The Most Important Social Security Chart Ever & What I Told Fiscal Commission About Social Security 25JUL10 & 1NOV10 from MOJO

THIS may be one of the best solutions to the Social Security "problem" facing the nation. I still think anyone retiring with a yearly income over $250,000.00 a year shouldn't receive anything from Social Security, but unfortunately that is not going to happen. WE STILL NEED TO BE VIGILANT AND READY TO TAKE ON THE DEFICIT COMMISSION'S SOON TO BE RELEASED REPORT AND RECOMMENDATIONS AS THEY WILL BE A 
FULL ATTACK ON THE SOCIAL SECURITY PROGRAM. From MOJO 
This is apropos of nothing in particular, but I guess that Social Security is going to be back in the news when the president's deficit commission reports back, so I want to take this chance to post the single most important chart you'll ever see about the finances of Social Security. Here it is:

This is from page 15 of the latest trustees report. What's important is that, unlike Medicare, Social Security costs don't go upward to infinity. They go up through about 2030, as the baby boomers retire, and then level out forever. And the long-term difference between income and outgo is only about 1.5% of GDP.
This is why I keep saying that Social Security is a very manageable problem. It doesn't need root-and-branch reform. The trust fund makes up Social Security's income gap for the next 30 years, so all it needs is some modest, phased-in tweaks that cut payouts by a fraction of a point of GDP and increase income a fraction of a point. Here's a proposal from Jed Graham (see below) that's designed to cut benefits a bit for high earners and encourage them to retire later, and maybe it's great. I haven't looked at it in detail. But the point is that the changes he recommends are fairly small. Any plan for fixing Social Security requires only tiny benefit cuts and tiny revenue increases. It's just not that big a deal

What I Told Obama’s Fiscal Commission About Social Security

By Jed Graham

Thu., July 29, 2010 2:20 PM ET

Recently, I had the opportunity to meet with two first-rate staff members of the White House fiscal commission who were seeking creative ideas for restoring Social Security solvency. The gist of my message to them was the same I gave in “A Well-Tailored Safety Net,” a new book that does not reflect the editorial view of IBD. While politics is surely the biggest hurdle to Social Security reform, a menu of mostly flawed and regressive policy options has further raised the bar. If you carefully consider four critical goals of Social Security reform, it is clear that the policy options that have been kicked around for years are ill-suited to producing an affordable and effective safety net. Both political and policy concerns should point the fiscal commission in a new direction: a safety net that is firmer for lower earners than higher earners early in retirement, with benefit cuts gradually unwinding to provide robust support for retirees of all income levels in very old age. This is the only path to Social Security reform that can limit the need for tax hikes and borrowing without cutting away critical parts of the safety net. First, let’s look at those four essential goals of Social Security reform: 1. Preserve income security in very old age. Increasing life expectancy and rising health care costs will leave retirees at growing risk of depleting their savings and being left to scrape by on an insufficient benefit check in very old age. The reality is that Social Security is hardly generous to begin with, particularly once you factor in early retirement penalties that are scheduled to reduce annual benefits by 30% for those retiring at 62. Consider that after a 30% reduction, a career $30,000-earner retiring today would receive just a poverty-level benefit, including the portion that goes to pay Medicare premiums. If we want a Social Security system that maintains the promise of income security late in life, additional benefit cuts that apply in very old age should be off the table. 2. Encourage delayed retirement. If workers opt for longer careers and a shorter time collecting old-age benefits, it would provide the best possible medicine for our fiscal ailments. To the extent that workers offset benefit changes by working longer, it could contribute to economic growth, boost tax revenue and rein in Social Security’s spending path — all while improving personal financial outcomes. Yet while it makes sense to tilt Social Security’s incentives in favor of delayed retirement, it needs to be done in a way that provides a built-in, fail-safe function for those who may have difficulty responding to more constructive incentives. 3. Preserve income support in early 60s. At times of high unemployment, like the present, it’s easy to see the logic in Social Security providing a credible level of income support as early as age 62 — particularly for modest wage earners. 4. Save money. Realistically, savings from Social Security can only make a very modest dent in projected deficits over the coming decade, and the program’s long-term financing gap is dwarfed by that of Medicare and Medicaid. Still, the budget prognosis is so grim that every program needs to be streamlined for maximum efficiency. Those bigger budget problems outside of Social Security mean that the government is in no position to take on the $5.3 trillion in extra debt (in today’s dollars) that would accumulate by 2037 under current law before the last special-issue trust-fund bond is redeemed by the Treasury. If these four goals seem mutually exclusive, that’s because they are under the current menu of policy options for reforming Social Security. Consider one idea that has gotten more attention lately: hiking the official retirement age to 70. This could leave a gaping hole in the safety net in very old age as early retirement penalties reach 43% for those who opt to claim benefits at 62. On the other hand, hiking the earliest eligibility age from 62 to 65 in tandem with an increase in the official retirement age from 67 to 70 would pull away the floor of income support for those in their early 60s and still exact a severe 30% early retirement penalty from those retiring at 65. Such an increase in the early eligibility age would only underscore the unfairness of a big, across-the-board hike in the retirement age, since gains in life expectancy are disproportionately enjoyed by higher earners who generally have the pension savings and range of work skills to allow them to rely less on Social Security in their early 60s. Questions of fairness will always be central to Social Security reform, yet there is a way to address these concerns, while striking an appropriate balance between the need for income security late in life with the need many workers will have for income support in their early 60s. In “A Well-Tailored Safety Net,” I introduce a new solvency approach called Old-Age Risk-Sharing, under which the steepest benefit cuts would come in the initial year of retirement; the cuts would be progressively smaller for lower earners; and they would gradually unwind over 20 years to provide robust support for retirees of all income levels in very old age, when almost everyone will depend on it. Under Old-Age Risk-Sharing, a career-average earner ($42,000 in 2009) retiring after 2032 would face an upfront benefit cut of 20%, which would gradually unwind over 20 years to keep the safety net intact. However, thanks to enhanced incentives for delayed retirement, that worker could fully overcome this upfront cut and attain an extra measure of income security in very old age by working two years past the official retirement age. A lower earner would face a 10% upfront cut that could be overcome with one extra year of work, while a high earner would need to work three extra years to overcome a 30% upfront benefit cut. The surest way of tilting Social Security’s incentives toward delayed retirement (in a way that saves money) is by scaling back the incentives, i.e. benefits, for retiring early. The front-loaded benefit cuts prescribed in Old-Age Risk-Sharing would go further in this regard than the lifelong benefit cuts in the traditional menu of Social Security policy options. And because the cuts are front-loaded, the savings would accrue much faster. Combining Old-Age Risk-Sharing with an increase in the official retirement age to 68 would save as much as hiking the retirement age to 70 on the same time table (50% of the 75-year cash-flow gap or 70% of the official shortfall that treats the trust fund as money in the bank). But Old-Age Risk-Sharing would yield a much more effective safety net: A worker claiming Social Security at 65 would enjoy a benefit that is 14% greater in very old age than if the retirement age were simply raised to 70. While the earliest retirement age would have to rise to 63 to limit the maximum early retirement penalty to 30%, this could be done in a way that preserves 62 as the early eligibility age, with benefits ramping up as careers wind down. Workers could still be eligible to receive 75% of their benefit at 62, with full eligibility phasing in by age 68. Thus, Old-Age Risk-Sharing offers the first cost-effective path to Social Security reform that doesn’t force policymakers to choose between providing income support at age 62 or income security at age 92. http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/1926-what-i-told-obamas-fiscal-commission-about-social-security