E M P L O Y E E   B E N E F I T S ,   C O M P E N S A T I O N
                    &   P E N S I O N   L A W
                 Vol. 5,  No. 15: August 12, 2004
_________________________________________________________________

Publisher:     LSN Employment, Labor, Compensation & Pension Journals
               a division of
               Social Science Electronic Publishing, Inc. (SSEP)
               and Social Science Research Network (SSRN)
 
Editor:        PAMELA PERUN 
               Urban Institute 
               Mailto:pamela@planetnow.com 
                          
Copyright:     SSEP, Inc. 2004. All rights reserved.

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                      Topic of This Issue:                    
                        Social Security
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T A B L E   of   C O N T E N T S
_________________________________________________________________


NEW and FORTHCOMING ARTICLES
 
"Social Security and Marriage in Black and White" 
      Ohio State Law Journal, Vol. 65, 2004 
     DOROTHY ANDREA BROWN 
        Washington and Lee University School of Law 
 
 
"The Long-Run 'Cost' of Tax Cuts" 
      Tax Notes, Vol. 104, No. 3, July 19, 2004 
     BRIAN H. JENN     DONALD B. MARRON 
        University of Chicago 
 
 
"Increasing the Early Retirement Age under Social Security:
 Health, Work, and Financial Resources" 
      Health and Income Security, No. 7, December 2003 
     MICHAEL V. LEONESIO     VIRGINIA P. RENO 
        National Academy of Social Insurance (NASI) 
     DENTON R. VAUGHAN 
        U.S. Census Bureau 
 
WORKING PAPERS
 
"A Summary of Saving Social Security: A Balanced Approach" 
     PETER A. DIAMOND 
        Massachusetts Institute of Technology (MIT) 
        Department of Economics 
        National Bureau of Economic Research (NBER) 
     PETER ORSZAG 
        The Brookings Institution 
        Sebago Associates 
 
 
"Can Faster Growth Save Social Security?" 
     RUDOLPH PENNER 
        Urban Institute 
 
 
"Social Security Finances: Findings of the 2004 Trustees Report" 
     VIRGINIA P. RENO 
        National Academy of Social Insurance (NASI) 
     NELLY GANESAN 
        National Academy of Social Insurance (NASI) 
 
 
"The Effect of Social Security on Divorce and Remarriage
 Behavior" 
     STACY DICKERT-CONLIN 
        Syracuse University 
        Center for Policy Research 
     CRISTIAN MEGHEA 
        Syracuse University 
        Center for Policy Research 


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EDITORIAL POLICIES
 To provide the broadest coverage of research in Employee
 Benefits, Compensation & Pension Law we do not referee working
 papers. We accept abstracts of working papers in Employee
 Benefits, Compensation & Pension Law whose topics suit the
 coverage of the journal and which are part of the worldwide
 scholarly discourse. 


N E W   and   F O R T H C O M I N G   Articles
_________________________________________________________________

"Social Security and Marriage in Black and White" 
      Ohio State Law Journal, Vol. 65, 2004  
  
      BY:  DOROTHY ANDREA BROWN 
              Washington and Lee University School of Law  
  
Paper ID:  Washington & Lee Public Law Research Paper No. 04-07 
 
 Contact:  DOROTHY ANDREA BROWN
   Email:  Mailto:brownda@wlu.edu 
  Postal:  Washington and Lee University School of Law
           Sydney Lewis Hall 
           Lexington, VA 24450  UNITED STATES 
   Phone:  540-458-8192 
     Fax:  540-458-8488   
  
ABSTRACT:
 Social security benefits are available for individuals and their
 spouses. Spousal benefits, however are subject to certain limits
 where spouses also work in the paid labor market. Social
 security benefits are the greatest for spouses who do not work
 in the paid labor market and are the least for spouses who
 contribute roughly half of their household income. 

 Social security benefits also are available for surviving
 spouses. Surviving spousal benefits are reduced for dual wage
 earner couples. Surviving spousal benefits are the greatest for
 spouses who do not work in the paid labor market and are the
 lowest where wives contribute roughly half of their household
 income. Census Bureau data shows that African-American wives are
 more likely than White wives to contribute roughly half of their
 household income. As a result, African-American wives are more
 likely than White wives to be penalized by the social security
 limitations placed on dual wage earner couples. This article
 should encourage scholars who are interested in examining how
 African-Americans fare under our current social security system
 to include married African-American couples in their analysis.

______________________________   

"The Long-Run 'Cost' of Tax Cuts" 
      Tax Notes, Vol. 104, No. 3, July 19, 2004  
  
      BY:  BRIAN H. JENN     DONALD B. MARRON 
              University of Chicago  
  
 Contact:  BRIAN H. JENN
   Email:  not available 
  Postal:  
                
 Co-Auth:  DONALD B. MARRON
   Email:  Mailto:DONALD.MARRON@GSB.UCHICAGO.EDU 
  Postal:  University of Chicago
           1101 East 58th Street 
           Chicago, IL 60637  UNITED STATES 
   
ABSTRACT:
 Some recent analyses have claimed that the 75-year cost of
 extending the 2001 and 2003 tax cuts is as large as the funding
 imbalances in Social Security and Medicare. This article takes a
 critical look at these analyses and finds them flawed and
 misleading. Previous analyses have relied on extreme assumptions
 about the acceptable level of future taxes and, as a result,
 have overstated the long-run revenue costs of extending the tax
 cuts, likely by a factor of 10 or more. The long-run cost of
 extending the tax cuts is not remotely comparable to the
 long-run imbalances in the leading entitlement programs.

______________________________   

"Increasing the Early Retirement Age under Social Security:
 Health, Work, and Financial Resources" 
      Health and Income Security, No. 7, December 2003  
  
      BY:  MICHAEL V. LEONESIO     VIRGINIA P. RENO 
              National Academy of Social Insurance (NASI) 
           DENTON R. VAUGHAN 
              U.S. Census Bureau  
 
Document:  Available from the SSRN Electronic Paper Collection:  
           http://papers.ssrn.com/paper.taf?abstract_id=555627 
  
 Contact:  MICHAEL V. LEONESIO
   Email:  Mailto:Michael.V.Leonesio@ssa.gov 
  Postal:  
                
 Co-Auth:  VIRGINIA P. RENO
   Email:  Mailto:vreno@nasi.org 
  Postal:  National Academy of Social Insurance (NASI)
           1776 Massachusetts Avenue, NW 
           Suite 615 
           Washington, DC 20036-1904  UNITED STATES 
 Co-Auth:  DENTON R. VAUGHAN
   Email:  not available 
  Postal:  U.S. Census Bureau
           Washington, DC 20233  UNITED STATES 
   
ABSTRACT:
 Policies that would reduce or eliminate Social Security benefits
 for early retirees could have adverse consequences for older
 workers in poor health. This Brief documents the health and
 financial status of people aged 62-64 who receive reduced Social
 Security benefits as retired workers, spouses, and widowed
 spouses. Although most of these early retirees do not have a
 serious health condition, almost half report some type of health
 problem. About 25 percent are estimated to have health problems
 that substantially impair their ability to work. When compared
 to other early retirees, those who have severe health problems
 have lower lifetime earnings, are more reliant on Social
 Security benefits, have fewer financial assets, and are less
 likely to have health insurance. About 12 percent of early
 retirees are estimated to meet the strict disability criteria
 for receiving Social Security Disability Insurance (DI) or
 Supplemental Security Income (SSI). Many of them do not receive
 DI because they lack sufficient work histories to qualify.
 Another larger subgroup does not meet the test of low income and
 limited financial assets for means-tested SSI disability
 benefits. About as many 62-64 year olds classified as severely
 disabled receive early retirement benefits as receive disability
 benefits from DI or SSI. The evidence suggests that Social
 Security early retirement benefits serve as a substantial,
 albeit unofficial, disability program for some early retirees.

______________________________   

W O R K I N G   P A P E R   Abstracts
_________________________________________________________________

"A Summary of Saving Social Security: A Balanced Approach"  
  
      BY:  PETER A. DIAMOND 
              Massachusetts Institute of Technology (MIT) 
              Department of Economics 
              National Bureau of Economic Research (NBER) 
           PETER ORSZAG 
              The Brookings Institution 
              Sebago Associates  
 
Document:  Available from the SSRN Electronic Paper Collection:  
           http://papers.ssrn.com/paper.taf?abstract_id=544244 
  
Paper ID:  MIT Department of Economics Working Paper No. 04-21 
    Date:  May 2004 
 
 Contact:  PETER A. DIAMOND
   Email:  Mailto:pdiamond@mit.edu 
  Postal:  Massachusetts Institute of Technology (MIT) 
           Department of Economics
           Room E52-344 
           50 Memorial Drive 
           Cambridge, MA 02142  UNITED STATES 
   Phone:  617-253-3363 
     Fax:  617-253-7804   
 Co-Auth:  PETER ORSZAG
   Email:  Mailto:PORSZAG@BROOK.EDU 
  Postal:  The Brookings Institution
           Economic Studies 
           1775 Massachusetts Ave. NW 
           Washington, DC 20036-2188  UNITED STATES 
   
ABSTRACT:
 This paper reviews the financial position of Social Security,
 presents a plan for saving it, and discusses why Social Security
 revenue should not be diverted into individual accounts. Our
 approach preserves the value of Social Security in providing a
 basic level of benefits for workers and their families that
 cannot be decimated by stock market crashes or inflation, and
 that lasts for the life of the beneficiary; it increases
 benefits for some particularly needy groups such as those who
 have worked at low pay over long careers and widows and widowers
 with low benefits; it eliminates the long-term deficit in Social
 Security without resorting to accounting gimmicks, thereby
 putting the program and the federal budget on a sounder
 financial footing. Our plan combines revenue increases and
 benefit reductions - the same approach taken for reaching a
 consensus in the last major Social Security reform in 1983.

 
JEL Classification: H550 
______________________________   

"Can Faster Growth Save Social Security?"  
  
      BY:  RUDOLPH PENNER 
              Urban Institute  
 
Document:  Available from the SSRN Electronic Paper Collection:  
           http://papers.ssrn.com/paper.taf?abstract_id=493804 
  
Paper ID:  Boston College, Center for Retirement Research Working
           Paper 
    Date:  December 2003 
 
 Contact:  PETER A. DIAMOND
   Email:  Mailto:pdiamond@mit.edu 
  Postal:  Massachusetts Institute of Technology (MIT) 
           Department of Economics
           Room E52-344 
           50 Memorial Drive 
           Cambridge, MA 02142  UNITED STATES 
   Phone:  617-253-3363 
     Fax:  617-253-7804   
 
Paper Requests: 
 Contact Amy Chasse, Communications Specialist, Center for
 Retirement Research, Boston College, Fulton Hall 550, Chestnut
 Hill, MA 02467-3808. Phone: (617)552-6783. Fax: (617)552-1750.
 Mailto:chassea@bc.edu
  
ABSTRACT:
 Numerous commissions, individual researchers, and the Trustees
 of the Social Security system agree that the current Social
 Security system is not sustainable. The 2003 Trustees' report
 forecasts that the program's two trust funds (Old Age and
 Survivors Insurance and Disability Insurance) will be empty in
 2042. After 2042, Social Security taxes would only cover about
 70 percent of projected benefit costs. Even before the trust
 funds are exhausted, the combination of rapidly growing Social
 Security, Medicare, and Medicaid spending is likely to create
 intolerable budget pressures that will force major changes in
 policy.

 The problem lies in demography. The economic burden imposed by
 these pay-as-you-go programs depends on the number of
 beneficiaries and the level of benefits that they have been
 promised. The economic resources available to the programs
 depend on the number of taxpayers and their ability and
 willingness to pay taxes. The population of elderly
 beneficiaries will soar in the future because of increased life
 expectancy and the retirement of baby boomers - the first
 boomers will apply for Social Security pensions in 2008.
 Meanwhile, the population of workers paying payroll taxes will
 stagnate because of low birth rates experienced since the early
 1960s. 

 Although there is a broad consensus that the Social Security
 system is in trouble, a few dissenters argue that the Trustees
 are too pessimistic about future economic growth. The dissenters
 believe that a more realistic growth assumption would allow the
 trust funds to remain financially sound far longer than now
 expected. This brief will examine the implications of more rapid
 economic growth for Social Security and the federal budget as a
 whole, including a discussion of both the direct and indirect
 effects of growth.

 
JEL Classification: J10 
______________________________   

"Social Security Finances: Findings of the 2004 Trustees Report"  
  
      BY:  VIRGINIA P. RENO 
              National Academy of Social Insurance (NASI) 
           NELLY GANESAN 
              National Academy of Social Insurance (NASI)  
 
Document:  Available from the SSRN Electronic Paper Collection:  
           http://papers.ssrn.com/paper.taf?abstract_id=552242 
  
    Date:  March 2004 
 
 Contact:  VIRGINIA P. RENO
   Email:  Mailto:vreno@nasi.org 
  Postal:  National Academy of Social Insurance (NASI)
           1776 Massachusetts Avenue, NW 
           Suite 615 
           Washington, DC 20036-1904  UNITED STATES 
   Phone:  202-452-8097 
     Fax:  202-452-8111   
 Co-Auth:  NELLY GANESAN
   Email:  Mailto:nganesan@nasi.org 
  Postal:  National Academy of Social Insurance (NASI)
           1776 Massachusetts Avenue, NW 
           Suite 615 
           Washington, DC 20036-1904  UNITED STATES 
   
ABSTRACT:
 Social Security pays monthly benefits to retired and disabled
 workers, to their families, and to the families of deceased
 workers. Benefits and the administrative costs of the program
 are paid from the Social Security trust funds. The funds receive
 income from Social Security taxes paid by workers and matched by
 their employers; from income taxes that beneficiaries pay on
 their benefit income; and interest earnings on the trust funds'
 reserves. The Social Security Act establishes a Board of
 Trustees to oversee the management and investment of the trust
 funds, and requires it to report annually to Congress and the
 public on the financial status of the funds. The report is
 prepared by the Office of the Chief Actuary of the Social
 Security Administration.

______________________________   

"The Effect of Social Security on Divorce and Remarriage
 Behavior"  
  
      BY:  STACY DICKERT-CONLIN 
              Syracuse University 
              Center for Policy Research 
           CRISTIAN MEGHEA 
              Syracuse University 
              Center for Policy Research  
 
Document:  Available from the SSRN Electronic Paper Collection:  
           http://papers.ssrn.com/paper.taf?abstract_id=546244 
  
Paper ID:  Boston College, Center for Retirement Research Working
           Paper No. 2004-09 
    Date:  April 2004 
 
 Contact:  STACY DICKERT-CONLIN
   Email:  Mailto:SDICKERT@MAXWELL.SYR.EDU 
  Postal:  Syracuse University 
           Center for Policy Research
           Syracuse, NY 13244  UNITED STATES 
   Phone:  315-443-3232 
     Fax:  315-443-1081   
 Co-Auth:  CRISTIAN MEGHEA
   Email:  Mailto:cmeghea@maxwell.syr.edu 
  Postal:  Syracuse University 
           Center for Policy Research
           Syracuse, NY 13244  UNITED STATES 
  
Paper Requests: 
 Contact Amy Chasse, Communications Specialist, Center for
 Retirement Research, Boston College, Fulton Hall 550, Chestnut
 Hill, MA 02467-3808. Phone: (617)552-6783. Fax: (617)552-1750.
 Mailto:chassea@bc.edu
  
ABSTRACT:
 This paper investigates the effects of economic incentives on
 divorce and remarriage behavior. Before December 1977, the
 Social Security law entitled divorcees to claim auxiliary
 benefits on their ex-spouse's record only if the marriage lasted
 at least 20 years. One of the 1977 amendments of the Social
 Security rules shortened the minimum duration of an "eligible"
 marriage to ten years. Following the passage of the law, we find
 that the divorce rate at nine years of marriage decreased
 relative to a control group. However, there is not strong
 evidence of a corresponding increase in the divorce rate at ten
 years of marriage. We also find no evidence that the new claim
 on future Social Security benefits affected divorced women's
 remarriage probability in the predicted way.