NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Thomas Johnson

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Working Papers

June 1998Social Security's Treatment of Postwar Americans
with Steven Caldwell, Melissa Favreault, Alla Gantman, Jagadeesh Gokhale: w6603
Social Security faces a major long-term funding crisis. A 38 or greater percentage increase in the systems' tax rate is needed to meet current benefit payments on an ongoing basis. Tax increases of this magnitude or comparable benefit cuts would significantly worsen what is already a very bad deal for postwar Americans. This paper uses CORSIM -- a dynamic micro simulation model -- and SOCSIM -- a detailed Social Security benefit calculator -- to study this deal. The study finds that baby boomers will, under current law, lose roughly 5 cents of every dollar they earn to the OASI program in taxes net of benefits. For today's children the figure is 7 cents. Measured as a proportion of their lifetime labor incomes, the middle class are the biggest losers, but measured in absolute dollars,...

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