Saturday, May 12, 2012

Save Social Security: Restore Economic Growth (3 possible scenarios we can look forward to)


American Thinker ^ | 05/06/2012 | Fred Bauer



The April release of the 2012 Social Security Trustees Report has occasioned considerable media coverage. Much of this coverage has emphasized the report's finding that the date for Social Security's bankruptcy has been pushed to around 2033 (the 2011 report suggested that bankruptcy would instead occur in 2036). Yet the implications of this report are not confined solely to the matter of public finances, and policy reforms for Social Security are not the only thing that could improve the outlook for this program.

Like many federal programs, Social Security is dependent upon the health of the broader U.S. economy; the poor economic performance of the past few years (if not the past decade) has taken a considerable toll on the program. In thinking about managing Social Security, the right should not miss the influence of economic performance upon the sustainability of this federal program.

The Trustees Report lays out three scenarios for the future of Social Security: low-cost (where there's less unemployment and higher growth), high-cost (slow growth and high unemployment), and intermediate. The projections Social Security uses are based on the intermediate model. Under this model, after a brief spike in growth, real GDP growth would hover around a little over 2% for the foreseeable future. The combined retirement and disability trust fund would be exhausted in 2033, being able to make 75% of its obligations by that point. By 2086, Social Security would be able to pay for 73% of its promised obligations. However, there are no guarantees that this scenario will come to fruition.

Furthermore, Social Security's finances could be even worse than this report anticipates. The report estimates that unemployment will drop under 8% by 2015 and that real GDP growth will be over 3% a year for a number of years after 2014.
(Excerpt) Read more at americanthinker.com ...

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