Wednesday, October 9, 2013
Well the timing might seem ironic to some, since the government agencies are still "taking some time off" but a new report on Social Security was just released (October 2013) by AARP. Gary Koenig of the AARP Public Policy Institute and Al Myles of Mississippi State U. released an AARP Public Policy Institute report, Social Security's Impact on the National Economy.
The executive summary starts with discussing the impact that Social Security has on individual recipients. That's not something that will be a surprise to those of us who teach in the field. Even the executive summary acknowledges that Social Security's impact on individuals is clear. Here's where the information gets interesting...what does the program mean to the economy? That's not so well known, according to the executive summary. Here's an excerpt from that, found on page 1 of the pdf:
Social Security’s economic impact starts when its recipients spend their benefits on goods and services. The businesses that receive these dollars use them to pay their owners and employees, purchase additional items to sell, and pay rent, taxes, and the other normal costs of doing business. Their suppliers in turn use the revenue they receive to pay their employees, suppliers, and so forth.
This report ...shows that Social Security benefit payments support more than 9 million jobs and add almost $1.4 trillion in output to the overall American economy. Every dollar of Social Security benefits generates about $2 of economic output.
This makes one stop and think about the future of Social Security and how more than individuals have a stake in its continued success. Thus as the executive summary notes, any reduction in benefits will have a ripple effect across the economy: "reducing benefits by 25 percent across the board (about $190 billion), which the Social Security actuaries project will occur around the year 2033, could cost the U.S. economy about 2.3 million jobs, $349 billion in economic output, about $194 billion in GDP, and about $93 billion in employee compensation in 2012 terms." (page 2 of the pdf).
The report offers some really good discussions of how the recipients use the payments, in addition to the impact on the economy. There are some nifty charts, including Table 5 (page 15 of the pdf) that lists the "Top Ten Sectors Affected by Social Security Spending in the United States, Ranked by Employment Impact, 2012". (I think my favorite coffee bar would fall under “[f]ood services and drinking places”). Table 6 (pages 17-18 of the pdf) provides Social Security's impact by state--very helpful for our class discussions.
The report concludes with observations on the positive impact the program has on recipients, businesses, employment and the economy overall. It describes the program as "arguably the most successful federal program. It keeps 22 million people out of poverty--the most of any public program—and serves as the foundation of retirement security for millions more."
Every semester I survey my students-asking them how many of them expect Social Security retirement to be there for them when they reach retirement age. A strong majority says no. But as this report discusses, the impact of the program’s success is far reaching. I'm hoping we can convince our colleague and good friend, Dick Kaplan from U. of Illinois to add some comments, since I consider him a great expert on the SSA programs.