Labor Statistics (BLS), is the measure that can trigger a change. The Social Security COLA is based on the percentage change in the index from the highest third calendar quarter average CPI-W recorded (most often, from the previous year) to the average CPI-W for the third calendar quarter of the current year. The COLA becomes effective in December of the current year and is payable in January of the following year. (Social Security payments always reflect the benefits due for the preceding month.) If there is no percentage increase in the CPI-W between the measuring periods, no COLA is payable.
No COLA was payable in January 2010 because the average CPI-W for the third quarter of 2009 did not increase from the average CPI-W for the third quarter of 2008, and again in 2011 because the average CPI-W for the third quarter of 2010 remained below the average CPI-W for the third quarter of 2008. When the average CPI-W for the third quarter of 2011 exceeded that for 2008 by 3.6%, establishing a new benchmark, a COLA was payable in 2012. Because the average CPI-W for the third quarter of 2012 exceeded the average CPI-W for the third quarter of 2011 by 1.7%, the COLA for 2013 will be 1.7%.
Because a COLA of 1.7% will be paid to Social Security beneficiaries in 2013, identical percentage increases in Supplemental Security Income (SSI) and railroad retirement “tier 1” benefits will be paid, and other changes in the Social Security program will be triggered. Although COLAs under the federal Civil Service Retirement System (CSRS) and the federal military retirement program are not triggered directly by the Social Security COLA, these programs use the same measuring period and formula for computing their COLAs. As a result, their recipients similarly will receive a 1.7% COLA in January 2013.
The Congressional Budget Office (CBO) and the trustees for the Social Security trust funds both project annual COLAs beyond 2013. This report is updated annually.
The National Retirement Risk Index: An Update
The National Retirement Risk Index: An Update
Source: Center for Retirement Research at Boston College
The brief’s key findings are:
The National Retirement Risk Index (NRRI), based on newly released Survey of Consumer Finances data, shows that over half of households may be unable to maintain their standard of living in retirement. Between 2007 and 2010, the NRRI jumped by 9 percentage points due to:
- the bursting of the housing bubble (4.5 percentage points);falling interest rates (2.2 percentage points);
- the ongoing rise in Social Security’s Full Retirement Age (1.6 percentage points);
- and continued low stock prices (0.8 percentage points).
The hardest hit households were those nearing retirement and those with high incomes.
CBO — As the Population Ages, Social Security’s Spending Is Projected to Outpace Its Tax Revenues
As the Population Ages, Social Security’s Spending Is Projected to Outpace Its Tax Revenues
Source: Congressional Budget Office
CBO estimates that in fiscal year 2012, spending for Social Security totaled $773 billion, equal to about 5 percent of gross domestic product and one-fifth of federal spending. As more members of the baby-boom generation retire and the U.S. population grows older in the coming decades, Social Security outlays are projected to grow more rapidly than the economy and more rapidly than the program’s dedicated tax revenues.
Over the next 10 years, outlays will exceed dedicated tax revenues by about 10 percent, on average. That gap will grow larger in the 2020s, and by 2030, Social Security outlays will be about 6 percent of gross domestic product and will exceed dedicated tax revenues by about 20 percent. As a result, under current law, resources available to the Social Security program will become insufficient to pay full benefits in about 20 years, CBO projects.
Today CBO released The 2012 Long-Term Projections for Social Security: Additional Information, which expands upon CBO’s projections of the Social Security program’s finances that were included in CBO’s The 2012 Long-Term Budget Outlook, published in June.
CBO Releases a Report on the Taxation of Capital and Labor Through the Self-Employment Tax
CBO Releases a Report on the Taxation of Capital and Labor Through the Self-Employment Tax
Source: Congressional Budget Office
Today CBO released a report, The Taxation of Capital and Labor Through the Self-Employment Tax.
The Self-Employment Contributions Act (SECA) tax is paid mainly by certain small business owners. That tax on sole proprietors and owners of partnerships is often characterized as one that parallels the Federal Insurance Contributions Act (FICA) tax that employers and employees pay to fund Social Security and Medicare. The two taxes, CBO concludes, are not really parallel in the way that they tax capital income and labor income. (For people who are not self-employed, interest, dividends, rents, and capital gains are capital income, and wages and benefits are labor income.) The differences in the treatment of capital and labor income may prompt people to make choices that they would not otherwise make about self-employment or the organizational form of a business, thereby reducing the efficient allocation of resources.
CBO finds that:
- Approximately 40 percent of the SECA tax base derives from capital income and 60 percent from labor income. The FICA tax base, in contrast, derives entirely from labor income.
- More than half of the labor income of self-employed people is not included in the SECA tax base. In contrast, virtually all of the labor income of employees is taxable under FICA.
CBO analyzed three options that would modify the SECA tax base by either reducing the share of capital income or increasing the share of labor income it includes. No option by itself would accomplish both of those objectives when applied to both sole proprietorships and partnerships, but one option would do so if applied only to partnerships.
Population Aging Will Have Long-Term Implications for Economy; Major Policy Changes Needed
Population Aging Will Have Long-Term Implications for Economy; Major Policy Changes Needed
Source: National Research Council
The aging of the U.S. population will have broad economic consequences for the country, particularly for federal programs that support the elderly, and its long-term effects on all generations will be mediated by how — and how quickly — the nation responds, says a new congressionally mandated report from the National Research Council. The unprecedented demographic shift in which people over age 65 make up an increasingly large percentage of the population is not a temporary phenomenon associated with the aging of the baby boom generation, but a pervasive trend that is here to stay.
…Social Security, Medicare, and Medicaid are on unsustainable paths, and the failure to remedy the situation raises a number of economic risks, the report says. Together, the cost of the three programs currently amounts to roughly 40 percent of all federal spending and 10 percent of the nation’s gross domestic product. Because of overall longer life expectancy and lower birth rates, these programs will have more beneficiaries with relatively fewer workers contributing to support them in the coming decades. Combined with soaring health care costs, population aging will drive up public health care expenditures and demand an ever-larger fraction of national resources.
Population aging is also occurring in other industrialized nations, so any consequences for the U.S. must be considered in the broader context of a global economy. Adapting to this new economic landscape entails costs and policy options with different implications for which generations will bear the costs or receive the benefits. Recent policy actions have attempted to address health care costs, but their effects are as yet unclear. According to the report, the ultimate national response will likely be some combination of major structural changes to public support programs, more savings during people’s working years, and longer working lives.
The Pension Coverage Problem in the Private Sector
The Pension Coverage Problem in the Private Sector
Source: Center for Retirement Research at Boston College
The brief’s key findings are:
- Only 42 percent of private sector workers age 25-64 have any type of pension coverage in their current job.
- This coverage gap creates two types of problems:
- More than a third of households end up at retirement with only Social Security.
- Workers who move in and out of coverage accumulate only modest amounts in their 401(k)s.
- Simplifying pension plans has not solved the coverage problem.
- Recently, both federal and state policymakers have put forth proposals to cover the uncovered.
- But given the low level of Social Security benefits and modest 401(k) balances, any new tier should be universal.
New From the GAO
New GAO Reports and Testimonies
Source: Government Accountability Office
+ Reports
1. Spent Nuclear Fuel: Accumulating Quantities at Commercial Reactors Present Storage and Other Challenges. GAO-12-797, August 15.
http://www.gao.gov/products/GAO-12-797
Highlights – http://www.gao.gov/assets/600/593746.pdf
2. Federal Real Property: Strategic Partnerships and Local Coordination Could Help Agencies Better Utilize Space. GAO-12-779, July 25.
http://www.gao.gov/products/GAO-12-779
Highlights – http://www.gao.gov/assets/600/593002.pdf
3. Electronic Government Act: Agencies Have Implemented Most Provisions, but Key Areas of Attention Remain. GAO-12-782, September 12.
http://www.gao.gov/products/GAO-12-782
Highlights – http://www.gao.gov/assets/650/648181.pdf
4. Recovery Act: Broadband Programs Are Ongoing, and Agencies’ Efforts Would Benefit from Improved Data Quality. GAO-12-937, September 14.
http://www.gao.gov/products/GAO-12-937
Highlights – http://www.gao.gov/assets/650/648356.pdf
5. The Distribution of Federal Economic Development Grants to Communities with High Rates of Poverty and Unemployment. GAO-12-938R, September 14.
http://www.gao.gov/products/GAO-12-938R
6. Unmanned Aircraft Systems: Measuring Progress and Addressing Potential Privacy Concerns Would Facilitate Integration into the National Airspace System. GAO-12-981, September 14.
http://www.gao.gov/products/GAO-12-981
Highlights – http://www.gao.gov/assets/650/648349.pdf
7. Medicare Savings Programs: Implementation of Requirements Aimed at Increasing Enrollment. GAO-12-871, September 14.
http://www.gao.gov/products/GAO-12-871
Highlights – http://www.gao.gov/assets/650/648369.pdf
8. Disaster Relief: Reimbursements to the American Red Cross for Certain 2008 Disaster Assistance. GAO-12-877, September 14.
http://www.gao.gov/products/GAO-12-877
Highlights – http://www.gao.gov/assets/650/648340.pdf
9. Disaster Assistance: USDA and SBA Could Do More to Help Aquaculture and Nursery Producers. GAO-12-844, September 11.
http://www.gao.gov/products/GAO-12-844
Highlights – http://www.gao.gov/assets/650/648075.pdf
+ Testimonies
1. SSA Disability Programs: Progress and Challenges Related to Modernizing, by Dan Bertoni, director, education, workforce, and income security issues, before the Subcommittee on Social Security, House Ways and Means Committee. GAO-12-891T, September 14.
http://www.gao.gov/products/GAO-12-891T
2. Human Capital: The Department of Health and Human Service’s and Environmental Protection Agency’s Use of Special Pay Rates for Consultants and Scientists, by Robert Goldenkoff, director, strategic issues, and Robert Cramer, managing associate general counsel, before the Subcommittee on Health, House Committee on Energy and Commerce. GAO-12-1035T, September 14.
http://www.gao.gov/products/GAO-12-1035T
Highlights – http://www.gao.gov/assets/650/648328.pdf
Correcting Labor Supply Projections for Older Workers Could Help Social Security and Economic Reform
Correcting Labor Supply Projections for Older Workers Could Help Social Security and Economic Reform
Source: Urban Institute
Changing age demographics have powerful implications for the shape of the nation’s work force. Formal models of labor force participation fail to take into account that as the relative supply of younger workers declines, employers will increasingly turn to older workers to meet their demand for labor to provide goods and services. Increased labor force participation among older workers can add to the solvency of Social Security and the broader federal budget. Policymakers in both the public and private sectors can accommodate this trend by removing barriers that discourage hiring and retaining older workers.
