“Social Security Fairness Act” is a terrible legislation-this is a way to solve the problem-retirement research center

Find the fundamental question-discovered state and local workers.

Every analyst who knows unknown social security agrees that the “Social Security Fair Law” signed by President Biden on January 5 is a terrible legislation. It is just a donation to some states and local workers-those who will now benefit from the progress of the welfare formula of the system and the benefits of the non-working spouse. Eliminate the elimination of accidents (weP) and government pension offset (GPO) to make social security less and less fair. For details of unexpected gains, see my recent blog post or my friend Andrew Biggs, the most detailed example of history.

Yes, the situation of WEP and GPOs involves some understanding of social security. Yes, this regulation can be better designed. Yes, it anger the state and local employees. But these adjustments are designed to solve the real fairness. How can Congress’s voting voting eliminate them-waste funds, accelerate the depletion of trust funds and make 75 years of financing loopholes greater?

Personally, I accept experts that have not been able to propose to the public, parliamentarians, and members of parliament. But I think it is time to accept failure and continue. At present, the most constructive thing is the root cause of the problem-that is, expand the scope of social security to 25 % to 30 % and the scope of states and local workers that are not covered by social security.

A little background. The “Social Security Law” in 1935 excluded state and local workers outside the scope of compulsory coverage because the constitution was worried that the federal government could tax the state government. With the expansion of Congress to the new private sector workers’ groups, it also passed the legislation of the 1950s, which allows states to elect their employees voluntarily. Although many states have indeed joined, our calculations show that 26 % -5 million workers in the state and local labor in 2022 still have no social security coverage. Most of the workers (77 %) live in seven states-California, Colorado, Illinois, Louisiana, Massachusetts, Ohio and Texas. In California, Illinois and Texas, the state and local workers accounted for 42 %, 42 % and 35 % of the total (see Figure 1). In Massachusetts, Ohio and Nevada, no government staff was covered by social security.

If all states and local workers are covered, the demand for equity adjustment (such as weP and GPOs) will disappear. In addition, the expansion of coverage will ensure that all workers pay their share in the cost of launching related to social security and contribute to the planning elements in the plan. At the same time, expanding coverage will also improve the retirement income of many states and local workers. They rely on public pension plans to be more generous than social security and provide them with important assistance protection currently lacking, such as spouses and survivors. Social security also provides comprehensive disability insurance.

Of course, the proposal to expand coverage has triggered a strong protest of public employee unions and prefecture/local governments on expenses. In fact, all suggestions for social security coverage are limited to new employees, which will reduce the transition. The scope of the final cost depends on the introduction of how to deal with social security-that is, the country and region are unlikely to simply increase social security on the basis of existing regulations. We need to carefully estimate the possible results.

On the other hand, the expansion of the coverage to 5 million unsteady workers will help the 75 -year deficit that ended social security. The latest estimation of the actuarian is that the expansion of the coverage will reduce the 75 -year -old deficit from 3.50 % taxable salary to 3.35 %.

Let’s forget wep and GPOs to set up fundamentals to solve fundamental problems. It is meaningless to have a national social insurance system with a re -distribution function, which makes 5 million workers not participate. This is a simple argument. Let’s start handling these numbers so that the expansion coverage is one of the proposals on the table in the case of designing a package to solve the shortage of social security and financial shortage.