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S O C I A L S C I E N C E R E S E A R C H N E T W O R K
E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 7, No. 6: March 23, 2006
Editor: PAMELA J. PERUN
Urban Institute
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Topic of This Issue:
Social Security
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T A B L E O F C O N T E N T S
"Macroeconomic Effects of Social Security and Tax Reform in the
United States"
TAMIM BAYOUMI, International Monetary Fund (IMF), Centre
for Economic Policy Research (CEPR)
DENNIS P.J. BOTMAN, University of Amsterdam - Faculty of
Economics & Econometrics (FEE)
MANMOHAN KUMAR, International Monetary Fund (IMF) -
Research Department
"Aching to Retire? The Rise in the Full Retirement Age and its
Impact on the Disability Rolls"
MARK G. DUGGAN, University of Maryland - Department of
Economics, National Bureau of Economic
Research (NBER)
PERRY SINGLETON, University of Maryland - Department of
Economics
JAE G. SONG, U.S. Social Security Administration
"Life and Debt: A Survey of Data Addressing the Debt Loads of
Older Persons and Policy Recommendations"
DEANNE LOONIN, National Consumer Law Center
ELIZABETH RENUART, National Consumer Law Center
"Income of the Elderly Population, Age 65 and Over, 2004"
KENNETH J. MCDONNELL, Employee Benefit Research Institute
(EBRI)
"Taxing Undocumented Immigrants: Separate, Unequal and Without
Representation"
FRANCINE J. LIPMAN, Chapman University - School of Law
"Retirement Income Guarantees are Expensive"
DON EZRA, Independent
"Social Security, Generational Justice, and Long-Term Deficits"
NEIL H. BUCHANAN, Rutgers School of Law - Newark
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"Macroeconomic Effects of Social Security and Tax Reform in the
United States"
IMF Working Paper No. 05/208
Contact: TAMIM BAYOUMI
International Monetary Fund (IMF),
Centre for Economic Policy Research (CEPR)
Email: tbayoumi@imf.org
Auth-Page: http://ssrn.com/author=49358
Co-Author: DENNIS P.J. BOTMAN
University of Amsterdam - Faculty of
Economics & Econometrics (FEE)
Auth-Page: http://ssrn.com/author=327625
Co-Author: MANMOHAN KUMAR
International Monetary Fund (IMF) -
Research Department
Auth-Page: http://ssrn.com/author=181843
Full Text: http://ssrn.com/abstract=888077
We use the IMF's Global Fiscal Model to evaluate recent proposals
to reform social security and the tax system in the United
States. Introducing personal retirement accounts is unlikely to
yield significant macroeconomic benefits unless it spurs
additional fiscal consolidation to prevent a large increase in
government debt. Similar benefits are obtained if the social
security surplus is placed in a lockbox while maintaining the
same debt target. Lowering the taxation of investment income is
beneficial, but only if the reform is revenue neutral.
Debt-neutral social security and tax reform in the United States
has large positive effects on the rest of the world.
______________________________
"Aching to Retire? The Rise in the Full Retirement Age and its
Impact on the Disability Rolls"
NBER Working Paper No. W11811
Contact: MARK G. DUGGAN
University of Maryland - Department
of Economics, National Bureau of Economic Research
(NBER)
Email: duggan@econ.bsos.umd.edu
Auth-Page: http://ssrn.com/author=236685
Co-Author: PERRY SINGLETON
University of Maryland - Department
of Economics
Email: Singleto@econ.umd.edu
Auth-Page: http://ssrn.com/author=392398
Co-Author: JAE G. SONG
U.S. Social Security Administration
Email: jae.song@ssa.gov
Auth-Page: http://ssrn.com/author=81600
Full Text: http://ssrn.com/abstract=875687
In 1983 the federal government passed legislation that gradually
increases the age at which individuals can receive full social
security retirement benefits from 65 to 67 and reduces the
generosity of benefits available at the early retirement age of
62. No corresponding changes were made to social security
disability insurance (DI) benefits. This increase in the full
retirement age will substantially increase individuals' financial
incentives to apply for DI benefits. In this paper we use
administrative data from the Social Security Administration to
estimate the effect of this change on DI enrollment. Our findings
indicate that the policy has contributed to the recent growth in
the disability rolls with the effect concentrated among 63 and 64
year old men. When the policy is fully implemented, our estimates
suggest that DI enrollment for this group of near elderly men
will increase by 1.6 percentage points (13 percent). The overall
effect would be modest, however, as it would account for just 1.3
percent of total DI enrollment and offset less than 4 percent of
the estimated budgetary savings that will result from increasing
the full retirement age.
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"Life and Debt: A Survey of Data Addressing the Debt Loads of
Older Persons and Policy Recommendations"
Contact: DEANNE LOONIN
National Consumer Law Center
Email: dloonin@nclc.org
Auth-Page: http://ssrn.com/author=586418
Co-Author: ELIZABETH RENUART
National Consumer Law Center
Email: erenuart@nclc.org
Auth-Page: http://ssrn.com/author=454866
Full Text: http://ssrn.com/abstract=885398
The budgets of a growing number of older Americans are stressed
by mounting debt loads as elders struggle to pay for necessities
such as groceries, prescription drugs, and urgent home repairs.
Debts levels of the elderly have taken a sharp turn for the worse
since the early 1990s.
Older persons are going into debt, filing bankruptcy, and, in
many cases, losing their homes in greater numbers than ever
before. The authors analyze the causes of rising debt loads,
including declining income, growing expenses, a shrinking safety
net, and easier access to high cost credit. The preemption of
usury and other state laws and deregulation of the credit
marketplace are identified as causes of the high cost loan
products and marketplace abuses that seriously injure the
financial condition of older Americans. The article also examines
the consequences of higher debt loads on the lives of the elderly.
The authors conclude with proposed strategies to address the
issues raised. These recommendations are separated into seven
main groupings: repairing the social safety net; eliminating
abusive credit practices; rigorously enforcing current laws;
strengthening support systems to manage legitimate debt;
expanding effective education and prevention measures; increasing
the availability of alternative products; and encouraging
additional research by requiring ongoing evaluation and data
collection.
Using credit as a source of income may have blinded society to
the growing lack of security after retirement. In the short term,
easy credit allows many elders to buy necessary services and
products even when their monthly incomes are insufficient to
cover the charges. In the long term, this trend likely is not
sustainable for any American, not just those most vulnerable or
living on the edge.
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"Income of the Elderly Population, Age 65 and Over, 2004"
EBRI Notes, Vol. 27, No. 1, January 2006
Contact: KENNETH J. MCDONNELL
Employee Benefit Research Institute
(EBRI)
Email: MCDONNELL@EBRI.ORG
Auth-Page: http://ssrn.com/author=297121
Full Text: http://ssrn.com/abstract=876995
The U.S. retirement income system - including employment-based
retirement plans, Social Security, individual saving, and
post-retirement employment - can be assessed in part by examining
the income of the current elderly population (age 65 and older).
This paper reviews the latest available data on the older
population's income (from the U.S. Census Bureau's March 2005
Current Population Survey) and how it has changed over time, as
well as how the elderly's reliance on these sources varies across
various demographic characteristics.
The PDF for the above title, published in the January 2006 issue
of EBRI Notes, also contains the full text of another January
2006 EBRI Notes article abstracted on SSRN: "IRA and Keogh Assets
and Contributions."
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"Taxing Undocumented Immigrants: Separate, Unequal and Without
Representation"
Tax Lawyer, Spring 2006
Harvard Latino Law Review, Spring 2006
Contact: FRANCINE J. LIPMAN
Chapman University - School of Law
Email: lipman@chapman.edu
Auth-Page: http://ssrn.com/author=334178
Full Text: http://ssrn.com/abstract=881584
Americans believe that undocumented immigrants are exploiting the
United States' economy. The widespread belief is that "illegal
aliens" cost more in government services than they contribute to
the economy. This belief is undeniably false. "[E]very empirical
study of illegals' economic impact demonstrates the opposite . .
.: undocumenteds actually contribute more to public coffers in
taxes than they cost in social services." Moreover, undocumented
immigrants contribute to the U.S. economy through their
investments and consumption of goods and services; filling of
millions of "essential worker" positions resulting in subsidiary
job creation, increased productivity and lower costs of goods and
services; and unrequited contributions to Social Security,
Medicare and unemployment insurance programs. Eighty-five percent
of eminent economists surveyed have concluded that undocumented
immigrants have had a positive (seventy-four percent) or neutral
(eleven percent) impact on the U.S. economy.
Undocumented immigrants, like all U.S. citizens and residents,
are required to pay taxes. Despite the historic and strong
American opposition to taxation without representation,
undocumented immigrants (except in rare and unusual cases) have
not enjoyed the right to vote on any local, state or federal tax
or other matter for almost eighty years. Nevertheless, each year
undocumented immigrants add billions of dollars in sales, excise,
property, income and payroll taxes, including Social Security,
Medicare and unemployment taxes, to federal, state and local
coffers. Hundreds of thousands of undocumented immigrants go out
of their way to file annual federal and state income tax returns.
Yet undocumented immigrants are barred from almost all government
benefits, including food stamps, Temporary Assistance for Needy
Families, Medicaid, federal housing programs, Supplemental
Security Income, Unemployment Insurance, Social Security,
Medicare, and the earned income tax credit (EITC). Generally, the
only benefits federally required for undocumented immigrants are
emergency medical care, subject to financial and category
eligibility, and elementary and secondary public education. Many
undocumented immigrants will not even access these few critical
government services because of their ever-present fear of
government officials and deportation.
Undocumented immigrants living in the United States are subject
to the same income tax laws as documented immigrants and U.S.
citizens. However, because of their status most unauthorized
workers pay a higher effective tax rate than similarly situated
documented or U.S. citizens. Yet, these workers and their
families use fewer government services than similarly situated
documented immigrants or U.S. citizens. Moreover, unauthorized
workers have been denied remedies by the U.S. Supreme Court under
the National Labor Relations Act and may be challenged to receive
protection under wage and hour, anti-discrimination and workers'
compensation laws. As a result, undocumented immigrants provide a
fiscal windfall and may be the most fiscally beneficial of all
immigrants.
Despite their net positive contribution to public coffers,
hundreds of thousands of immigrants enter the U.S. each year
without documents because of impracticable quota and labor
certification requirements. These immigration restrictions
combined with the additional tax or "tariff" on undocumented
immigrants are inconsistent with economically efficient
immigration policy. Moreover, the high effective tax rate imposed
on the poorest undocumented working families relative to their
less unfortunate friends and neighbors is inconsistent with
fundamental tax policy. This Article describes and analyzes the
separate, unequal and unrepresented federal taxation of
undocumented immigrants.
______________________________
"Retirement Income Guarantees are Expensive"
Financial Analysts Journal, Vol. 61, No. 6, pp. 74-77,
November/December 2005
Author: DON EZRA
Independent
Auth-Page: http://ssrn.com/author=567625
Abstract: http://ssrn.com/abstract=872784
Traditional defined-benefit pension plans depend on funding by
employers to preserve the security of their income guarantees.
The U.S. Social Security system depends on demographic stability.
In both cases, security has proven to be elusive. In neither case
does one find contingency reserves created in good times to help
sustain security in bad times. Instead, society turns to
defined-contribution arrangements, thereby throwing the risk onto
individuals. Individuals have their own problems to cope with,
however, involving uncertainty of both longevity and investment
returns. The unsurprising lesson overall is: eliminating risk is
expensive.
______________________________
"Social Security, Generational Justice, and Long-Term Deficits"
Rutgers School of Law Working Paper No. 005
Tax Law Review, 2005
Contact: NEIL H. BUCHANAN
Rutgers School of Law - Newark
Email: neilb@andromeda.rutgers.edu
Auth-Page: http://ssrn.com/author=47801
Full Text: http://ssrn.com/abstract=871136
This paper assesses current methods for evaluating the long-term
viability and desirability of government activities, especially
Social Security and other big-ticket budget items. I reach four
conclusions: (1) There are several simple ways to improve the
current debate about fiscal policy by adjusting our crude deficit
measures, improvements which ought not to be controversial; (2)
separately measuring Social Security's long-term balance is
inappropriate and misleading; (3) the methods available to
measure very long-term government financing (Fiscal Gaps and
their cousins, Generational Accounts) are of very limited value
in setting public policy today, principally because there is no
reliable baseline of the government's likely future expenditures
and receipts; and therefore (4) the government's current annual
and 10-year deficit projections, while highly imperfect, are
nonetheless the best measure available for assessing fiscal
policy, especially compared with Fiscal Gaps and Generational
Accounts.