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Earlier this month, the National Academy of Social Security released its new report, “Economic Security for the 21st Century”. He left the Academy’s Economic Security Study Panel 2019-2021, which aimed to “assess economic uncertainty and present policy options to better ensure a stable and adequate income”, with the dual goals of reducing uncertainty, ie insufficient income, as well as uncertainty, lack of predictable income. And while the Panel was formed before Covid was hit, the subsequent effects of the pandemic certainly further affected the Commission’s efforts.

The report divides the Commission’s recommendations into four categories, or “pillars”: labor policy, benefit policy (traditional social security / income redistribution programs), protection policy (policies designed to ensure that households experience less loss of income) and equity policies. In addition, the report provides recommendations on how to fund their proposed changes. Altogether, there are 147 recommendations (including recommendations that are duplicates or almost duplicates).

It’s a very long wish list – and the items on the mix list are completely reasonable recommendations, completely unfeasible suggestions, and potential changes that illustrate the pitfalls of unintended consequences.

Yes, side effects. Conservatives tend to say (or at least stereotypically do so) that people will play the system if social security benefits are made too generous; Progressives are more likely to insist that people will always “do the right thing” so these worries are not a problem. But here’s a concrete example: in the Netherlands, before significant reforms in the late 1990s and 2000s, disability benefits for short-term and long-term illness / disability were so generous that 12% of the total workforce received benefits, and the rate was so high that even the Progressive Center for Budget and Policy Priorities acknowledged that “Dutch programs for people with disabilities needed significant reforms”.

Let’s look at a sample of NASI’s proposals, looking at retirement-related ideas.

The proposal makes a series of recommendations regarding the minimum wage, suggesting that the minimum wage could be raised to what is called “poverty wages” – a level sufficient to bring a full-time worker with three dependents to the poverty line – or to the current a salary of $ 15 per hour, which is subsequently indexed to inflation or a medium wage increase. Is it appropriate to expect that a person receiving the minimum wage will be the only support to a family of four? Would a CPI-related minimum wage create a price-wage spiral? The NASI authors acknowledge that the potential effects of too high a minimum on employment must be taken into account, and suggest that differences in wages from state to state or urban / rural could also be appropriate.

Their recommendations regarding state benefit programs are extensive.

Some focus in particular on the poor, such as those related to increasing or increasing the EITC (income tax credit). Others promote an increase in benefits and a relaxation of the conditions for acquiring the right to SSI, a program for the elderly and people with disabilities with very low incomes and little or no social security benefits. Still others are unusual, mostly a universal income base – although, unlike former presidential candidate Andrew Young’s $ 1,000 a month, they suggest a much smaller figure, such as $ 200 a month.

There are proposals to increase social security benefits and increase solvency. We’ve heard many of them before, including an increase in the minimum allowance and first-class benefit formula, and the (re) implementation of family benefits for full-time students under 22, who are part of Sanders ’Social Security account. The proposal to increase family benefits for double-income couples is also not new. And the only thing new about their solvency proposals is really “old” – that is, unlike today’s democratic politicians, they are willing to consider a broad-based tax increase to fund the program.

Their more interesting suggestions relate to disability. There is currently a five-month waiting period for Social Security disability benefits and a 24-month waiting period for Medicare benefits, even after all eligibility criteria have been met; argue that this should be eliminated. That was the subject of the Stop Waiting Act introduced during multiple sessions of Congress, most recently earlier this year. While it is true that poor people with disabilities may be entitled to additional security income, I would like this proposal to be taken seriously, including an assessment of its costs and benefits. The proposal also recommends improving work incentives for those receiving disability benefits by improving interruptions and phasing out. Finally, the proposal calls for changes to the DAC program.

Have you never heard of the benefits of DAC? Yes, I had to look at that too. An immediate concern of the proposal is that recipients of these benefits, targeted at people with disabilities from childhood, lose if they marry, unless their spouse is also a recipient of a DAC with a disability. There are also circumstances in which an incentive program may lead to permanent termination of recipients, rather than allowing them to return to benefits if their condition worsens.

But it’s not as simple as this. DAC stands for “adult child with a disability”. These benefits, which are rarely heard of, pay benefits for adults with disabilities, based on records of their parents ’income. (See this Social Security Administration booklet or this SSA website, or this description from the Financial Planning or Legal Department.) When a parent of an adult with a disability retires or becomes disabled, that child is entitled to a DAC benefit of 50 % of parental social insurance. When that parent dies, the benefit increases to 75%. Although benefits and SSIs are similar in limiting the amount of money a recipient can earn, DAC benefits can be much greater than SSI benefits, and DAC recipients are entitled to Medicare rather than Medicaid that they would receive under SSI. While “marital punishment” certainly seems like an archaic rule, I guess most people would be surprised to learn that state benefits for adults, of any age, can depend on how much money their parents have earned!

Sure, there’s a lot more food for thought on the long list of suggestions, but this should be enough to provide a little sense of how complicated these issues can be.

As always, you are invited to comment on JaneTheActuary.com!

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