By Robert Wenzel
Elizabeth Warren recently released a Social Security plan that would exacerbate many of the program’s existing problems while also creating several new ones, writes Charles Blahous.
The key is to understand that Warren wants to increase payments to current recipients across the board.
- Increases Social Security benefits immediately by $200 a month — $2,400 a year — for every current and future Social Security beneficiary in America.
- Updates outdated rules to further increase benefits for lower-income families, women, people with disabilities, public-sector workers, and people of color.
But where is she going to get the money to pay for these increases to: “women, people with disabilities, public-sector workers, and people of color,” never mind the $200 increase she wants to give to all retirees (presumably even straight white males)?
Hint: Increase taxes.
In other words, her scheme is a simple transfer of income.
The Warren proposal would increase national Social Security tax burdens by roughly 30% relative to current law. Even the Zandi memo issued in support of the proposal recognizes that these tax increases would reduce economic growth by having a “negative impact on the supply of labor.”
And Blahous also informs how it will screw current youth when they reach retirement:
One of the biggest problems arising under current Social Security law is that it treats younger generations much worse than older ones. Because Social Security is not a savings program but rather an income transfer program, it is a zero-sum game at best: No one can gain net income through Social Security without someone else losing it. The largest such income transfers occur across generations. The trustees’ report shows that unless something is done to moderate the benefit growth rate for current participants, younger generations will lose income through Social Security equal to 3.4% of their career taxable earnings—net of all benefits they receive. The program cannot reasonably provide social insurance for young workers if it is making them more than 3% poorer over the course of their lives. By increasing benefits for today’s participants (including the wealthiest) well beyond what their own future taxes can finance, the Warren plan would substantially worsen the aggregate net income losses of younger generations.
The Warren plan is an economic train wreck. It will slow current economic growth and sets up a scenario where current youth will receive less when they are eligible for payments than what they have been forced to pay in.
Warren is an economy wrecker.