“Laid-off workers and aging baby boomers are flooding Social Security’s disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.

“Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs — in an economy that has shed nearly 7 million jobs — and can’t find new ones.The stampede for benefits is adding to a growing backlog of applicants — many wait two years or more before their cases are resolved — and worsening the financial problems of a program that’s been running in the red for years.

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From the Washington Post:amazon.com erhaps it’d be more useful to run through some of the numbers I find it helpful to keep in mind while writing about the issue:

1) Over the next 75 years, Social Security’s shortfall is equal to about 0.7 percent of GDP. Source (PDF).

2) For the average 65-year-old retiring in 2010, Social Security replaced about 40 percent of working-age earnings. That “replacement rate” is scheduled to fall to 31 percent in the coming decades. Source.

3) Social Security’s replacement rate puts it 26th among 30 Organization for Economic Cooperation and Development nations for workers with average earnings. Source.

4) Without Social Security, 45 percent of seniors would be under the poverty line. With Social Security, 10 percent of seniors are under the poverty line. Source.

5) People can start receiving Social Security benefits at age 62. But the longer they wait, up until age 70, the larger their checks. Waiting to 66 means checks that are 33 percent larger. Waiting to 70 means checks that are 76 percent larger. But most people start claiming benefits at 62, and 95 percent start by 66. Source.

6) Raising the retirement age by one year amounts to roughly a 6.66 percent cut in benefits. Source.

7) In 1935, a white male at age 60 could expect to live to 75. Today, a white male at age 60 can expect to live to 80. Source.

In 1972, a 60-year-old male worker in the bottom half of the income distribution had a life expectancy of 78 years. Today, it’s around 80 years. Male workers in the top half of the income distribution, by contrast, have gone from 79 years to 85 years. Source.

The conclusions I draw from these numbers are:

1) Social Security’s 75-year shortfall is manageable. In fact, it’d be almost completely erased by applying the payroll tax to income over $106,000. Source (PDF).

2) Most opinion elites — Simpson being one good example, and the U.S. Senate being another — show a very strong preference for working as long as possible. Most Americans show a very strong preference for retiring as early as possible. Elites who enjoy their jobs need to be very careful about generalizing their experience to people who don’t enjoy their jobs. More bluntly: Raising the retirement age is the worst of all possible options for reforming Social Security. It’s not only regressive, but it also falls most heavily on those with the worst jobs. Means-testing would be much better.

3) Social Security is fairly stingy and getting stingier. We also know most 401(k)s are underfunded, and the same goes for many defined-benefit pension systems, both public and private. We need to be very careful not to “solve” the Social Security problem by worsening a broad retirement-security problem, and that requires approaching Social Security as part of our retirement-security infrastructure rather than simply as a budgetary question. Here are some ideas on how to do that.

By Ezra Klein | 05:23 PM ET, 05/10/2011 See page here:

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“More than eight in 10 Americans now see the country’s Social Security system as headed for a crisis, and most think a major overhaul is in order, according to a new Washington Post-ABC News poll.

Overall, 81 percent of those polled see Social Security as veering severely off-course, up 10 percentage points from 2005, when former president George W. Bush led a push to privatize the government-run program. And since that time, public support for specific changes has risen, but remains tepid. See story here:

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The number of former workers seeking Social Security disability benefits has spiked with the nation’s economic problems, heightening concern that the jobless are expanding the program beyond its intended purpose of aiding the disabled.

Applications to the program soared by 21 percent, to 2.8 million, from 2008 to 2009, as the economy was seriously faltering.

The growth is the sharpest in the 54-year history of the program. It threatens the program’s fiscal stability and adds to an administrative backlog that is slowing the flow of benefits to those who need them most.

Moreover, about 8 million workers were receiving disability benefits in June, an increase of 12.6 percent since the recession began in 2007, according to Social Security Administration statistics.
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The decision will eliminate about 136 million paper checks sent by the Social Security Administration, Department of Veterans Affairs, Railroad Retirement Board and Office of Personnel Management.

The switch is part of a broader plan to shift away from paper-based payments and transactions. The plans should save taxpayers about $400 million in processing
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“The idea of the market as cure-all arose during the great bull market that ran from August 1982 through March 2000. With stocks (as measured by the Standard & Poor’s 500-stock index) returning an average of 20 percent a year in capital gains and dividends, middle-class people could fund their own retirements with minimal effort and even afford private college for their kids if they started saving early. Market gains would transform state, local and corporate pension funds from underfunded to overfunded, and capital gains — and stock option — related tax revenue would balance budgets on the federal, state and local levels. No pain, all gain.

The topper came four years ago: President George W. Bush could even propose privatizing Social Security by letting beneficiaries invest in stocks and have the idea taken seriously. Now the cycle has shifted. For many older baby boomers who once felt comfortable but have seen their 401(k)s and other accounts eviscerated the past two years, the magic words are no longer “stock market” — they’re “Social Security.” See full article here:

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