they have also been significant buyers of treasuries and fixed income. back to the point all of these thate certainly appear now would work woodwork and said we like to buy treasuries because the yield never was so high. will these buyers sell? will they move around? or just a lot of things with yield sensitive buyers and rates it makes this discussion much more worrying mix a whole new set of a bias that what we had before. these bias only came in because the number feels map so much. >> i disagree all is, well as we have in the past decade. i think on days like today you don't have these issues are buying a a lot obliquity will be turned off.

i would not say everything is fine. i guess with the fed would do is the regulations. the others interesting in light of the earlier question which is gary mentioned the idea of distinguishing at the treasury's insight mark getting functioning perks had they done that maybe they would not have kept it song in 2020. quick as a reason why. we have to go but thank you very much. thank you so much i love we are color-coded. we did that on purpose. [laughter] and thank you so much. [applause] thank you to ai into the other cohost for having us here today. not enough discussions and digging down deeper into some of

the drivers behind it. we at the partisan center been working position for many, many years unfortunately not much is changed we ran a debt reduction task force way back in 2010 that was the shadow condition that president obama sat up. a few of those recommendations were enacted but many were not particular on an issue at door talking about in this panel, social security. at bbc margate spells a former secretary of education was a new president and she has really committed to fiscal policy being top of the agenda in the next 18 months especially as we approach the fiscal cliffs of the year ahead. one thing we are going to be doing is trying to better link fiscal policy to the many other policy issues that are stakeholder committees care about and trying to help explain why they need to be invested in resolving the fiscal challenge. in terms of ourur panel today zo in on social security in particular. and on thatt issue i have a

fantastic group of folks that cannot be any better to dive into this and help folks who understand where we have been, where we are and where we might be going if action can be taken what action could look like a policymakers to finally get there arms around this issue. our work on this issue was led by ken conrad and jim lockhart letter former deputy commissioner of the program. the two of them had a commission to propose a comprehensive package to result social security challenges unfortunately those way back in 2016 the situation is only got worse and similar talk about that a little bit on this panel. we continue to work with offices on this issue the key i found a promising element is many members of congress behind the scenes are trying to work toward solutions. you do not hear about in the press they're eager to get out of their head of the election. i think we can remain cautiously optimistic after the election of the political stars align their

theremight be movement to help t least get the conversation from where it has been in recent years. so with that comment want to start and have a set of where social security is right now. the importance of place at people's retirement security. i don't think that can be understated. there is a recent survey that came out that showed 80% of working age americans are either worried or extremely worried both understandable given the headlines we've seen about it for a little perplexing given most of the folks in this room know even if congress takes no action, 79% approximate benefits will continue to be paid out after the trust fund depletes. that is not necessarily people should not be worried but worried they won't be at all for them a little bit of a themisconceptions i get played t in the media. with that, i want to turn to you first. if you could just talk about how social security factors into

financial and retirement securities we can level set where this issue comes from and why it is so important to the vast majority of all americans? >> that's a very important people rely on it for their social security it's 30% of the income of the elderly sometimes you are higher numbers than that. i saw a number we know that well we don't helps benefits we don't have great data on the other income of the elderly best estimate suggested to come 30% of the income of the elderly about 40% of elderly households rely on it for half or more of their income. about 20% the elderly rely on it. certainly for a subset availability is crucial. calculate suggested they did not do social security but 10 million more elderly households would be poor it is a very important antipoverty program. and something people are relying on for a very big chunk of their retirement security.

>> thank you. you want to weigh in on how different folks and places in the income distribution factor that into the retirement planning in different ways in general? >> sure. the social benefit formula is progressive in the sense people with higher earnings to receive higher monthly benefits but the multi- benefits are a smaller percentage of their prior earnings. it tends to be at lower income individuals who rely more on social security and receive more gender social security replacement. >> anything added and the rest of the retirement system comes in? >> sure can think of cbo data cvo datafor calculations for coe years ago they looked at social security benefits at a percentage ofy people's pre-retirement earnings the social security benefits percentage of your earnings adjusted for inflation.

her people in the bottom that lowest income of an tyree's they receive social security benefits equal to 80% of the preretirement earnings. if you wonder why low income people don't say much that's part of it. there's not that much reason too. when you go to the middle you'rl looking at 50% replacement rate you go to the top you're looking at 25%. this expends the outsize of socialsecurity for lower income retirees. my cottage industry is telling people the u.s. retirement system is working pretty well. so on and so forth. if you are each look at the source of cuts the social security benefits that would happen of the trust fund just

last week the social security trustees release their latest projections for the program. i was glancing over them i was reminded of the recent billy joel song, turn the lights back on the second line is nothing this different than we did before. we've definitely been here before. that networks before we dive into the forward-looking portion of the panel. if you could talk about where the program is and why it is so concerning when we look out into the future decades? >> sure i say if you read a "new york times" article from stay tuned 1990 you pretty much know what you need to know about the financing challenges for socialw security. social security's pay-as-you-go program soleimani paid in by workers most go out the door to pay for beneficiaries the demographics the aging of the population is the main challenge were facing. in the latest social security trustees report of a back up a

little social security is essentially a retirement program and a disability program. often we think about the finances we assume those two things are merged. talk a little bit about the retirement program by itself. the retirement program is a project of the trust fund will run out in 2033. at that point you are facing cash flow shortfall in today's dollars about three to $50 billion. so that is real money. if you want to keep the program solvent for 75 years she would have to immediately and permanently increase payroll tax rate by around 3.6% the unfunded obligations around $25 trillion. the reason it excluded disability in the past the disability system was the least well-funded part of the program retirement was better funded it was discerned you would emerge the retirement program would subsidize disability.

that is turned around and around 10 years ago you had cash infusion from the retirement program and disability but more importantly significant not totally explained to client and the number of americans claiming disabilities. the disability fund rightil nows fully funded going forward. it's social security retirement part is the real problem is. i suspect reforms are going to play out mostly on retirement. >> 200 talk a little bit about the factors that are leading us to this problem? >> sure. let me put social security depletion and context. so, when you think about the debt challenges they do their debt challenges they assume it's one of the one places you would say they're not exactly following current law. they assume the trust fund assets are depleted benefits are

paying out at one 100%. one of the reasons i would zero in social security imbalances are a larger portion of the total fiscal challenges. is not a different topic it's the details of the fiscal challenge topic. we have a system based on wages by formula. we could be pay-as-you-go. if the demographics change then you could no longer afford that same benefits for the same tax rate is not actually pay-as-you-go in the sense there is an automatic increase in the tax or reduction of benefits was just we have this form of the operates pay as you go in there were going to have to do something when all the sudden the sonic taxes coming in. munson oldernd society. that means there are more old people per working person on

their for a constant tax rate on waitresses not going to be enough to finance the benefits of the elderly since the elderly are now larger proportion. >> many years ago there about five workers paying in the program for every retiree now i think it's three cold want and it's turning to two and a half -- one. the challenge we have is if not change at all taxable maxima. what is important to remember we think about we have this problem is not by and large because benefits are getting more generous. it's because of the structure of the economy has changed an older economy. that maybe it changes what you think are paying more and more benefits every year may wish to pull them back. the one place that's not true as people are living longer. you have this in the lifetime sent social security more generous.

not on income sense you have a formula is spent replacing on average. you think about the cause of the problem is not overly generous benefits. question rate retirement earnings remain constant. someone claiming benefits thisef year get a monthly benefit about 40% higher in real terms. this goes back to the re-eval quickly benefits should grow in the future? going to say it's a philosophical debate there is the issue i would think it income replacement terms which is roughly constant are we talking real dollar term which is quite d higher. what standard of living with them to have the one standard of living rise with everyone's standard of living which is how it turns out benefits rights

with wages. or if it's just to make sure they're not poor and have enough to eat. the rest is up to private that is thehe philosophy. mark succumbs to the looming insolvency or trust fund depletion back in the late 70s or early 80s. want to talk a little bit about the parallels in some case the differences in where we are today. >> sure. i would say one was the problem is bigger today. theig problem is bigger. i would also make two additional points about this, things i think are different today you look at the broader context of ithe federal budget it's overal in worse shape going back to the first session this morning that is not around one or% of gdp.

projected to be higher at the time social security trust fund fruns dry. back in the late 70s early 80s that was more than the third of gdp. the federal government finances are overall in worse shape which leaves less room to maneuver. revenue political scientist i think it is b fair to say this more political polarization is e feasible to do. >> is very interesting. we were able to do it and i think this is really important because there was a crisis. one of the reasons there might be potential something will have to give. there will have to be legislation. butut experience and 82 is different and 1979 the projections were the system

would be fine for 30 years. hwhat happened with our two deficits to recessions in 1980 and 1981. and two, the trust fund at that time was very small and cover like 20 percentages. if you don't have a large trust fund you're hit with recessions you could have a system that appears solvent is insolvent they appear to visit insolvent for five years without a be five years and it goes back to being solvent partially because there'd had tax increases that have been legislated there were going to happen was much less then, then you have to do it now. you have to do between two and four and half times as much effect of the cap two sets of estimates the optimistic and pessimistic said it's a much

larger problem you don't have the same runaway as we had then. then it was a recession and then you're going to be fine until people started retiring which was long time ago. mount we are almost done with the transition we cannot not like do anything for 30 years and announce a change 30 or 40 years later. that's not going to work as well. >> the problem is when i spoke to members of congress they will look back at the 1983 reforms and say we did at the last minute. it's completely different size in 1983 they would've come back into solvency they really could've easily avoided that or borrowed it or something. problem you're not looking at a 4% cut lasting for six or seven

years or look at 20% lasting forever. i think a lot of policies don't appreciate the larger task at hand for them. >> absolutely but will start looking forward but they could do to resolve this. we talk a little bit given where we are now and this is the point and where it was just making. is it realistic to think policymakers are actually going to maintain the strictly pay-as-you-go nature of the system that we have today? we could fill the 21% gap it turns up in 2033 with more taxes in the form of general payroll taxes or reductions in benefits? or are we too far down thatar rd to preserve that? >> is pretty likely we are not going to keep that we have this in guard rail around social security the only money they can come in or from payroll taxes

and other designated taxes that money can go out for benefit. the type of tax increase were not asking in two years we are going to be asking right before i think it's most likely we don't have that much time really. i think it's likely will use general revenues and we should use general revenues for me tell you why. what you mean by the use of general revenues is move beyond cutting benefits or raising payroll b taxes. to solve the social security system that could be raising other taxes. it could be financing the most like a fight have to bet i was there going to end up not having benefits and adjust your financing remember that does not change the trajectory of the debt it's already assumed we do that in all the projections. i think will end up doing that we made the same time also do some reforms but in the near term there not enough ever.

so i think we will do something whether or not it's like were going to sign the estate tax revenue to the trust fund or we are just going to borrow it's not clear. something that brings in new sources of revenues and probably new sources of revenue and not just were going to raise taxes but not right away. theth thing about general revene goes back to it happen in the early 80s. because of the reforms they did in 1982 where they all recognize there's going to be pressure way down the road they did not have to do is much as a gibbet would say did the reforms they sillhes try to get the system solvent for 75 years which meant that new they're going to be there later they build the trust fund at first to spend them down over the next half of that 75 years. because of that we've had a very large trust fund being built up for most of the past 30 years

which meant that when there was a recession we did not have the same issue social search is going to be depleted we had a very large cushion. if what happens as we get down to the place we basically have very little cushion and we start to act and act just enough to see according to ssa get it fixed for 75 years. if anything happens we'll be back in that place we talk about social security again. we get this wholeut reform. something bad happens all the set are we going to be able to pay benefits question rick you don't want that. you do not want the system to be sold for a liberal to temporary things. i've done some calculations or try to figure out. this two type of calculations it's easy to do. one is social security's a lot more optimistic about the trajectory of the trust fund. in the printed it's demographics at all the pieces that go in. social security is more optimistic. what if in 2026 we did enough to

make the trust fund solvent according to social security. if that is true of the trust fund would be depleted or it would be insolvent by 25 years instead of 75 years so it's a very big difference will be back insert talking about 10 years or 15 years later would be doing this again. the other thing is a measurement a shock like the great recession if we had a trust fund with what her% of benefits given her for one year. then would be depleted about nine years. i think it's important in the reformer social security that you allow some form of access to general revenue so these things don't bring it back to this conversation whether or not they trust fund can borrow. whether or not there is an infusion with unemployment rate do not know what but thinking about not just with the expectation is in planning for the expectation understanding these projections are super hard to do and you're going to be wrong. you're going to be wrong and you

may be wrong of the other side. and maybe you're the ai is fantastic we have huge productivity boom. that helps social security. we have all of this money and you would not want to say let's just reap the benefits this system is cordoned off from the rest of the budget is a much better shape. part of the logic of keeping it cordoned off as it would be more likely to happen it would recognize as part of the budget. it's part of the whole budget. you would not have those kinds of pressures. >> he packed a lot into that. [background noises] we need a chance to respond or tojust a couple of thoughts. i am firmly in the camp that you are a don't think we're going to be able to get to a place in the next nine years we can keep the system as it has been. but, i also feel given what you're saying about the overall were talking about today the overall fiscal projections that still a pretty concerning in

terms of its based on projections continuing on that path. i also think you raise a really important point the lack of action by policymakers being dramatically unfair to people trying to plan the retirement. that's oftenng overlooked we assume they're going to fix it. how could you plan for time accurately we do not know it 20% of social security benefits are more going to look like. if you do not have a firm understanding of the issue allowed to blink the programs going to go away entirely it leaves you an entirely hopeless state which is really a disservice from policymakers to our constituents. andrew jump in on any. >> short. if i had to make a prediction i was either going to use general revenue. i consider that a pessimistic projection. one of the concerns i have about

it this deadline of 20342035 depending upon how you look at it is a political economy benefits to having a deadline like that. but forces action in a situation where the political incentive is to procrastinate. you kick the can to issue debt. there is some value in having an artificial deadline like that. i do appreciate the concern things are going to get out of whack occasionally we do have to make adjustments to be good to have a rule in place so people can plan for their retirement i do appreciate that points. >> are sort of a risk but an a opportunity. go back to the last panel talks about a fiscal crisis.

it's good to be premised on i forget the term adverse fiscal announcement. we are going to cover the social security funding shortfall going forward. i've always been fiscally responsible. at the same time the general revenue has open up opportunities. as i see it the real funding problem there is a question we have to face are we going to levy higher and higher taxes on middle and upper income americans just to give you an idea what social security calls medium earners retiring today your combined social security benefits will beat somewhere north of $58000.

it's over the poverty threshold before you touch a penny of your own retirement savings which, for americans even the middle are record high levels. they're working later in life. we have more capacity the private retirement side that we've had in the past much more. you do get the issue at some point you say this is enough? two high earners making $168,000 would retire a $96000. if that same couple living in canada since they are at libertarian paradise they would read something like $31000. rich canadians they respond by saving more. which is consistent with how other countries similar to us the uk, australia, new zealand

how they do it would just focuss your resources much more in preventing poverty in old age essentially if it has retirement plan at work. this is not an unsolvable problem. our problem in the u.s. is not additive policies at the governmental process. click soon to talk a little bit more about the proposal is a similar? against the private savings? >> a recent wrote a paper for me at boston college that works in the clinton administration a center left i worked the bush administration to center light.

how you fix social security in the state of u.s. retirement system. but we found we agreed on is neither of us think the federal tax preference for retirement savings. the tax deferment or pensions people assume it does because you get a tax break. when you look at the research what you tend to find is more people substituting taxable accounts and nontaxable accounts to get the tax reference. people might save a little bit more because their tax bill is lower that's offset by higher debt on the government side. this is real money. this year's close to $200 billion a year. now i am on the far end of the willingness to cut social security. i think we should transition to an australian style flat benefit for everyone.

it is a benefit and rollback the retirement payment. pond whatever form and we can depend on that. at the same time the private side rollout though, rollouts is something similar than what the uk has done. deduction from the paycheck and decade, their private sector orretirement participation rate

what happened we have flat benefit for everybody with the supplemental universal account, that solves your elderly poverty problem and solves retirement savings problem. and to be able to follow those things while leaving space in the budget for medicare and everything else strikes me a reasonable way to go about it. >> i would categorize as very aggressive version, you've also written about ways to do that maybe are more politically palpable but moving in the direction but not quite as further and i think a lot of the bipartisan proposal that is we have seen come out do have as significant element so if you want to explain a little bit more. >> yeah, the first thing i want to pointnt out, when i talk abot testing what i mean is reducing benefits for higher earners and what i want to point out is there already is testing in

social security. if you're a higher, benefit that you receive is smaller. the benefit formula is progressive. one way to increase is testing in social security is make the benefit formula even progressive. i think the nice thing about the way existing testing is done it is based on an average on your earnings on your working life. there are some proposals to means test out there that would base means testing based on your current income during current requirement.

sensitive to that in there more likely to refuse working hours or stop working entirely in response to that implicit tax. so i think the existing benefit formula does it right, so based on an average of your lifetime earnings and you could just go a little bit further in that direction. i've personally would have come out in favor of a flat benefit but we don't want to go all the way to a flat benefit, then increasing in the existing formula is a good solution. >> one advantage of a plat benefit, what sida was proposing was on offer. the advantage of a plat benefit not lowering benefit but raising at the bottom. when i run -- reform in the

u.s., about the bottom 25% of people would see their benefits increase and that matters. has the second highest disposable income in the world than luxenburg. so it's not just reducing but also gives people confidence. a lot p of this comes on the political economy question. if i'm going tell people, i'm going to reduce your benefit, your proceed, i think they are more willing to swallow that, i can guaranty you will not retire into poverty. it's not that expensive to do because we don't have that many

poor people. it's framing things in order to try to build confidence that i'm going to take these risks if i know really have a solid background on it. and what that says to me, if we -- for overall the population that we have longer life expectancies then we also need to accommodate for the fact that many do not and protect them

from h they would be adverse important. if you can talk a little bit about your perspective there and if that's how you see it. there's been incredible writing about this. if you keep early retirement age then all it means they use, it's the benefit cut that always affects the retirees. if you think about raising early retirement age. why do we have early retirement age at all. not understanding that they will

be poor. the best thing someone can do to make the retirement is to work longer. so there is the question is, can we to things, do -- you think about raising 62. you can talk about average life expect antsy. it's always been true that richer people longer than poorer people but the gap has widened tremendously. it doesn't quite make up for it.

and so i do think that raising the retirement age, there's some evidence, focal points. people suggest maybe 63 is the earliest or 67 is normal retirement, maybe not 100% clear whether the cleaning behavior changes. it's not clear. i do think it makes sense to think about, you know, about getting people to work longer and i'm not sure we are using plthe retirement age as the best way to do it. can i just talk about the benefit issue too this is a political economy, you totally change social security from public. the formula is in, i don't

actually have an opinion on this, i think we get a lot less as you do that and there's budget amount. the benefits of social security reversal and get out. >> the program for the poor support program in a captiva >> i may be a little wrong. transfer programs something like 1% ofen gdp and today they are % of gdp. will americans support and the

answer has been, well, and there's a broader point in the sense that the idea of earned benefit is we have strength politically one thing to tell pee lower the payment, i didn't burn it when people told and you are to them, i will fight changes and the reality and the projections for people retiring in the mid- 2030s. that group on average is premised something like 27%

higher lifetime passes. they didn't pay for the benefits, we know that. think there when they are not so ultimately this idea benefits. if it's not true it's harder to make the changes. the trust from finances and combined with got it worked wonders the security worker

benefits and sport delaying benefits leading a plane will not more generous people are living longer so it turns out it could be a big deal for many people so that is the personal-finance site but i do think working longer have to be part of the solution. we are working a little longer but retirement has increased so there are things we could do to facilitate number lines. one thing i looked at business social security benefits from the other things i could be

proved? >> effectively improve people's individual retirement security. >> would you talk about who doesn't pay payroll taxes and up later. >> it is a problem. [laughter] >> the clergy can and there you go.

she died at 58 so figures government employees and retirement systems. social security i get that it's range idea and cap force them to participate there's rules in place for the benefit will be on the size of pension. the reality is they are not at the benefit form in the sense of people of i can come and they low income. it would transfer to them and we have provisions in place.

and i try to explain it and work out. >> this is something right off with legislation in recent years because money are having this conversation. make sure goals are not getting it as a result. people think there social security benefits are stripped away treated unfairly but the

bill right now would repeal and give them a windfall and cross a lot of funny. it is a bipartisan bill that has a lot of support. the debate is not likely to go away. >> i like the idea of phasing out 4o1k and ira.

i'm reminded of the very important research in part sponsored by aei led by phil gramm which that anytime you talk about incomes and property, you have to look at the old monopoly of transfer programs of the bottom. this affects the top. as in the income distributional there is an african sleeping. we want people to be able to do something save for retirement. when giving money people who have risk of poverty in this

type benefit, we are not doing that either but on the economics, what made me think about this is the way it plays out is when you eliminated some up so this framework helps explain why you don't see a reaction to the economic studies not presenting incentives about

and are getting to do anything and we have taxes for retirement savings out there, home mortgages and not the same, it strikes me as an area where you can look at opportunity getting money medicare benefits. >> getting a brother tax advantage and a lot of people agree. there is a tax benefit.

>> behavioral effect and should we get rid of this? for many european countries we have even after distribution. >> and from the same conference a discussion with former