Andrew G. Biggs
@biggsag
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I'm a senior fellow at the American Enterprise Institute and a member of the Financial Oversight and Management Board for Puerto Rico.
Joined February 2015
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Pinned Tweet
With Social Security reform back in the news, I've been sending out more links to my chapter in
@aei
's new book, American Renewal. I promise it's different from the usual stuff on fixing Social Security.
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This will only add to my unpopularity, and yet a short thread follows...
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In the US only 9% of retirees characterize their incomes as severely inadequate. In Europe it’s two-and-a-half times higher at 23%. In France & Germany, it's 3.5 times higher than in the US.
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No solvent business prefunds its pensions? Tell that to the DOL, which requires private pensions to be prefunded using conservative investment assumptions and to promptly address unfunded liabilities when they occur.
GOP is talking smack about the Post Office (of course, since they have no ideas).
The funny thing about that: it‘s the GOP’s own “business model” that hurt them! They forced USPS to prefund pensions decades out (which makes NO sense & no solvent biz does)instead of year to year.
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A good test of a methodology is if it produces absurd results. The same data & methods that produce the supposed 21% "teacher salary gap" also tell us that nurses are dramatically overpaid and telemarketers are highly underpaid.
@aeiecon
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First, the MAIN reason Social Security faces a massive funding deficit is that past and even current participants receive significantly more benefits than they paid in taxes + interest. It was a great deal for them, but that makes it a poorer deal going forward.
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"What's Your Major": Another Blow to the So-Called Gender Pay Gap.
@aeiecon
@Mark_J_Perry
#EqualPayDay
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In other words, more and more of our taxes will produce nothing in return.
🚨Interest is now our 𝐬𝐞𝐜𝐨𝐧𝐝 𝐥𝐚𝐫𝐠𝐞𝐬𝐭 government program🚨
𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐜𝐨𝐬𝐭𝐬 this year just 𝒔𝒖𝒓𝒑𝒂𝒔𝒔𝒆𝒅 𝒅𝒆𝒇𝒆𝒏𝒔𝒆 𝒔𝒑𝒆𝒏𝒅𝒊𝒏𝒈 and it also 𝒆𝒙𝒄𝒆𝒆𝒅𝒆𝒅 𝑴𝒆𝒅𝒊𝒄𝒂𝒓𝒆 𝒔𝒑𝒆𝒏𝒅𝒊𝒏𝒈.
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My new paper with Alicia Munnell argues for rolling back the federal tax expenditure for retirement plan contributions and redirecting the savings to Social Security. Full repeal would fix roughly 3/4 of Social Security’s long-term funding gap.
@aeiecon
@RetirementRsrch
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Second, and related, even today Social Security is promising more than it takes in. Call it an earned benefit; but you can't call it a paid-for benefit because haven't paid for it.
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So New York City pays $150 million per year to 822 teachers who don't teach. Since I didn't have one of those teachers, I can do division. That's $182,000 per teacher-who-can't-teach.
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Simply put, people think things about Social Security that aren't true. And those not-true beliefs, shared by both the left and right, make it much harder to generate solutions that make Social Security both effective and affordable. For some ideas, see
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Had Congress frozen Social Security benefits in 2000, the average 65+ household's income in 2019 would have been reduced by only around 4%. And Social Security would have been made permanently solvent.
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Well, the Fed says it's not 50% but 13% who lack retirement savings. But what's a 37% difference, anyway?
Today, nearly 50% of older Americans have no retirement savings – ZERO.
Meanwhile, 2,000 top executives have amassed over $13 BILLION in retirement savings thanks to special tax advantaged plans.
Absurd. We need a retirement system for working people, not just the wealthy.
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Not only does no
@oecd
country have zero out-of-pocket health costs - the average is about 20% of total psending paid by patients - the US out-of-pocket share is actually far below average, at around 11% and near the lowest in the world.
You know how you got your vaccine without paying a dime? That’s how all health care could be.
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Just throwin' it out there: This chart would look different if GW Bush's plan for Social Security personal accounts had passed.
Top 1% of Americans hold 30.5% of U.S. wealth (as of June), up from 23.7% in late 1989; bottom 50% hold just 1.9% of overall wealth, which is down from 3.6%
@federalreserve
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I have a very hard time understanding how block chain is supposed to fix the pensions crisis. Public pensions' problem isn't administrative costs, but promising benefits without funding them.
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CBO: Federal employees receive average salary & benefits 17% above levels paid at large private sector employers.
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Third, when you read that Social Security is solvent until the 2030s, that INCLUDES repayment of amounts borrowed from Social Security. And that borrowing is currently being repaid. If not, benefits would have been cut beginning in 2010.
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There have been lots of takes on
@oren_cass
's Cost of Thriving Index. Here's mine, limited to a basic point:
If rising housing, health, transportation & college costs have squeezed middle class families, I'd expect to see them spending less on purely discretionary items. 1/
Thread (1/16). How is that our economic statistics suggest workers have been making slow but steady progress in recent decades, while popular perception is that their family finances are coming under increasingly untenable pressure? I've been working on this, here's my answer:
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False claims backed by false statistics. Another day in Twitter.
The
#TrumpBudget
contains massive cuts to our Social Security system.
One-third of seniors rely on Social Security for virtually all of their income. We need a leader who will not only protect Social Security, but who will expand it.
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You're also receiving the same benefit. That's how the system has always worked, and for a reason: Roosevelt didn't want social security to look like a welfare program.
If you make ~$160,000 a year, you're paying the same amount into Social Security each year as a billionaire. In fact, billionaires put just half a cent of every $100,000 they make into Social Security.
This system is unfair—it should not be controversial to try and fix it.
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I come across this all the time in retirement debates. Someone makes a claim about this or that and I'm like, "You know, there's data you can actually check on this."
@ToTheMoon_SFM
The persistence of the belief that multiple jobholding has become more common despite the easily available evidence strikes me as an example of negativity bias rather than a refutation of it.
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Something makes me think I might not get a fair shake in this story...
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Factcheck: False.
@sensanders
omits the 40% of near retirees (including most public employees) who have traditional pensions, which he doesn't count as "savings." Include retirement accounts and pensions and 73% of near-retirees have savings. [Thread]
At a time when half of older Americans have no retirement savings and are worried about their ability to retire with dignity and millions of seniors are living in poverty, our job is not to cut Social Security. Our job must be to expand Social Security.
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A very kind blog post from Alicia Munnell of
@RetirementRsrch
regarding my nomination by President Biden to the
@ssabgov
.
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Note: both
@swinshi
and
@lymanstoneky
are
@aei
. At how many other think tanks do analysts openly debate each other rather than all echoing some institutional position? This makes AEI a great place to work, but also makes AEI of greater value to the public.
I still see nothing in here refuting my one actual claim: that Millennial women have been no less successful than late-Boomer women to achieve their fertility goals. The chart in the second tweet is entirely consistent with this conclusion.
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Yikes.
Stop & ponder the magnitude of this: Half of 25-54 yr old men not in the labor force take daily pain medication
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@PTBwrites
@_StephKramer
In every OECD country, children from single parent households have lower average math/reading scores. Part of supposedly poor US education is simply that we have more kids from single parent families
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On this day in 1935, the Social Security Act was passed.
But it was Amendments passed by Congress in 1977, setting benefits on autopilot, that made a Social Security funding crisis almost inevitable.
From me and John Cogan of
@HooverInst
.
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Just paying promised Social Security benefits is a 20%+ increase in the annual cost of what's already the federal government's biggest program. Expanding benefits costs even more. Affordability is precisely the matter.
The question of whether to expand or cut Social Security is a matter of values, not affordability:
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@mattyglesias
MA/PhD Eds are a big driver of the supposed teacher pay gap. The degrees aren't held to be very rigorous or to improve teaching, but mean that pay studies compare teacher salaries to MA/MBA/PhDs in other fields, often STEM. This makes teachers appear increasingly underpaid.
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@tommy_lop1982
@JonahDispatch
That's actually not right, because the low life expectancy in 1930 was driven by infant mortality. What matters more is life expecatncy contingent on reaching working age; that HAS risen, no doubt, but not as much as overall life expectancy.
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If this study had shown that tightening eligibility for disability benefits had negative effects two generations later, we'd read about it in the New York Times.
But when the study finds positive effects?...
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@Brian_Riedl
My Social Security solvency plan: Everyone who screams "Social Security isn't an entitlemet" gets their benefits cut. They just TOLD me they weren't entitled to it!
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Realistically, the Republican platform pledging no cuts to Social Security or Medicare means the end of the GOP as a low-tax party.
The deficit is already unsustainable, and the cuts to other programs needed to keep these promises aren't going to happen. Prepare yourselves.
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Takeaways:
1. Trump did not and does not have serious policy views on Social Security.
2. In office, he would almost certainly follow the path of least political resistance. Which is to do nothing. This isn't a guy who's risking political capital to cut benefits.
New: Donald Trump has been all over the map on Social Security and Medicare
An examination of what Trump has said and done over the last quarter century, from backing major changes to his 2016 campaign, his White House budgets and the present 👇
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The strategy for GOP candidates who actually want to reform entitlements is to push Trump relentlessly -- and I mean relentlessly -- on what taxes he'll raise to pay for his promises. Trump has no actual plan to avoid Social Security benefit cuts, just a pledge to pass the buck.
This is what I mean. Just mauling Desantis from the left. The only way to beat Trump among Republicans is to show you’re better at beating Democrats, and Desantis and every other Republican is failing at that.
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@gwenmoritz
There's a pro/con literature on that, which I can point you to. But that's not what Time was getting at. They're pointing to examples of absolute deprivation, where people need to sell their blood to get by. That's not close to typical given the income levels teachers have.
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@gwenmoritz
@clarkjames70
@TIME
I'm not sure what you mean by "demonstrably underpaid." But a headline that reads "This is what it’s like to be a teacher in America" & follows with atypical examples and dodgy statistics is misleading to readers.
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The most compelling argument against reducing Social Security benefits to restore the program's solvency is that benefits are "earned," which turns a financial argument into a moral one.
But in
@WSJ
, I show that for the vast majority of Americans, that's not the case. [Thread]
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The "donor state" narrative is the liberal version of conservatives showing voting maps of red counties vs blue counties. States don't pay taxes (and counties don't vote). If you have a redistributive tax and transfer systems, rich states will pay more than they receive.
New York State remains the largest donor state in the nation for the 5th consecutive year with a negative balance of $22.8 billion for 2019, and a cumulative 5-year negative balance of $142.6 billion.
Data dashboard:
Report:
(2/)
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State/local government pensions are 67% funded. Using a 7.5% discount rate. 10 years past the end of the recession. With the S&P having returned an annual average of 13% over that period.
But don't worry, it's all good.
Milliman: U.S. public pension plans see funded status drop in fourth quarter
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I'm not sure how a mischaracterization of my testimony - that the MAXIMUM Social Security benefit of $43,000 is 3-4 times higher than in other countries - is a mike drop.
🔥Senator Whitehouse calls out Republican Witness, Andrew Biggs @ Social Security hearing.
Biggs: I believe maximum benefit in the US is too high, $43K per year is far more than is needed to protect against poverty.
Senator: “TOO HIGH answers my question thank you.”👏
🎤 DROP!
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I have a piece in the Washington Post, co-authored with Jose Carrion of the
@FOMBPR
, stating our concerns that long-term, structural economic reforms for Puerto Rico - called for in PROMESA - aren't going far enough or fast enough.
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States don't pay taxes; people do. And if the people of New York didn't want federal policies that tax the rich to redistribute to the poor, presumably they'd vote that way. They don't, which makes Gov. Cuomo's argument a little tough to understand.
NY has given $116 billion more to the federal government than we received since 2015.
Kentucky *took* $148 billion more from the federal government than it gave.
Just give NY our money back, Senator McConnell.
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The poverty rate among teachers is effectively zero, meaning 16% of Americans are struggling more. Teachers receive 97% of their incomes from teaching, making 2nd job income almost trivial. And teachers' retirement package is 2nd to none. Maybe the testing is an issue.
"One issue this country faces is how unfairly educators are treated, O’Rourke stated. He declared that teachers are struggling, they often work a second or third job, are pressured by standardized testing, and cannot afford healthcare or retirement."
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@asymmetricinfo
Or use part of your 401k balance to cover a delay in claiming Social Security, which effectively creates a pension for life at lower cost than a private annuity and with CPI-protection.
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Personally, I'd give them some help (mostly loans) IF they froze the system and switched all employees to defined contribution plans. But the federal taxpayer shouldn't prop up gold-plated pensions that most taxpayers themselves don't have.
Breaking: Illinois Senate President
@DonHarmonIL
is seeking a whopping $41.6 billion in federal aid for the state — including $10 billion to bail out the public-employee pensions that Illinois lawmakers haven’t properly funded for years. H/t
@Wirepoints
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The College Board's 'adversity index' would add 200 points to my son's SAT score. Leaving aside that he's suffered no adversity himself, this is a huge incentive for higher-income parents to live in lower-income school districts.
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I would risk Covid to have a public debate over this nutty study claiming that public sector pensions generate net revenues for their states.
Read the condensed version of the executive summary of our Unintended Consequences 2020 Update research here!
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@gustavovelezpr
@FOMBPR
The biggest impediment to economic growth in Puerto Rico isn't status or federal tax policy or bankruptcy; it's governance.
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France's pension benefits are 50% more generous than Social Security. And yet in surveys, French seniors report the lowest levels of retirement income security while Americans report the highest. Why? Americans save a LOT more for retirement on their own.
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Working with John Mantus of
@aeiecon
, I’ve released my first working paper on education. Using data from the OECD’s PISA exam, it looks at the debate between traditional “teacher-oriented” instruction and more progressive “student-oriented” instruction. Comments welcome. /1
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Facing a large fiscal gap, it doesn’t make sense to pay hundreds of billions of dollars to households that don’t need the money to incent them to do something they’ll do anyway. The retirement tax expenditure fits that description.
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@oren_cass
/4 I get the personal dissatisfaction
@oren_cass
is trying to capture in data. But I'm not seeing that rising core household costs are preventing households from spending more on things that bring them enjoyment or help others,.
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Um, no. The actual share is about 1/4, and they're predominantly low-income individuals who receive higher replacement rates from Social Security.
Today, in America, more than half of older workers have no retirement savings – zero. That is unacceptable. We must create an economy that works for all of us, not just the wealthy few.
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@DavidKlion
Don't the students who showed up to hear her have the right to hear what she has to say? Just as those who oppose her should have the chance to challenge her in Q&A. Seems pretty obvious to me...
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Seat recline in economy should be eliminated. Tiny comfort improvement for the recliner, but a veal crate for the person sitting behind.
Question: What is the appropriate response to the one guy who reclines his seatback all the way on a 100% full flight? Asking for a friend.
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@oren_cass
/5 I'm not saying this proves anything (or that proof is even possible). But it's worth asking what measurable things we'd expect to see if Oren's theory were true. Maybe there are others we can check.
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Here we go again: The central claim of this article - that nearly half of Baby Boomers have no retirement savings - simply false.
This factoid, which originated with the GAO, assumes that retirement savings MUST be in retirement accounts. /1
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It's easy to throw shade at
@MittRomney
's plan for a new entitlements commission; how many have we had?
But it's like selling your house: it only has to work once.
And after 30 years without Social Security reform, there aren't many other options.
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“Why
@biggsag
is wrong?” You’re killing me, Teresa.
Still, my heart must go on. So here we go. /1
@AEIecon
My latest: why
@biggsag
and
@RepublicanStudy
are wrong about America's retirement crisis--and why
@SenSanders
is right.
@BernieSanders
@HELPCmteDems
@AARPpolicy
@NIRSonline
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I understand that politicians like a good talking point, and
@BernieSanders
claim that 1/2 of older Americans have no retirement savings is a compelling one. But it's simply untrue and he should know that by now.
A short thread running through things.
@aeiecon
Today, nearly half of Americans 55 and older have no retirement savings. Join me LIVE as the HELP Committee discusses what we must do to solve the retirement crisis facing working class Americans.
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A thread: My least-favorite attribute of progressives - which has increasingly spread to conservatives - is the inability to acknowledge good will among one's ideological counterparts. A person cannot be well-intentioned but mistaken. Instead, that person must be evil.
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@GregRenoff
@pzizzo
And yet a lot of Sammy's lyrics were much more crass than Roth's. DLR's has a wink-wink quality while Hagar's were like a frat boy on spring break.
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A short thread on why there's no retirement crisis:
1. CBO data show that since 1979, retiree incomes have grown much faster than incomes for working-age households. This is true not just on average, but at different points of the income distribution.
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Noteworthy that it's employer demand for workers, not Disability Insurance reforms, that seems to be the key to rising employment among the disabled. Important to know how to replicate this when the labor market slows.
A wave of disabled Americans is joining or returning to the US labor force
The average monthly jobless rate for the disabled in 2018 was 8%, down 4.6 points from 2014
Unemployment for this group is falling at a faster rate than for the broader population
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101% funded at a 1.5% discount rate and still contemplating benefit cuts. There's no way the US could run a pension with as strict funding standards as this.
[A lesson in sharing risk and return.]
Dutch pensions face possible benefit cuts.
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Does Social Security contribute to the federal deficit?
Answer: Yes.
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Paper shows that when accrued Social Security benefits are included, wealth inequality is both much smaller and slower-growing than we've been led to believe. And since much of households' wealth is savings for retirement, this has real world importance.
Best Paper in Asset Pricing at
#SFSCavalcade
2021
“Social Security and Trends in Wealth Inequality”
Sylvain Catherine
@sc_cath
Max Miller
@mjmill611
Natasha Sarin
@NatashaRSarin
Paper will be presented Thursday at 2:45!
3/4
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I've seen hundreds of comments on today's
@wsj
piece. Tons of insults. Not a single substantive response to our argument, that the methodology producing a 21% 'teacher salary gap' also finds that nurses, fishing boat captains, firefighters & others are dramatically OVERpaid.
Don’t fall for the ‘teacher salary gap’ and the flawed study that sustains the myth, writes Jason Richwine and
@biggsag
.
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A nice write-up of the Oversight Board's findings regarding the cost of the Puerto Rico legislature relative to mainland states.
@ElNuevoDia
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Ok, for those interested in a teacher pay comparison to other workers. This is simplified, but tries to look at salaries, benefits and work-year in a reasonably understandable way to see what teachers would likely earn in other jobs.
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The US holds 2/3rds of world retirement savings. I'd hate to see the other guys' retirement crises...
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Study criticizes Canadian pensions for using an excessively high 6% discount rate. I wonder what they'd think of US state/local plans that still use up to 8% rates?
High discount rates could leave pension funds with 'insufficient assets to meet obligations': C.D. Howe via
@nationalpost
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I don't know a Republican outside of DC who doesn't think the election was rigged while I don't know a Republican in DC who thinks it was.
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@CPopeHC
And yet French retirees report the lowest ability to maintain their preretirement standard of living of EU countries. Maybe they're just complainers, but maybe someone else is going on.
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Puerto Rico has one of the lowest labor force participation rates in the world, yet will be importing workers from the Dominican Republic to work on hurricane reconstruction projects. There is something wrong here.
Obreros de la República Dominicana cualificarán para obtener visados de trabajo no agrícola en Puerto Rico - via
@elnuevodia
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I have a new
@aei
paper that takes a different approach to the debate over retirement in the US .
Instead of stating my own best arguments, I took on what the most prominent advocate of the retirement crisis narrative – Teresa Ghilarducci – put forward as her own best points. /1
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If
@sammyhagar
and
@eddievanhalen
could bury their differences at the end, maybe there's hope for 2020 yet...
SAMMY HAGAR Says He Reconnected With EDDIE VAN HALEN At Urging Of Comedian GEORGE LOPEZ
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The pensions industry acts as if low discount rates for pension liabilities cause pension underfunding rather than reveal it.
@BRADFORD_PI
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And of course, public pension contributions -- which have more than doubled since 2000 -- are paid by taxpayers on Mars, with no impact on local jobs and businesses...
Public pension benefits are spent in communities around our country each and every day, supporting local jobs and businesses. We highlight the economic impact of public pensions with "Pensions on Main Street", a new section of our website.
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Is it possible to win the Darwin Awards if you don't believe in Darwinism?
Liberty University will reopen this week, Jerry Falwell inviting students to return and ordering faculty to come back to work.
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What could we do? Make pensions less generous, since the average teacher pension is WAY more generous than a 401k, and use the savings to raise salaries. That way, teachers will see the compensation they're getting & have the cashflow they need to pay bills today.
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I admire Sen. Bill Cassidy's push for a bipartisan Social Security reform plan. But his core idea - borrowing money to invest in stocks - isn't a good one.
A quick thread on why.
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Private pensions are 92% funded using a 4% discount rate. On those terms, state/local pensions - which claim to be 70% funded - are only 42% funded. Put another way: private pensions have set aside more than TWICE the assets per dollar of promised benefits as state/local plans.
Milliman: Corporate pension funding improves in April to nearly 92%
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I have a new working paper that overcomes some of the weaknesses in traditional methods of analyzing the adequacy of teacher salaries. Thread to follow.
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