Feb 19, 2014|
Angela talks social security with former Social Security Administration deputy commissioner Andrew Biggs of the American Enterprise Institute.
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Automatically Generated Transcript (may not be 100% accurate)
Well you've put into the Social Security system since the day of your first job. With the belief that when you retire after the age of 62 or beyond. That money will be there for -- But Willett. We hear conflicting reports that Social Security fund has been raided by the general fund and will be broken a number of years. And we here the opposite that the Social Security fund solvent and can't be touched. -- Richard only designed to help the elderly through old age the fund now pays almost 20% of its money. Two disabled workers and their dependence. Who is eligible for that. So many questions for the millions about to join the ranks of Social Security recipients. And we have the perfect person to help answer them. Andrew Biggs is a resident scholar at the American Enterprise Institute. And a former director commissioner deputy commissioner at the Social Security Administration. And Andrew I really appreciate you spending a whole hour with this and I hope. All of our listeners out there who were either one on Social Security or two heading in that direction and have any questions as I have many. We'll give us a call at 2601870. We have got the expert. To to help us with all of this I just sense and for me there's always been sort of a mystery. Around social security administration and I know that I'm in paying into it and ultimately animal gets something out of -- But to but not much beyond that and yet we hear. These various. Things of oh it's not going to be there when you need it so maybe you can clarify force. Bully you into a very interesting point in in one sense. The Social Security is its front and center for people -- you know it is the biggest tax to most people pay a bigger than income tax. Is the biggest source of income -- retirees. The six's biggest program federal budget. At the same time -- that people often don't understand very much about the system of how the benefits are fine and I. -- was a trust fund mean it's. They also don't mention -- -- benefits are calculated. And so it's it's interesting certainly in the sense that we in one sense we know a lot about it we talk a lot about it. Believe that the -- -- summit that's where things get all the work murky. So one that you look at this as say training session for us -- I really do wanna know. One is -- going to be there I just read something the other day where a man said you know if you're our fifty. Kind of forget it it's not may not be there for you if you're closer you know sixty going into the 65 you'll be all right. Is there any merit to that. What Social Security is what you call it a paid -- program. Savings going on in the same way it was before warning today your regular pension. It relates to transfer program. So there's there's good news. There's bad news that the good news is that as long as the system is collecting taxes from workers it will have something to pay out to retire. So the idea of the year yet nothing for a program that's useful as launchers missiles pretax there's going to be those security that's. At the same time though when you have this transfer program mr. -- Hugo program kind of setup. It's very sensitive to the number of workers pain in her relatives that number beneficiaries. Collecting. On the if you went back to 1950 had something like sixteen workers paying into Social Security for every one person collecting benefits. At that point yet assessment really easy fine. You can take generous benefits -- with a low taxes on people could you just it's huge ratio of workers spent this year it. You know to 1960 to two ratio fall -- to about five to one. It's round three workers for each retiree you go into the future it's going to be less than 21. The masses from that kind of thing is just relentless it. Is it simply means if you wanna keep paying the same benefits to people. The tax rates after rockets alternately unless you wanna raise taxes that benefits have to be talked. So that's where things get tough year that you're not in the Euro from the program. But you know -- unless the unless we decide street taxes pretty significantly going forward you're not to get everything you've been promised -- Seeing that that's what makes the heart flutter is because I think it. People many people I've talked to actually say will you know I have paid into it for forty odd years are going on even further than that. And and now they're gonna start chipping away. And they looked at it more as if they were paying into an insurance policy but now isn't gonna pay out what they expected. But but I hear what -- saying in one of the things is we're living longer so they're more people who are going to receive this. -- sure you have the of the combination. Longer lives. So that people it's not that it's not simply just that people are living longer past retirement although they are. There's also more people survive into retirement to survive -- benefits of living a longer time afterwards. And you also the lower per tree and that means fewer new workers paying into the system so you combine all that together. And it just gets a lot tougher defiant. The EME -- people who -- like you know I hated to all my life then I'll walk the benefits to come at it -- probably understandable. At the same time though the Social Security -- entered the year on year get -- worse deal for people. So in saying well I've paid in -- -- -- money Al. Wallets completely understandable. The math works out that same rules polite kid my grandkids to get paid a heck of a lot more. For this program and I did. One assistants start the tax rate was 2% of your earnings -- gradually go on not to 12% today. If you had some of these retiring today on average they probably paid. 58%. Of their earnings into the system to get their benefits. Going forward to make this system for rule. People on average probably have to -- somewhere on 16% to there into the program to get the same kind of relative benefit. -- retirement. So eat eat you do get into questions of generational equity in generational -- -- yes I wanna get everything has been promised to make. But he but I also wanna be steered my kids and grandkids and not stick them with the bills. For things that are sort of affordable. So if he gets to question not simply. Massive forecasting but also get these bigger. Kind of fairness questions about it and we treats different generations of people. You know I have many questions concerning about who is receiving it now but before we do that we do have some callers and I'd like to get to them but best. Or Betty I'm sorry Betty. Are -- Angela you know I'm good how are you on the -- we we have something on your eyes met. As many -- my husband taught and the cool. Yeah. He opted out at that point to go to private school so he hit his retirement from the when he began teaching -- he began at 40 one's our security. So now when he retires. He will be penalized because he received -- time. And from him and -- are and who are the end baccalaureate common airlines. They have been cutback to 46 -- -- on security because they aren't we need retirement. This is just appalling to everyone and let me out. Not really be action and actually -- -- out like no. Why is it being turned around and reviled and you know management. What wonderful question Andrew do you have an answer for that. Yeah. Mom what do what she's referring to these two provisions there's there's the shorthand is wet. And GPL wept that the windfall elimination provision -- PO which is referring to government pension offset. He gets a little bit complicated but there it's. There's a small number of people state local police were not covered by Social Security state receive a pension from from a government from there you know. Booted from school or other policeman. Incident not covered by Social Security the question how do you treat folks who have a pension coming from. View from uncovered employment -- Social Security. And then come in and start all -- to benefit from Social Security. Did the tricky part is that the Social Security. Is a progressive system. -- it pays essentially. We call hire replacement rate for low income people went for higher income people means that. The -- at the UK is a higher percentage. Of your earnings if you're low income -- you're -- And the way the benefit formula works is -- you calculate that based on. You're the average income over your whole life time over the -- 35 years ever -- Does the tricky part comes in. You win you have somebody who spent a lot of time there that are career outside of Social Security the benefit formula. Still thinks is kind of a mathematical sense do you work 35 years it doesn't know yet all you were getting income from all the years outside of Social Security. So when it looks a year income that's been covered by Social Security divided by 35. And it's securely -- And so that you did you that you become the beneficiaries of progressive benefit formula the system. He can be getting a relatively high benefit from Social Security because the system think your poor. Even if you're not poor because you have all in on the team from. A government job attention coming from other government job. That -- street that reform is not -- -- just not working its way into the calculation. They have asserted that pox calculation that goes on -- -- the government pension offset. That's designed to adjust for. That question you are you are you being treated unfairly in the basic interest now. Nobody -- see their benefits cut back but yet you were not in fact being treated unfairly. I -- well on chicken into herself but not in person comes in my mind is. What -- the Social Security Administration care if somebody has a pension. Yeah. Oh well they'll -- idea though is that the sows -- restriction doesn't wanna be re distributing money. -- intended for -- people to people were actually not poor. -- I I must say what you're saying there but but if if somebody had three pensions because they did three different things. Why should that be even be a factor. And let let's say by the pension. From my regular job 41 K and I choose to save a lot of money in that and because diamond industrious person and I Heidi. Forward K pension because that. Toaster doesn't reduce money bet that -- is that what they're reducing here is the fact that you have attention coming from. A job does not covered by Social Security okay so yes when you have this uncovered employment Social Security. Think if you pour even if you're not -- And what the older I started to argue that cannot but thank you -- -- answer it doesn't really that much easier to tolerate those. We -- you put your money to get it out but opulence here. Appreciate you calling -- very much. Andrew we're gonna have to take a quick break but I want all of our callers Phillip and -- in Sydney hang on. We've got the expert who can answer all of our questions and stay with this I'm Angela under the W well. The subject is social security and we have the expert Andrew Biggs who -- a resident scholar at the American Enterprise Institute. And former deputy commissioner of Social Security Administration. Again we're very grateful for his time in our phones are loaded -- for new violence. -- -- -- -- First well I think you should be aware that the American and a presidential true. Hitler Republican leaning. Think. And so I believe their lives and and our guest as stated that those security you say. Just in. And that should be increased to 60%. -- shall pay ecosystems no conscience. Just curious as so when you can ask why -- equally strange. I think you just asked -- that Andrew. Back. Then it gets. -- -- -- Digit justice -- -- said that the contribution would have to go up to current 16%. That's the number includes the assets that trust. That the trust fund is essentially. And that that does not mean. Mean I worked in the bush administration's city you can guess what political liens or. But you can certainly find plenty of other people with different political means we'll give you this prejudiced him exploration and -- hear it now. But the that this -- trust fund is. From an economic perspective is serving. It's an accounting. Entry did he tell you the amount of money that does the general budget quote the government has borrowed from Social Security. Went -- -- runs a surplus which ran from the mid -- -- people around 2010. That extra money is that invested in these special issue treasury bonds which essentially means the rest of the budget borrows that money. Now that those securities running political cash deficit paying out more in benefits of the -- in that car taxes. The system the trust -- go to redeeming those those bonds and the further but it has to pay them back. Now from the point of view the Social Security program as a whole. These. Which -- -- trust fund is an -- it's an asset to the program that helps -- keep this system salt and help put paid that. What were people in -- mistake is thinking that this is somehow makes it easier for us to pay that that's. And you know in an economic -- budgetary sense it doesn't and the and the reason really is that the trust fund is an asset to this a security system. With the liability is to get for the rest the federal government. And when the federal government to pay off that debt hooted go to to do that -- to you know who you know it he did eat it's good -- pay off the -- security trust fund. By either raising taxes. Cutting other spending or Barkley. Those three team choices the system -- that it would if we didn't have a Social Security trust. So it's most budget analyst it is in the week we take the Oscar trucks and in consideration we think about how long the system with salt and all that. But when you're thinking about the flows of money and how it's paid for. The the truthfulness from an accounting entity it's not gold sitting there at Fort Knox waiting to pay benefit. It is a commitment by federal government that so long the truck from last we're gonna continue paying full benefits to legal commitment. Once the trust fund runs out though legally. This systems could cut that. So it held you kind of Howard resolve these funding issues -- for a certain period time we're gonna com open after tax might say that that's. While the trust funds run that were cut benefits. It's not it's not real blow in in the sense -- and I think. Well it's not real money because shadow government. As London. So that it's going to be certain culture thing back to jet that those shall secure. President left the international that was projected to be paid off at twelve years would be around. And step up. As Kupchak well it's. Triple double the national debt when bush. There are surely -- such as gentry he stopped and helped the Steelers sixteen true. Because they won't let. The president racetrack to well. So well and so security Medicare. They. Control the Republican Party. People. Should do so churning on -- -- that I think. The average person cannot wait to retire. So being down so security initiatives error in Canada supported. -- Protectionist. On the wealthy. Wearing the cap -- holdings so -- all -- system. And at a -- and people should get out. Phil I love your comments I appreciate this call more than you know. Unfortunately we have to take the break and I want Marion Sydney to stay with us again thank you -- -- and stay with this Andrew will be right back let's go to the newsroom. We are talking Social Security with Andrew Biggs. And who used to work for the Social Security Administration is now with the American Enterprise Institute. I have a bunch of questions for Andrew but I wanna get to marry who's been patiently waiting merry. I your question or thought on not such a security. Yet at the -- what happens when a husband and wife are both joints as the security. And the husband. I passed that the way that the white. Began to get back -- -- that the security or should it is not what I understand that. When you switch to expose survivors that that are widow's benefit in this case. Would a -- that you get used to greater figure two benefits but not vote. So -- in general husbands -- of higher benefits than it then why it's 2% longer working careers could happen. Taken time out as much steel kids. In the so Ian in most it would have. Witnesses and husband dies. The white for the -- -- is. That that instead of her on. While there are obviously cases -- exceptions to that. But I near Acton that can be a problem because you know one two people living together can live fairly cheaply. When you're living on your own in a year year year cost drop but not that much. But your benefits can drop pretty substantial. -- if the wife is working. And not a recipient and her husband dies can she still gets. His Social Security as a widow's benefit even though she's working. She will be at -- and start a benefit. -- -- has spent as early as six d.s than normal retirement ages sixty to. On in general she can continue to keep continuing to worksheet and keep doing now while collecting benefits. If you retire early there's something called the retirement earnings this past. Which would temporarily cut her benefits but then they should get their money back later. So in general she can continue to work if you -- Thank you very much Mary for that at all. A couple of quick questions. In just doing some reading on this and again nine and almost overwhelmed with how complex it is. It showed that we have eight a greater number of people now getting Social Security because they are disabled. And even spouses of disabled and children and disabled -- when he did that kick in to the Social Security system. Yeah that is a bright factors to push and that band that's certainly true. Yeah I think today sampling some of my head I think disability costs are probably around 20%. Of total Social Security benefits -- -- Com which is not the case in the past. -- you had a couple -- thorny -- demographic bit and -- the aging population means it. You have more Americans were in the prime years horror. Becoming disabled which is -- late forties mid sixties. To -- as people -- that you're going to have more disabled people. It also uses the increase. Labor force participation women means that more women are qualified for disability benefits today than in the past. They might it become disabled in the past but he didn't qualify for benefits today do because more women working outside the hall. So those are just you know they they are what they are. There are off and harmless issues but it did not think if you really try to change. On the other hand though back in 1980s. There was almost to consider loosening of the eligibility criteria for. Applying for disability benefits. And you've seen a big increase in people applying for benefits particularly the thing that's Blake. Back pain depression. That are are very difficult to be honest to prove -- where you -- I've sat in a disability cases and you just can't. It's very very hard to say. And one of the results of that has been more people. Getting disability it's things like depression back pain knows -- really be good. Factors today in in the disabled population. Were to -- went back thirty years ago they are not as they. Addicts it's etc. But you are just and again I'm not saying that disable people's absolutely should get help. I'm just curious why it -- Social Security Administration. Why it is in another part of government. Well for the Social Security. He its old age survivors and disability insurance that that is done through Social Security program. And disability benefits are calculated in much the same way that your retirement benefits -- -- to. On now if you're somebody who's very very poor who didn't work very much didn't pay into Social Security. Then there are separate disability benefits you can get through OSS. It would just supplemental security income. That's history -- welfare program there's no this. Paid that paid through Social Security associated. Managed by Social Security is not paid out there -- so -- trust fund does not finance editor payroll taxes. Armed so that you -- The disability portion of those stories a little bit like private disability insurance to be based on how much you -- it and it's based on year earnings. But it is insurance planned stop it helps people who who really needed it. Freaky remain healthy right like you'll need it. So it is -- -- there were derived in disability policy is a matter of consider. Obviously you -- differentiate how much of that is certain natural factors in the aging of the population. And how much of it is because we've -- eligibility. Perhaps too much I think we need to have. Reforms not just throw people -- disability. But to improve incentives for employers to keep accommodation to people with disabilities to help them. Keep working. If you can go back in the if you look at the data is that number to report they have a disability today is around the same as it was twenty or thirty years ago. But the labor force participation of people who report in the disability is much much lower today than in the past -- -- in the past people with disabilities. Maine and continue to work and support itself today a lot here that you do not think that that's the problem is testament to problem for the people to. I understand we have a large homeless population here which are sad but I understand many of them do get a disability check. And either through mental illness or or alcoholism or whatever. Is that through Social Security -- to SSI. It could be true. -- You think you can no longer get. Disability checks by virtue. -- alcohol or drug abuse that was stopped during the Reagan administration. But it is homeless folks could be getting disability checks. Either through Social Security -- -- aside just depending on what year. -- earnings record was able to work history wasn't -- -- -- the criteria for qualifying pretty similar the two programs. But the benefits are different social street he'd get more generous because some -- paid for pesticides is orchestrated Walter about. -- Andrews with this and all of our callers I will get to you another quick break we'll be right back. We are talking with Andrew -- About social security and we do have a bunch of callers on gonna try to get as many as I can so I'm -- asked to our callers. Two to be very brief in your question and Andrews and answers as quickly as possible. We're gonna start with Michelle in new Marlins. Thank you and so I can -- First -- equivalent to your life in your husband says that he's still live in what percentage. Could do drop from his stick. If you never work in your husband living -- spousal benefit equals around 50% of his benefit. Well once you guys should get his benefit. But no more and. Her book and secondly. If it had been cut forty prosecutors know that. -- became disabled before he was sixty. And you know they want which Italian confidence for the security can only to our viewers potentially could disable -- when -- -- title. But it really picked. I think what you sixty could quite a little that the prior to that -- if you were disabled you and I believe will be based on earnings record. I mean it but it's complicated by I think that's how would play out. Well I'm never have actually Adam in the seventies and applaud my husband and I -- when he got his benefits. And he made more than and it. Not that I worked on many many years. It'll play out that there was no retirement because Atlanta and six people are doing. You should've been covered -- Social Security touched that shouldn't be a factor in its its policy -- he. I'm not saying it'll make mistakes they thought they did that it really complicated stuff I would recommend you really had to work try to work through them. It'll it'll it'll just be taught to do to be. Thank you Michelle we're gonna move on to Purdue on the West Bank. Coordinator artworks are -- -- -- -- -- our bid to appropriately where it's been about. These jobs program would -- a problem. It's happened very decrypt it -- and correct them and they leave at 88 -- And hatred the enabled by an economic data did not come out and operator trapped popped up a pretty -- It conduct or are written. And without coupons and shopping -- being depleted. Because I'll edit and Medicare broke. Thank you land at. I want her thank you very much. James in Picayune. Hello yes James. Yeah. -- -- -- -- -- -- -- -- -- -- -- And when you turn into -- the old age to be all. -- -- -- -- -- -- -- -- -- argued China for Social Security or for disability. This I think would be for SS it's just it's -- -- -- with assets assets day. Is it appears as welfare program. They care about your income your assets you know property as well. The Social Security retirement. Or the mean even as a tree you mean disability programs they care about that sort of stuff is basically. The density senior earnings. And how she hated the system. But at -- -- -- different story to the welfare program and so they have to estimate. You know what sort of resource -- Steve apps that have to look at both your income but also the you know year money in the bank and valley possessions like which is not. It reputed. But if you if you look at it and you can -- on your property. And it. If that's. You know a price at one price. Why -- Odom it could be -- immortal -- you. Stories. Did it -- -- I don't know the answer to -- I do you know in general if you talk real estate. All the assessments -- done for tax purposes are lower in the market value of the property. I'm not to swear on on -- I think -- That's possible school on reducing adding zero though you're -- -- like to hand and that's not right. So the other and an out and checked into and see what's what's actually. James thank you very much we're gonna go on to Don and Harding. Way court alms but some parts are what structured so so security roughly. -- thought a year and two little security. Now if I have a time report what my job lot still. Be eligible to receive. So security benefits actually contribute so. Share posters now we called means tested meaning they don't pay the benefits based on you know looking at the other income you've -- So easily really. Each year gonna get your Social Security benefits and can you -- your 401K or some other pension plan not the additional money you have for retirement that's. -- keep on saving -- match. But what isn't it true that if you have a certain amount. That your almost penalized for Social Security that they will cut back another reject your pension is very high your income aside they are in effect starting now to. To adopt. In the world now. It at a certain point used those trees start to and taxable. -- and so once rule that you don't want your benefits senior total income it is time you start pay taxes on it. Eventually the way to form to work eventually were all end up paying taxes on this was something passed in 1980s. And it's it's it's -- didn't situated eventually were all could be paying taxes on all this stuff you can make an argument that the people should be. Because Saddam at least part of your personal security contributions were not packed up front. But that's different from that's straight out means test means something like emphasize that means that you've got a 100000 dollars in the bank you're not get -- society because. Zero in the bank you might take -- on and though it's it's not a strict means test. To all of our callers I think it but Andrew I cannot thank you -- we've got you number we're gonna call you again this obviously is something people need to know about. Again thank you very much Andrew basics -- it OK stay with -- everyone we'll be right back. Hope you enjoy the rest of your evening now let's go to Dave Cullen in the newsroom.