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Monday, October 08, 2012

CBO On SS - It's A Terrible Deal For Most People

Both Mitt and Barack spoke about Social Security (SS) in their debate. For political reasons, they took the same approach. They indicated their continuing support for this busted program. They agreed that some “tweeks” might be necessary, but there would be no fundamental changes to America’s largest entitlement program.

I wish that one or the other of the candidates had spoken the truth about SS. The fact is it is a terrible program for the vast majority of workers who are forced to contribute to it in order to keep this dog alive.

Fortunately, the Congressional Budget Office has provided the information necessary to look at SS and evaluate how various income groups will fare over their lifetimes. The bottom line is as ugly as it can get. The fact is that SS is stiffing 80% of American workers.

The key statement from the CBO report (link) [4]:

For people born in the 1940s or later who have household earnings in the second quintile or above, the present value of taxes will be, on average, more than the present value of scheduled benefits.
Got that lovers of SS? 80% of the people who contribute to SS get less than what they paid in. Only the bottom 20% of income earners have a chance of breaking even.

The CBO provided a chart that describes the consequences to various income groups. I found the CBO presentation a bit confusing and also misleading. The following is the original chart from the CBO, after that is my stripped down version.

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