PAYGO only makes sense when the size of each generation is the same.
The writing has been on the wall for decades that the demographics were shifting in a very material way.
I don’t think I am following your thinking on the fund side.
What I am saying is:
Paygo system with contributions (with a slight excess)
That excess goes towards investments
Those investments are then used to smooth the demographic transition.
That fund (excess) would not have to be enormous. I am not talking about replacing the entire paygo structure, but building a smoothing mechanism into the contributions in order to be able to adjust for the demographic changes from one generation to the next.
The Canada Pension Plan actually had built up a small reserve fund equal to about two years’ benefit payouts at the time it was reformed in the 1990’s. Contributions were less than payouts however. The contributions were greatly and rapidly increased so that they exceeded payouts and this permitted a further buildup of the CPP fund. The fund investments changed from 100% government bonds to an actively managed portfolio of assets.
Currently, the CPP fund has built up to about 10 times annual benefit payments; annual contributions now exceed annual benefit payments. The investment income on the fund plus contributions at the current rate are forecast to cover benefit payouts for at least the next 75 years.
All that a “transition” does is push the date back. Gen X has exactly the same problem that the boomers have, they didn’t have enough kids for the current tax rates and benefit formulas.
On an accounting basis, there was a “transition” fund. The boomers paid more than necessary to pay their parents’ benefits. The excess taxes went into a “fund”. It “earned interest” at the Treasury rate, but it will run about 10 years from now. Investing in equities would have pushed the exhaustion date back a little, but the demographics still rule. (And, again, that’s on an accounting basis. Looking at the big picture, it would have just shuffled money around.)
Thanks. The internet tells me that you’ve been able to do that on a contribution rate of 11.9% through $65,000 of income. I think that also covers disability, but I’m not sure.
The US rate is 12.4% through $168,000. The isn’t enough to pay this year’s benefits (so we are digging into the trust fund).
When they did the amendments in 1983, the fund was down to two months of benefits, not two years. Maybe that’s some of the difference, but it still looks like you’ve got something else going on.
You also have to look at the relative level of benefits provided under the US and Canadian systems. OASDI provides a higher percentage of income in benefits than Canada. We would need much higher levels of contributions than the US to provide your richer level of benefits.
The CPP historically provided about 25% of earnings over a working career up to AIW. Someone earning at the AIW in the US would have a much higher %.
Not sure when you’re considering the start of “cracking down”.
In 2010 undocumented immigrants contributed $12B in taxes to Social Security, according to the Social Security Administration (page 2, https://www.ssa.gov/oact/NOTES/pdf_notes/note151.pdf) The SSA explicitly says the presence of unauthorized workers is a benefit to Social Security.
I can’t find a perfectly comparable source, but recent years do seem to have lower taxes from undocumenteds.
Even a very revered party eventually loses support if it does not deliver results over time. ANC fails to win majority of seats in South African election.
Was talking about a cruise last year when my wife was seasick.
She says “and i never get seasick”
I say, “you can’t say that anymore”
the woman we are talking to says
“why, what is objectionable about that”
going over the conversation in my head, i can’t figure out what she meant
realized how trained people are to the phrase “you can’t say that” as something un-PC.
All i meant was wife can’t say she never gets seasick
A quote from Eliot Higgins, founder of Bellingcat:
“I’ve dealt with lots of communities who believe in conspiracy theories. None of them generally believe they’re conspiracy theorists. They believe they’re truth seekers fighting against some source of authority that is betraying us all.”
