Well, welcome to this session on Lessons from Abroad for the U.S. Entitlement Debate. You all have bios of the speakers, so I won't provide introductions to people who need no introduction. Our first speaker is the author of the report that you should have in your package. Really an excellent report.  Very good. Thank you, Rudy. You know, from the Congressional Budget Office and the Government Accountability Office to the Boll Simpson and Rivlin Domenici Commissions, everybody who's looked seriously at the fiscal arithmetic agrees that there's no solution to the long-term budget problem that doesn't include fundamental entitlement reform. After all, entitlements account for well over half of all federal spending today and for all projected growth and non-interest outlays as a share of GDP over the next two or three decades. Demographers, economists, and policy experts have, of course, been warning for decades that the aging of America would eventually trigger an explosive rise in entitlement spending that pushes the federal budget toward a fiscal precipice, but two recent or fairly recent developments have now greatly increased the urgency of reform. The first is the retirement of the baby boom generation. With the leading edge of this outsized generation now reaching old age, the long-predicted cost spiral is finally upon us. The second development is the economic and financial crisis, which has driven the federal debt to unprecedented peacetime levels and essentially erased all fiscal room that the United States might otherwise have had to accommodate the projected growth in entitlement spending. So these two developments together have taken a long-term budget challenge and turned it into a near-term challenge as well. As the United States grapples with entitlement reform, it will have much to learn from the experience of other developed countries, some of which have moved much more deliberately than the United States has to control the long-term fiscal cost of their age waves. Several countries have enacted sweeping overhauls of their public pension systems designed to stabilize their cost as a share of GDP. Italy and Sweden are transforming their traditional defined benefit systems into notional defined contribution systems in which benefits are in effect indexed to the growth in the payroll tax base, perhaps not directly but indirectly. Germany and Japan have introduced automatic demographic stabilizers into their pension systems that achieve much the same result by adjusting annual benefit payments to partially or fully offset the annual change in the dependency ratio of contributing workers to retired beneficiaries. In many more countries, recent reforms have trimmed benefit formulas, raised retirement ages, and put in place new funded pension systems that either supplement or even partially substitute for pay-as-you-go systems. Meanwhile, on the health benefit side, most developed countries have been more successful than the United States at imposing budget constraints that control or at least moderate the rate of spending growth. Our focus today will be on retirement policy. It's sometimes argued that achieving savings and social security is unimportant or perhaps even unnecessary since most of the projected growth in the overall U.S. old age dependency burden is due to growth in Medicare and Medicaid. It's true that achieving savings and health benefit programs must be a high priority, but I do not believe that it follows that retirement reform can be neglected. Total cash benefits account for a large and rising share of total federal outlays, cash benefits to the elderly, that is. Moreover, there's no guarantee that health care cost control efforts will be successful. Indeed, if the history of past efforts is any guide, it is likely that advances in medical technology and rising public expectations about care and cure will interact with demographic aging to put relentless upward pressure on government budgets for decades to come. To the extent that health benefit spending proves difficult to control, reducing retirement spending becomes all the more important. From the viewpoint of the budget and the economy, what matters is the total resource burden of federal entitlement programs, not which federal agency is spending the money. In the core of the report that we released today, I look in some detail at reform developments in nine other developed countries. I have Edward Whitehouse here and Jim Capreda, who probably know a lot more about that than I do. I'm going to leave aside the nuts and the bolts of retirement reform in other countries and instead take my remaining time to put the overall U.S. aging challenge and international perspective and hopefully set up the rest of the panel. In some respects, the United States is remarkably well positioned to confront the global aging challenge. Yeah, we're aging, but we're now the youngest of the major developed countries and thanks to our relatively high fertility rate and to substantial net immigration, we're projected to remain the youngest for the foreseeable future. The share of the U.S. population aged 60 and over, which is now 19 percent, will increase to 26 percent or thereabouts by 2040 compared with 30 percent in France, 39 percent in Germany and 43 percent in Japan. Meanwhile, the U.S. median age will rise from 37 to 40, but Europe's will rise from 40 to 48 and Japan's from 45 to 55. By the 2020s and 2030s, the United States will also be the only major developed economy that still has a growing working age population. To put it in other words, when the last of my troublesome baby boom generation has passed on to that great wood stock in the sky, we'll be about as old as Japan and Italy are today. But not only due to age less than other developed countries, we also have a less expensive welfare state and less expensive old age benefit systems. The U.S. cost advantage in public pensions is especially striking. According to CSIS projections, I should say according to projections I've prepared while at CSIS, these are published in my Global Aging Preparedness Index, seven of the other nine countries included in the report will be spending a larger share of their GDPs on public pensions in 2040 than the United States will, and three of them, France, Germany and Italy, will be spending twice as much. Only Australia and Canada will be spending less. Now, to be sure, Social Security is seriously underfunded with earmarked tax revenues projected by 2040 to be sufficient to cover only about four-fifths of benefits. Nonetheless, the overall cost of the program is not especially onerous by developed world standards. If we instead look at total government benefits to the elderly, including health benefits, the U.S. cost advantage obviously narrows considerably. Yet at 18.5% of GDP in 2040, the total U.S. public old age dependency burden is still projected to be lower than that of any of the other countries in the report, except once again Australia and Canada. Now, you might suppose that less generous old age benefits would translate into a relatively lower living standard for the elderly. But in fact, properly measured, the income of the U.S. elderly compares quite favorably with that of the non-elderly. In 2010, the ratio of median after-tax elderly to non-elderly income, note after-tax, was about 1.3 to 1 in the United States, actually higher than in any of the other nine countries. Now, this doesn't mean that all of the elderly are well off. Compared with most European countries, the United States has both a much higher level of income inequality and a less generous means-tested safety net. The share of the U.S. elderly with an income beneath 50% of the median income for all persons, a standard relative poverty threshold and international comparisons, was 18% in 2010, which is higher than any of the other countries covered in the report except Australia and Japan. Still, despite America's less expensive welfare state, the living standard of the typical elder is surprisingly high. Now, this apparent paradox has a number of explanations. I highlight two of them. The first is our well-developed funded pension system, which despite large gaps in coverage helps to lift elderly living standards while taking pressure off of public budgets. All told, funded pension benefits, including both benefits from employer plans and from personal plans like IRAs, make up about 30% of the income of the median income elderly in the United States, which is a larger share than in any of the other countries except Canada. And the large economies of continental Europe funded pension benefits as a share of elderly income are trivial, just 5% in Germany and just 1% in France. So there's funded pension income. There's also our relatively high rate of elderly labor force participation. In 2010, 39% of adults aged 60 to 74 were in the labor force, twice the participation rate for the same age group in Germany and four times the rate for the same age group in France and Italy. So we don't have a problem. There had to be a second part to the presentation. There had to be the but. Despite its many advantages, the United States faces, in fact, faces a challenge that may be every bit as daunting as those facing countries that are aging much more rapidly and have much more expansive welfare states. The projected level of spending on old age benefits in the United States may not be particularly high, but the projected growth in benefits is very high indeed. In our projections, which I think are roughly the same as CBOs, 7.4% of GDP from 2010 to 2040 higher than in any of the other countries except the Netherlands. Now, the level of old age benefit spending is clearly the most direct measure of the resource burden of population aging, but the growth in that spending may be just as important. After all, some societies may be institutionally and culturally better equipped to manage a rising old age dependency burden than others. In a country like the United States, with its tradition of limited government, may find that the road ahead is just as bumpy as for many countries that are projected to spend much more. I think I skipped one too many. So, what accounts for the rapid growth? Well, mainly two things. The first, it's partly attributable to America's unusually large baby boom. Although the United States is due to age less than most developed countries, the upward shift in its age structure will occur very rapidly. If you look at the elder share of the population in 2040, we're at the low end. If you look at the projected growth rate and the number of people age 65 and over, we're at the high end. You know, as it's passed through youth and middle age, the baby booms temporarily slowed the aging of the population. If you look at either the metric of the age dependency ratio or the elderly share of the population, but now with its leading edge crossing the threshold of old age, it's going to accelerate the aging of the population. Between 2010 and 2040, the number of Americans age 60 and over will grow at the average annual rate of 1.9%. That's higher than anywhere else except Canada and Australia, which also had unusually large post-war baby booms. According to the Congressional Budget Office, the resulting surge in the number of beneficiaries will account for all growth in Social Security retirement benefits and more than half the combined growth in Social Security Medicare and Medicaid benefits. So the demographics before we even get to the second point, which is excess cost growth, are a big driver of spending. Now, of course, as we all know, the United States also has an exceptionally rapid rate of growth in health care spending, which acts as a multiplier on the growth in the number of beneficiaries. Over the next 25 years, real age adjusted public health care spending per capita. I'm sorry, over the past 25 years, it's grown at 4.1% in the United States. In none of the other countries did this growth exceed 3%. And in Canada, Germany, Italy, and Sweden, it was less than 2%. The greater success of other countries, and perhaps we can get to some of the questions surrounding why they've had more success in the discussion, but that's relatively well-known. What's less appreciated, certainly by US audiences, is that many of these same countries have also been more successful at limiting the growth and retirement benefits. Faced with projections showing that the aging of their populations would put relentless upward pressure on public pension spending, a number of countries have enacted very significant reductions in the future generosity of these systems. Compared with a hypothetical current deal scenario in which today's average replacement rates and average retirement ages remain unchanged, the total cost of pension benefits in the current deal relative to current law in the United States is cut by about one-fifth. In Canada and France, it's cut by about one-third, and in Germany and Japan by two-fifths, and in Italy by nearly one-half. We'll hear more about why from the other panelists. So in the end, and let me just wrap up quickly with a few thoughts, we're left with an apparent paradox. Here you have a bunch of other developed countries, many of whom have very large, expensive welfare states that have historically proven resistant to cost containment and to reform. And yet these countries have been able to move more aggressively to address their long-term aging challenge and fiscal challenge than the United States has. As you can see in the chart, retirees in much of Europe receive almost all of their personal income from public pensions, which are considered the cornerstone of social democracy. So why have these other countries been able to enact reform when we haven't? I think part of the explanation is probably that until recently, the age wave in the United States loomed well over the horizon while aging populations have been pushing up payroll tax rates and slowing economic growth in Japan and Europe for decades. Part may have to do with our seeming ability to borrow without limit, due in part to the dollar status's global reserve currency, that there's a great advantage that comes with that, but also a great risk, because it lulls us into a sense of invulnerability. Part of the explanation, I think, lies in America's peculiar entitlement ethos. In Europe, government benefit programs may be fiercely defended, and even at the barricades. But in the end, everybody understands that government benefit programs are part of a social contract, and that this social contract is subject to renegotiation and revision. In the United States, much of the public seems to view social security, and particularly social security, but also Medicare as a kind of quasi-contractual relationship between the individual and the state. And this mindset, which is encouraged by the misleading insurance metaphors in which these programs are cloaked, may make old age benefits paradoxically more difficult to reform in the United States than in Europe's quote unquote bloated welfare states. Now, it may be that some of the progress other countries have made is more apparent than real. I mean, after all, there are two ways you can look at the difference between the current deal and the current law projection. One is that some countries have made a lot of progress in reducing the long-term costs to their old age benefit systems, and the other is that these countries have a lot of benefit cutting they're going to have to do over the next couple decades, just so things don't end up more expensive than the projections actually show. But still, no matter how you slice it, I think there's no denying that other countries have addressed the challenge with greater seriousness than the United States, at least to date. And significantly, the impetus for reform has been as likely to come from the left as the right. Reforms have sometimes been reversed when the party in power has changed. This happened in the UK. But more often than not, countries have been able to achieve a broad consensus across the political spectrum. Part of that's due to great attention to coalition building. But I think it also points to a deeper truth. Political leaders in other countries and many other countries seem to have grasped something that eludes leaders in the United States. And that's that the unchecked growth in old age benefit spending threatens the agendas of both left and right. It is inimicable to limited government, but it's also inimicable to progressive government. So let me end there. Sorry for running a few minutes over, Rudy. Thank you very much, Richard. Our next speaker is Edward Whitehouse. Thank you very much. And thank you, Richard. That was a very interesting overview of those countries that was very, very useful. I think coming from the outside, the thing that always strikes me about the United States is how little pension reform there has been. It is really only in the early 80s was the last major change. Apart from a few adjustments to the incentives to keep working longer under the Clinton administration, very little has been touched. That, as Richard rightly emphasized, is not true of the other industrialized countries where not only have there been at least one major pension reform, but there have often been a whole series of them. So pension reform in Italy, for example, is probably more of a process than a one-off event. There have been at least three major changes in the last 20 years, which makes my job of trying to monitor the pension systems of the 34 countries that are members of the OECD, quite a tricky one, to keep up to speed. But there have been major reforms. I think the sorts of numbers that Richard was showing there in terms of how much they will reduce benefits for future retirees are showing very closely with the analysis that we have carried out. So significant reforms, significantly lower benefits. It's also interesting that basically all OECD countries are now increasing pension ages. And there was only a few who were saying 67. Even a decade ago, there will probably be around eight countries were heading towards 67. Now more than half of the OECD countries, 18 countries, are going beyond 65. And there will be no country in the long term with a normal pension age below 65. In some countries, Italy and Greece, for example, the pension age is going up to 67. And then we'll be linked to life expectancy. So for someone starting work today in Italy and in Denmark, I would estimate that their normal pension age will be about 69. The UK and Ireland are taking pension ages to 68. So it looks to me like 67 is not going to be the limit. And countries will be taking pension ages higher than that. What, in terms of encouraging people to work longer, changes in pension age alone are often shown not to be sufficient. You need to look at the whole structure of the incentives of people to work and retire at particular ages. Most countries have now fixed what used to be very strong incentives to retire as soon as you possibly could. There are very, very few countries now which still have systems in place which encourage people to retire earlier. And the secular decline in actual ages at which people stop working has reversed now. And in some countries, Germany will be one example. There have been a significant reversal of a move to early retirement and a very great increase in the proportion of 60 to 65-year-olds who are working. In my own country, the UK, the fastest growing segment of the population in employment are over 65-year-olds. And the normal pension age being 65 at the moment for men and slightly lower than that for women. So there's a significant amount of people now working after the normal pension ages. That is a trend that I think will continue. And public policy across the board needs to allow to support people having longer working lives. I just wanted to echo Richard's point about the relatively benign financial projections there are for the United States. And that's echoed in our own figures and research that currently the US spends around 4.5% of GDP on pensions. The OECD average is 9.5%, so significantly more. In the long term, we project that it will be roughly constant for the United States. And the OECD goes up from 9.5% to nearly 12% of GDP. So there is still a significant fiscal pressure from population aging in countries in Europe and in Japan and so on. But those increases, as Richard pointed out, would be much greater if we just had allowed the demographics to play through into the longer term. Overall, on the generosity, roughly speaking, a median earner can expect a replacement rate, that is, the pension relative to their earnings of around 60% in the United States. It's about 70% on average in the OECD, so slightly less generous. At the lower end, because of the redistributive nature of the Social Security formula, giving you a 90% replacement on the first slice of your earnings, roughly for a low earner, roughly a replacement rates of about 70%, both in the United States and in the rest of the OECD. So the Social Security in the United States is not an extremely small program. There are other countries with less generous schemes in place. Quite right to point out on the poverty numbers. That is a concern that something like one fifth of older people in the United States are living in poverty, defined as having incomes of less than half the median. That compares only about 12% for the rest of the OECD. And I think something that needs addressing is the strength of that safety net. Supplemental security income is only claimed by a very, very small proportion of people. I suspect that there are some people who are put off claiming that, by the complexity of claiming it. And the rules in terms of the means test of that are very, very tight. Basically, if you win anything, you are excluded from it. So one way of getting more bang for your buck is to have a system which targets the help on those most in need, one way of keeping the costs down. And I think looking at the area of SSI in the United States would be a priority for me. I was asked by Richard to mention the kinds of reformers that have introduced some sort of automatic stabilizers into the pension system. And I have some specific country examples, some of which were included in his Richard's survey. Sweden, Poland, Latvia, and Italy have introduced notional accounts. Notional accounts are notional in the sense that there is no money in them, but it is a mechanism for accounting and building up your pension rights. The important part of that pension calculation is that there is an annuity factor in that calculation. So as life expectancy grows over time, benefits are automatically cut, reflecting how much life expectancy is changing. And that's those countries that I mentioned. But other countries, say Germany or Finland or Portugal, have a more standard type of pension scheme that will be more familiar to you, a defined benefit type of state pension scheme. And in Portugal, Finland, again, benefits automatically go down proportionately as life expectancy goes up. And in both cases, the first reductions in benefits as a result of those formulae have been put in place. As I mentioned before, Greece, Denmark, and Italy are linking the pension age to life expectancy. So there will be continued increases in pension age. The Czech Republic has passed a law which says the pension age goes up by two months a year. And they have put no end on that. So it could be 100 in a couple of centuries times. But there is no limit on that. My concern about these stabilizing mechanisms is that you're still cutting benefits. And that's fine if your starting point is Sweden or Italy where your benefits are high, but it is not fine if you are starting from the situation of, say, the United Kingdom or even the United States where the benefits are much more modest. It seems to me, in those cases, linking the pension age to life expectancy makes much more sense. You can't start shaving bits off what are already relatively low benefits. One more direction of reform has been the introduction of greater amounts of pre-funding in pension systems. It started off in Chile and went through Latin America. And then it's gone through the Eastern Europe, Central Asia region as well. Some of these reforms have subsequently been reversed in Hungary and most recently in Poland. But it does mean that they are still in place in Estonia, Latvia, Lithuania, Bulgaria, Romania, Slovak Republic, and so on. So that's an introduction of mandatory defined contribution to funded pensions has happened in those countries. Also, it was made mandatory in Australia in the 1990s and more recently in Norway. So that is one particular trend. I think of interest to the US audience is the automatic enrollment schemes of New Zealand and now the United Kingdom. So these are defined contribution pensions and they are automatically enrolled in them unless you sign a piece of paper saying, I don't want to be in this. And it's being rolled out slowly in the UK. So the contribution rate is currently quite low. So it's difficult to come to any long-term judgment about what that has done. But in the past, there has been a significant decline in the proportion of the workforce covered by workplace pensions. It has gone down quite dramatically, about 3 million fewer people in the UK in company-provided pension schemes than there were a decade ago. And so this reform is designed, it is hoped, to reverse that and to use people's inertia to turn these reluctant people into retirement savers. In New Zealand, certainly a lot of people have been automatically enrolled, but a lot of people have actually chosen to join them. So it's difficult to say whether the New Zealand experience would carry over either to the United Kingdom or to the United States because New Zealand in the 1980s abolished all tax-privileged savings. And they went from having half of the workforce in company pensions to zero practically overnight by doing that. So when they came along and said, right, there's this thing called KiwiSaver and it is tax-privileged and there is nothing else tax-privileged out there. A hell of a lot of people are going to go into that, not because they're being auto-enrolled but because of the size of the tax incentives. And I think the balance between auto-enrollment and tax incentives is a significant one and one that perhaps there can be some lessons learned for the US. Germany has introduced a thing called the RISTA pension named after I think the chap who designed the program. And that in the space of five years got to about 60% of the workforce. So it went from zero to 60% of the workforce in a very, very short period. There is concern with that. The contribution rate's quite low. I think the maximum is about 4%. And the government's putting in a hell of a lot of the money. And so it's got to the point where the tax incentive is actually noticeable cost to the government and there are some significant concerns about both that and in New Zealand. Roughly speaking, 45% of the money in KiwiSaver and in RISTA pensions came from the government. And so there is that a sensible use of government money. I think there, I'll draw to a close. I hope I've given an overview of as many countries as I could think of. And I'd be happy to answer any questions you have about other countries as well. But I'll draw to a close there. Thank you. Well, thank you. That was very interesting. And I just want to also urge everyone to read the Richard's report, which has quite a bit more in it than what he presented in his opening remarks. It does cover quite a bit about the international experience and I found it very useful for treating some thoughts about how to think about the US reform debate here, which is what he asked me to take a look at it in particular. Now, as Edward has already gone over, there are some themes that one can pull out of the, and you can tell from his comments, there's also Richard's comments, some themes that show up when you look around the world at what they've done. And I, of course, agree very much with the point that's been made, which is that it's remarkable how much has happened around the world, number one, number two, how much hasn't happened here in the United States. And number three, how much the United States doesn't know what's happened around the world. So it's quite a remarkable turn of events where there's a lot of people here in the United States where I think are still in a, basically a 1980s mindset where they think essentially the European welfare state is sort of in a state of disarray and hasn't really changed much. Now, there's some truth to that to some degree when you dig underneath the surface, but it's really remarkable how much political action has been taken, some of it quite risky politically to make massive, massive changes in their pension systems. And some of the themes that come out of that are what I wanna focus on here and what they might mean here for the United States. The first is this business of automatic stabilization. And, you know, what is to commend this? You know, especially in the US context, the great thing about automatic stabilization is you take your pain one time, presumably, that if you do it right and you design something properly, you can insert into your structure something that can bring about a level of stability to your pension system, commensurate with your demographic experience. I mean, the truth is, for a pension system, you cannot run it long, or you can for a while. Long is an interesting term in the pension world, but you can run it for a while in a way that's inconsistent with the demographic reality, but at some point, you know, it does, a collision point will come. And so you always will have to adjust your pension system to demographic reality. This is a question of when and how you do that. And what these automatic stabilizers have to commend them is that someone has thought through to some degree and they're relative, they're not all the same and they have strengths and weaknesses, but someone has tried to think through in their own political context how to insert into their pension structure something that allows the political system to say this should be self-correcting over time, commensurate with whatever happens. Demographically, if we live longer, if we have shifts in our birth rate up or down, you might be able to self-correct your pension system without large-scale political turmoil every 15 or 20 years. Now, Italy is a special case, they enjoy political turmoil, and so they have an automatic stabilizer, but they revisit it all the time anyway. But it's not necessarily true that we would have to do that here. Obviously, here in the United States, we do not like to revisit social security. If you think about the life of Social Security, it was enacted in 1935, many, many changes occur between 1935 and 1983. And then in 1983, they tried to build into it some degree of more stabilization, not quite the same character as what they did in Europe or elsewhere around the world, but and have essentially, as Edward noted, left it alone ever since, pretty remarkable long period of time when there's been massive demographic change and nothing essentially has changed in social security. And so I think it probably is time for the United States to start thinking about what can be done here to make this issue more self-correcting over time. And the themes, of course, are that there is demographic adjustments that automatically occur, particularly around how long people are expected to be on the benefit program, longevity, but also, to some degree, certainly in Sweden and in Germany, there's a corrective for the relative size of the retirement population to the working population that is supporting it and will eventually become retired. What's interesting about the Swedish reform is it tries to build all of that into a very complex and interesting formula that self-corrects over many generations. So that's one element to it, but there's also a rate of return aspect, sort of what can be allowed as a rate of return on contributions based on both the demographic as well as real economic growth reality of the country. That is implicit in the Italian scheme and also in the Swedish scheme. And so those are interesting things because, of course, those are the elements of a pension system. Who's working, who's retired, and how much is the rate of return? If you figure those out, you've got the basics of how much you can pay. And so if you build them in automatically, perhaps you don't have to revisit in a traumatic political sense every five or 10 or 15 years. The other major theme that's there is, by the way, I would just say that Richard outlined this and explained this quite well in the report as I indicated earlier. The second theme that comes out of the countries that are surveyed in other countries is transparent and positive labor supply incentives, that this whole business of notional accounts is in part designed to signal to the workforce, the more you work, the more retirement income you'll have. And in many defined benefit pension plans, that is not the case. Certainly in social security here in the United States, it is demonstrably not the case because you have a certain number of high retirement earnings years that are counted and other years are not. And once you get past a certain point, it's very difficult to change the basic size of your pension formula by working more. So that is a big part of it. The more you work, the more your notional account grows, the more you'll earn in retirement. And then the third element obviously is to try to incent and build and allow the promotion of widespread, private, kind of fully funded retirement savings. Some are private, but encouraged by the government or forced by the government. And in the United States, it's a different context. We have a very large, robust liquid, it's sort of the envy of a lot of people really. We have a very large scale, privately funded retirement system, fully funded retirement system. The question is how to make it more widespread and accessible in the United States to populations that are left out. But sort of mandating, it would be very difficult here in this country to mandate a new system on top of Social Security because we already have a very large scale participation in a private system today. Now, specifically in the US Social Security context, what are the features we're grappling with? Obviously, we have a pay-as-you-go system that's similar to most of these other countries. So we're facing the same demographic and economic forces that forced reform around the world. It's a divine benefit program, Social Security with large scale redistribution. As Edward alluded to, it has this very opaque benefit formula that provides a very large rate of return on the first tranche of retirement earnings, 90%. And then the second tranche is 32, and then the highest earning tranche is 15, but only earnings below the taxable wage cap, a little over $100,000 today, are counted toward this. So it's a very complex formula that is opaque to most of the public, and they really have no idea for a marginal dollar how much they're earning on their Social Security benefit. Notional accounts is intended to really address this idea, right? The idea is the more you earn, each dollar earned is equal in terms of the value it's gonna provide to you in retirement in that year. So it allows a very strong signal to both the working age population, as well as those who are near to retirement to keep working as long as they can because, well, the retirement benefit could go up. But you shouldn't underestimate the importance of the fact that we have a incumbent defined benefit program that is very difficult to, it's hard to imagine displacing it easily because of the distribution. You're redistributing between high and low wage workers. There's also other movements of money between single earners to couples, and then there's also other social welfare benefits built into Social Security. There are family benefits that are included here and survivor benefits. So it's a complex situation to move from this defined benefit structure to a notional account type structure. And moreover, in doing that, you probably would have to add a third element to the program to make it work, which would be politically difficult too, which is to have at least some kind of generous flat benefit. Edward alluded to our SSI program. SSI, Supplemental Security Income, is a could conceivably be a flat benefit program in the United States if it was ramped up maybe almost double in size to its current program. But it's hard to see how that could happen politically too because that carries with it quite a bit of expense. You'd have to couple it with a large scale social security reform, where there was substantial downsizing of those costs. So I do think that there is a large political obstacle to just saying, let's move to the United States to our notional accounts. But that doesn't mean that some of these lessons still can't be applied in their own way. A few years ago, our distinguished moderator and one of his colleagues also in the audience here, Gene Sterly had written a report about automatic stabilizers. And they proposed to put in certain to social security essentially longevity indexing by administrative discretion. That is, instead of trying to figure out through the legislative congressional process every 10, 15, now 30 years, what should be the right early and normal retirement ages for the social security program? Why not just hand off that authority to an administrative body with expertise for measuring that on an ongoing basis and adjust it accordingly, every five or 10 years? To me, that sort of makes a lot of sense. It's a technical, technocratic thing and it's not necessarily something that does need to be inside a legislative decision making process where it becomes so politicized because the truth is you should be, each generation should be treated fairly in terms of how much retirement benefits are provided based on the tax rate and how much people are expected to live. It only makes sense. You're gonna have to make this adjustment as Edward indicated, these other countries are in fact passing us now on moving beyond 67. Now, the next idea that could be considered is something that would be borrowed essentially from Germany. They built into their formula an automatic benefit stabilizer based on the ratio of the elderly to the retiree population to the workforce and if it moves away from a baseline projection by some degree, then they automatically start lessening the benefits and then it's on across the board cut. I agree quite right very much with Edward that that would be difficult proposition to just enact and start cutting things across the board here. However, I do think you might be able to look at something like this as a way of measuring the amount of benefits that are provided to newly retired people as they go into the retirement program and you don't necessarily have to cut everybody who's on the existing program but you might need to look at where we are demographically at a five, 10, 15 year interval and say for new cohorts of retirees this kind of measurement will affect their essentially their annuity that's allowed to be paid over their lifetime. The third idea might be to eliminate the payroll tax post age 62 or perhaps higher 65. For most people they're still paying both their social security and Medicare payroll taxes and they are paying on any earnings even when they reach these ages where those earnings provide very very little rate of return for their retirement benefit. Certainly in Medicare it provides essentially no benefit. So it's a large drag on the incentive to work for the post age 60 population. One idea would be say let's just wave that entirely unless it's a really meaningful contribution where the worker wants it to count toward their benefit. It might be an idea to get rid of it. The fourth idea is to get to this business of non-participation in fully funded retirement in the United States. There is some large scale participation in the United States but a segment is still left out. To reach that hard to reach population you could set up something like what we have for federal retirees here a thrift savings like program for people to participate in on a voluntary basis. I'm not always in the nudge base you know nudge people in automatic enroll but I'm certain that some people would propose that in this context. But it certainly would provide a low administrative cost safe investment vehicle for people to get into the 401k world who perhaps aren't in it today. And then you know as a more radical idea why not allow notional defined contributions for new entrants into the system. Perhaps move toward a system where they do look a little bit more like something as Sweden has tried to do. Their pay as you go contributions would still cover current costs. This is a way of bringing some more individualization into the system without moving toward fully funded individual accounts inside social security. And you might be able to make it an election at age 25 or 30 whether someone would want to take their retirement that way or not. I'll go very quickly through this because I don't I think I'm over my time and Rudy's being generous. You got a little bit more. Medicare deserves five minutes. Okay I'll go through Medicare very quickly. I'm sorry to run over a little bit. So you know trying to think about Medicare it's obviously a totally different discussion. Medicare is a health benefits program health insurance program. So it's not really the same but it's a program that's unusual in the context around the world because most countries don't have a benefit program for health insurance just for their elderly. They have a national insurance program that their entire population participates in whether they're working or retired. And so this is a little bit unique. And so what one way to think about Medicare is sort of step back from its day to day operations and say what is it really trying to do? And essentially what it's trying to do is say here in the United States we're going to put everybody age 65 and older into the same insurance pool and it's guaranteed issue community rate in insurance that is you get it whether you're sick or not and it's the same premium for everybody regardless of your health status. So that's a huge value. But no money needs to transfer between one pocket and another for that to happen. In other words, that huge value that's delivered to the elderly is just the fact that it's saying here's insurance for you guaranteed issue community rated now let's talk about the premium and Medicare adds to this community rated insurance product the fact that it's going to essentially have a social insurance scheme set up to partially pay your premiums for you when you reach that point in time. Now, it's this issue the partial payment of the premiums that could be rethought that you could say instead of it being the way it is now a sort of a defined benefit approach to calculating how much that premium payment is from the government it could be more like a defined contribution almost like an add on to your social security benefit. And if you start to think about it in those kinds of terms one can then start to think about applying these lessons from pension reform also to the Medicare construct that is perhaps one starts to think about this contribution you're going to get from the government towards your pension or toward your premium payments in Medicare almost like an annuity that needs to be adjusted for longevity as well as perhaps other demographic factors the ratio of the elderly to the working force population and one could start to make adjustments to this defined contribution that the government is making towards your Medicare premium payments based on the same demographic shifts that are going to be made in the pension world. Now, leave me I know how hard it would be to do this it's a leap of it would be such a leap of policy here in the United States it's hard to imagine but at least some of the thought process might actually be created lead to some creative thinking. You know, certainly I've been a long time supporter of moving toward a defined contribution model in Medicare anyway the idea is to foster more competition and choice among the beneficiary population that could then put cost pressure back on the delivery system of healthcare that's its value in and separate and apart from it what it might do in terms of this kind of a discussion we're having today but you could as I just said adjust those defined contributions based on when someone starts to take them so perhaps you have a calculation that says here's how much Medicare premium payments you can get from the government over your lifetime if you take it at age 70 you can get more and if you take it at age 65 you get a little bit less so again another encouragement to work longer instead of taking your Medicare benefits perhaps before you really need it. I think it also lends itself when you move into a defined contribution structure it would lend itself to much more means and income testing than today's current benefit right now what they're trying to do is keep adding on premium requirements on top of the requirements depending on if your income exceeds a certain threshold you know if someone is if you start to think about Medicare as real value in the fact that hey you're gonna get this insurance the question now is only who's gonna pay for it for people that are well to do and have plenty of retirement savings they can then start to have in their mind I have to I'm gonna have insurance it's government guaranteed insurance when I reach 65 or 70 but I'm paying the premium myself that's still hugely valuable to that person and it doesn't necessarily require that they get any transfer payment from the government and so if you do it that way you start to realize you don't necessarily need to give a Medicare payment to people making any money above a certain threshold I'm gonna have one more comment which is going back to some of the things Edward said which I think is exactly right which is that to make all this work in the United States we probably do need and as I mentioned earlier we probably do need to start thinking about raising the SSI benefits one way to think about it is to provide a more generous benefit to the old the very old instead of raising the SSI benefits threshold for everybody why not say we're gonna have an even higher standard for people that are age 80 and older and if somebody outlives their savings their family members die there's all kinds of reasons why a person 80 and older is far more even more vulnerable than an elderly person at 65 and you might be able to I think get a bigger consensus around that, thank you. Thank you very much Jim before I turn to the audience let me ask several questions of the panelists. To me the most interesting thing about the foreign reforms is that they did them that is they overcame very serious political obstacles frankly looking at the United States the political situation really looks grim to me right now even talking to some of the Tea Party types who are very keen on reducing spending on the sides of government they get very nervous when you start talking about social security reform or Medicare reform so I've sort of drawn the reluctant conclusion that we're not gonna get anywhere unless we face some sort of crisis now it seems to me Richard that in some of the countries that you talked about there were indeed crises I mean in Sweden early in the 1990s very serious economic and financial difficulties in Canada certainly on the verge of crisis it's not actually in one I think Australia had a foreign exchange crisis I wonder what's your notion of how those crises related to the subsequent social security reforms? Right, yeah I think it's probably true that an affair number maybe even the majority of other developed countries that have undertaken a significant reform of public pension systems that this was done in response to a crisis of one kind or another I mean in Italy it wasn't coincidental that the pension reforms and Edward correct me if I get any of this wrong coincided with the need to show that their government books were in reasonable order this was right in the run up to joining the EMU the monetary union as Rudy mentioned a crisis in Sweden Germany reformed its pension system back when it was the sick man of Europe and along with pension reform there were a whole series of labor market reforms certainly throughout central and Eastern Europe the reforms coincided with the transition from command and control to market economies so I think that that's right and I think it certainly will I say this reluctantly too but probably very probably require a major crisis in the United States to get significant reform and if you think back through history you got social security itself during the as part of the new deal when you have like Rob Emanuel said not I don't often quote Rob Emanuel but a crisis is a terrible thing to waste this last one was wasted so I guess we need a new one the Great Depression gave rise to the new deal social security was part of that the stagflation of the late 70s and early 80s this is not entitlement reform but allowed Ronald Reagan the Reagan administration to push through its deregulation agenda so you may well need a significant crisis you mentioned Italy a few years ago I was visited by a deputy minister of finance who was in charge of their social security system and I mentioned to her that I had heard it was hard collecting payroll taxes in Italy especially in the south of Italy and she said yes that was true but it didn't present a problem because their offices were so inefficient they didn't pay benefits either that is one approach to reform but one thing we don't talk a lot about in the United States it's just administering the system and I think that's because at least with social security we really do administer it quite well at low cost you can argue about Medicare a little more but I was wondering how you saw administration across countries and you've worked a lot in emerging economies I mean are these systems really workable in a poor country? Goodness, that's a very big question just return to the crisis issue I think clearly the recent crisis has produced an acceleration in pension reform and most countries have not wasted this good opportunity I think the alarming thing though is if you do wait until a crisis then the adjustment is ever more painful and we've seen Greece and Italy for example have had to undertake pension reforms very fast and very painful changes the pension age for women who work in the public sector in Italy went from 60 to 67 overnight almost and so incredibly painful reforms because they had kept delaying it and the same is true of Greece as well Up from 45 as recently as the early 90s Yes, yeah in terms of what's happening in emerging markets the defined contribution model has been taken up quite widely now in Latin America and in Eastern Europe and also now some countries in Africa as well in Nigeria for example there is a compulsory defined contribution plan what has happened is that the coverage of formal pension systems remains very strongly related to national income ahead and so the poorest countries in Africa and in South Asia probably cover roughly 5% of the workforces and so I think the implicit in your question was is there much point in just covering 5% of the workforce what is the point of having all of the administration and so on for these schemes which are very very very very small then there's a whole series of countries with roughly half of the workforce covered that would be true of most of Latin America so on with a few less than that at that point it does seem sensible to have some sort of formal pension arrangement in place I just wanted to come back as well briefly on the issue of these automatic stabilisation mechanisms I think it is very interesting to note that in Sweden when the crisis came they just changed all the rules because they would have had to cut benefits by 4% in one year and they just said no that's politically impossible so you have to have some care if you're cutting people's benefits however you dress it up you're still cutting the money and that's politically difficult in Germany in five of the six years since the new rule came in they have ignored it so they have put in larger increases than they were all said for five of the six years so you do have to be very careful with these mechanisms that you don't kid yourself that you've made everything safe and sustainable and nothing can go wrong because the politics still enters into it and can still make difficult decisions even more difficult Jim, in the context of Medicare we've seen this remarkable slowdown in the rate of growth of spending that's lasted a number of years now do you expect that to continue? You know what causes it Well, there is no definitive answer to what's going on in the health system but the team of people that do the Medicare numbers and the national health account numbers from the executive branch every year, the actuaries did a paper last fall that will be updated again this September and so we can see what they say this year but when they looked at the experience in the recent years they basically attributed the vast majority of the downward pressure that's been the downward movement in the spending growth rate to the economic conditions in the country the recession itself and then the aftermath, the slow recovery and they did a series of simulations going back in time to all the spending patterns over the last several decades and said that the rough pattern of what has occurred in recent years follows pretty closely with what you would have expected from what had happened in previous slowdowns Moreover, the downward trend that one sees in health spending here in the United States can be found in many, many parts of the world where of course the crisis, the global financial crisis was a global phenomenon and so there was depressed demand for health services not just here in the United States but elsewhere which sort of gives you a sense that there wasn't necessarily something unique going on here in the United States The second point to make though is that there is slightly detectable a longer term trend in the United States toward spending decline even on the part from the downturn and the actuaries admit as much but they don't attribute it is so small relative to the other thing they don't make a big deal of it yet but we'll see what happens but if there's anything going on structurally the most likely culprit I think by universal by people that are in the system and watching what's been going on is the movement toward higher deductibles especially in employer plans going back to about 2004 and five and so there's been a pretty steady heavy push by employers of their workforces into higher deductible plans and that has perhaps put some moderation on the spending growth not just in the employer system but also throughout the whole system including in Medicare Some people think there's a movement away from fee for service medicine that's so inefficient do you see any importance to that? There's been an upward trend in Medicare in the part of the program that is privately administered called Medicare Advantage and that's much more sizable than it was a decade ago it's now about 27% of the program and new entrants are going into it at about a rate of one out of two so yeah, that's potentially a thing that's going on there but that's not the that has nothing to do with there's been a big debate about whether things that have been enacted in the healthcare law in 2010 have caused this and that trend predates that law by a long time and also if anything that law will reverse that trend to some degree and so it would be hard to attribute that to things that have happened to try to move away from fee for service from the 2010 law Well let me turn to the audience questions, yes way at the back there Thank you I'm Stephen Kanna retired from the U.S. Council for International Business and you used the word cuts a lot and are we talking about cuts in the rate of increase or are we talking about absolute cuts and shouldn't we start changing the dialogue when we try to the ideas are floated about amending the inflation rate adjustment for social security the press talked about they're cutting social security they weren't cutting social security you're cutting the rate of increase so if you change the dialogue a little bit could this help also well I'm while I'm sympathetic to your to your argument you know when we're when we're talking about projections you know over a 10, 20, 30 year period it really only makes sense you know to talk about benefits relative to wages or relative to GDP yes we're reducing the projected growth in benefits but if your point is that so long as we're paying the same nominal dollar benefit in 20, 30 that we're paying today we haven't cut it I think that that's economically silly to say that absolute absolute real dollar cuts I think the answer I think the answer the answer is basically yes in the Medicare context if we had Medicare growing it at essentially inflation consumer inflation maybe even plus a little bit but below GDP growth and certainly below the historical rate of growth in health spending absolutely that would solve the problem getting there though will still be very painful you know you won't be able to fool the public because it will still be quite painful because you know that they'll notice that there's a slowdown in their use of services and new technology and the quality will feel different so it's not it's not something that one can slip by people without I mean there's a reason why some of it bad there's been a reason why some of these things have been growing faster than a normal rate because there's huge demand for especially in the health world health benefits so you can do it that would solve the problem I think some semantics can help here but I've been around the debate long enough to know that it doesn't get you all the way there you know at some point you've got to bite the bullet Jane just a quick comment on that I know he's left so anyway, but I will still make a quick comment currently in 2010 roughly speaking the European countries on average spent about 9% of GDP on pensions if demographics alone what happened that would double to 18% by 2060 the actual projections are more like 12 so it's going up but there have been cuts you can have both of the things going on at the same time and the way I think of a cut is what was promised to you know what was promised to my parents what benefit was promised to them what's promised to me and how much more of that is that to me is a cut and they are significant Jane Jane Sterley, the urban institute sometimes I think that people like us in this room are major culprits in this problem in the sense that across both these countries the primary issue that causes the imbalances is a labor force problem and it's not really a financial problem and we're all trained in finances so we all try to manipulate them numbers and change present values and get trust funds and balance and try to find financial solutions to this whether tax rate increases or benefit cuts and when we do that I wonder if we don't miss out on the labor force broader labor force issues so that in point of fact one of the biggest impacts of these demographics isn't on Social Security at all it's on lower growth rates lower GDP, lower personal income lower income tax collections on and on and Social Security is just a piece of the puzzle Social Security and Medicare define some of that larger issue because they define when we're old so people like Rudy are now very old and Richard and Jim are almost old because we define old as being 62 and that sets all sorts of signals for the economy even beyond the incentive so the current question maybe it's mainly for you Edward but is to what extent did countries formally actually think about the labor force issue so that when they do things like benefit cuts thought about doing more benefit cuts in young age or younger old ages say 62 to 70 versus older than 70 to what extent did the United States think about early retirement ages where the impact up in the early term in age has little effect on Social Security would have a big impact on the rest of the budget and on personal income so on and so forth so I'm curious the extent to which these countries really formally are addressing or did address the broader labor force issue of which Social Security is only a piece I do agree with you there and you have to think of the policy as being both on the demand side and on the supply side and so it's no use designing a beautiful pension system with all the right incentives to keep working in it if there aren't any jobs for all the people to have I think what has been happening is that the average age of the workforce has been going up and I think the low point was 1966 when I think the average age of the workforce was roughly about 32 or something it's already got to 40 and so employers are having to adjust to a reality which is that if you want to have any workers at all you are going to have to have some older workers because there aren't enough bodies in the economy I think countries have to a large extent tried to look at this problem holistically so you have had tightening up of the rules for early retirement and so on and in some cases Germany would be a very good example there has been a dramatic change in behaviour that people are retiring significantly later than they used to do I think much of the problems of pensions can be answered in one number which is 70, if everyone could be persuaded to work till they were 70 then all of these problems would disappear and we could have quite sizable incomes in our retirement as long as our retirement was roughly what it used to be in the 1960s when people actually retired later than they do today it was the average retirement age in France in the 1960s was actually above 65 it's now 58 so if we move back to a situation in the 60s where you could possibly be expected to live about 10 years in retirement instead of one where you live 20 years in retirement you could fix much of the problem 70 seems almost teenage to me but Richard, I see you put up a chart yeah, I put up a chart that I hadn't shown before which is related I think to the point that Jean's making this is sort of borrowing the way you've talked about a Jean but vast rivers of public money, pension money but other benefits too flow in every developed country to adults in their 60s who were increasingly not really elderly at all but late middle aged and I've sometimes been criticized this age 60 threshold and a lot of these numbers come from my global aging preparedness index you know, why age 60? Well, it's not meant to indicate the threshold of functional senescence hope not, we are getting pretty close, aren't we, Jim? but it is pretty close to the effect of retirement age in most developed countries and in the United States roughly a third of cash benefits to the elderly defined as adult 60 and overflowed of people in their 60s and in some countries it's significantly more than that so I think a big part of the solution and this is echoing something I think you were saying, Jim is to shift benefits more towards true old age when I mean if the solution if part of the solution is to work longer, right and to save more well there's a point beyond which work becomes less feasible for most people maybe for some people that's already in the 60s for many more people it's in the 70s you know, the older elderly and here I draw the threshold at 70 rather than 80 but they're less able to work they're at increasing risk of running out of their savings and they have in large part because they don't work as much they have much lower per capita income in most countries than the younger elderly do so sort of looking toward the future I think we might begin to think about the role of the government more as a you know rather than one of these three legs in this you know this mythical or this much talked about stool really as a kind of backstop against the risk of inability to work and longevity risk and the risk of running out of savings in what's true old age Sandy? Well that brought up a lot of hands Sandy? Richard would you mind putting up that chart sorry would you mind putting up that chart you show to the effect of reform on I think it's average pensions that's let's see that's it, yeah um sorry could you give a rough explanation or a general explanation of why the US is expected to decline by one-fifth even? Absolutely yeah part of that's the increase in the Social Security retirement age uh... to sixty-seven uh... which is not actually a retirement age increase at all but a pro-rata benefit cut uh... at each age um... but and I don't have the I can't parse it for you exactly that that might be half of it uh... the other part in my public in my in in my gap index definition uh... of public old age benefits we include civil service pensions so embedded in there is also uh... uh... the shift from the old CSRS system to the new and less generous FERS system uh... so those would be the two the two main reasons yes everyone's eye tech and I have the follow-up on the same question I missed or two questions related to this one uh... this are future projections how much of the stuff has already occurred that's the most fundamental one because my experience in many countries with many countries that I worked on and that includes some of the Baltic states of Poland on Hungary is that they implemented reforms very ambitious reforms and it was obvious from the beginning that they were unsustainable and they were just reversed like it happened in Hungary or Poland the Baltics by the way I think the securities were in most of the pension money is invested in in treasury securities and then what is the offset you know so yeah we reduce it on the pension expenditure but then if pensions will decline too much compared to median salary there's going to be uh... demands public demands which will be most likely accommodated from from other parts of the budget absolutely uh... you know too but I I I I think I alluded uh... at least to this point in my talk or maybe I skipped it over to to try not to slop over the the time limit too much uh... but but yeah you I mean you have to take some of this with the grain of salt uh... when I constructed my global aging preparedness index I felt reluctantly but I felt obliged to use current law uh... projections you know in the case of Italy I love Italy I did my doctoral research there but you know in the case of Italy I sometimes say that they've solved the projections not the problem you know you there there is a real question whether uh... these reforms are are are socially and politically sustainable because part of part of these these these large declines in in in in in benefits you know in under current law relative to the current deal or due to higher retired assumed retirement ages in some countries but a big part of it you know in germany Italy and a number of other countries is actually you know projected current law cuts and benefits relative to wages now is that going to happen well in the gap index we have a sort of total household income model we take into account uh... trends in labor force participation uh... and also funded pension savings and we at least try to look at uh... whether countries are are filling in that gap or not uh... and in our for projections it kind of looks like germany and sweden are uh... it doesn't look like france and italy are at all so yeah there's there's there's a very big question uh... about whether current law pension projections uh... in a lot of you countries it in my opinion uh... actually described the most likely future course for spending uh... because that the cuts are prospective right and i mean it in italy you know to to come back to italy again when they enacted the uh... the deanie reform you know the one that shifted to the n dc system back in the mid nineties the grandfather everybody old enough to vote you know so i mean in the face of in the face of and and remember the chart i showed such somewhere in here on the the uh... the high level of dependence on public benefits right high level of dependence on public benefits and an aging electorate uh... you need to be let me just sum it up this way and then i'll stop you cannot have an adequate pension system that's fiscally unsustainable because the thing crashes in the end you may not be able to be able to have a fiscally sustainable system that's inadequate because of precisely what you said you're gonna get pushed back from the electorate and rightly so uh... it has to be both sustainable i can just say i'd like to say just something about this my impression from from reading about and watching what's happened around the world is that it's sort of the opposite of what would happen here in the united states is that the the amount of sound and fury that goes around the enactment of something is quite remarkable in other words if someone were to propose a very sweeping so security reform it cannot secretly and quietly be enacted you can't slip it through the system there will be an immense political debate around it and a lot of gnashing of teeth and a lot of people probably lose their seats over it so having gone through the turmoil of doing something like that it's very difficult to reverse later actually uh... that thing of the nineteen eighty three reforms uh... you know they enacted a a uh... upward shift in the retirement age and it's been going on going now for the last decade or so and hardly anybody says anything about it it's cutting people's benefits right now nothing much as being said so i i i think one thing i've learned from reading about these other countries is when they enacted these things often in a parliamentary system the amount of discussion and debate about what was actually happening was incredibly minimal it was pretty opaque and the sweeping reforms that were enacted sometimes were hardly understood by the public at the time they were being enacted so i think it's you know it depends a little bit on context and you know every country is different but i would just say that about what i've been reading and by that standard we did it pretty well those of us old enough to remember the increase in the normal age was slipped in at the last minute as it were and done on the floor of the house and i've seen polls that suggests that less than a majority of the population even realizes it's going on today yeah that's a good point question i'm just one brief comment about what you said is that with social security i think you're very correct but if you look at say medicare and the sustainable growth rate sort of kabuki that goes on every year where congress postpones it you know every single year for going on almost i think a decade now uh... perhaps we are not as doing quite as well as as might otherwise be indicated my question though is sort of what is to be done that uh... i think that this uh... presentation is done very good job of laying out the sort of issues but other than waiting for our creditors to start calling in their their debts sort of is there any lessons that can are there any lessons that can be drawn from the various reforms in various countries as to sort of a path forward what is the best way to go about doing this in a way that is politically sane of both in the sense of getting it passed and in not playing games with that once it's been passed well i do think that uh... that uh... first of all i think we're probably in a in a window of about ten years or so when when something will happen you know it's it's hard to tell exactly what will precipitate it but if you just look at the cb o projections and the interest payments on the debt and and the the pressure the amount of funding the taxpayers putting forward just to pay interest on the debt and to cover um... entitlement obligations meanwhile we're planning this massive downscaling of our national security spending something's going to give you know now and we said that what what would then happen i mean i think you would you would pursue a series of incremental steps in the basic same direction that other countries have gone as i the themes are still the same try to build into the programs something that recognizes changing demographics uh... build in a little bit of automatic control if you can and emphasize longer working lives and fully funded retirement benefits and perhaps in the united states context a better safety net and i think if you pursue those you can downsize unfunded liability commitments but in a way that is prospective um... anyway that's that would be how i would think about it sorry just a very quick observation isn't my understanding is that there is a sort of automatic thing in social security that when the reserve fund is exhausted that that in theory aren't all benefits supposed to be cut by 20 percent am i missing something here in theory in theory it's never been tested in the courts right so it's a it's a reading of the statute that says if you the trust fund is fully depleted you'd have an automatic across the board cut and benefits no administration has tested that no court has looked at it no one knows what would happen and it was the threat of that that triggered the 1983 reform yes i'm old enough Mauricio Soto from the IMF so just one quick remark is when you know when you go to a country especially in europe they actually look to the US and say how could we do that small system streamline low taxes relatively speaking and the problem the fiscal problem is not that dramatic as it used to be in europe and uh... my my question my question is is related more how does it all fit together i mean we're proposing here longer work lives different types of benefit cuts we can call it increase in retirement age lower replacement rates better accrual rates so uh as somebody mentioned here that may be going back to in 1960 it did meaning people are going to retire maybe at their 70s if we move to europe Irish payroll tax rates for pensions are close to 20 or probably higher than 20 percent of wages is there a point that we will reach a breaking point for the social contract will young people pay 20 percent for 45 years to get a relatively low pension and and that's that's something a role of struggle with would that happen at what point do the social contract breaks down well i don't know maybe there's an analogy and you know to financial markets you know there's there's there's some uh debt level at which uh you know one one thing we know there's two things we know and one of them is that there's some debt level at which you know uh uh funding will not be forthcoming uh at affordable or attractive interest rates and the other thing is that we can't know what that threshold is and i think that's probably true with the social contract too you know there have been people uh uh over over over the years who've tried to argue that you know a higher tax rate will actually not be over burdening younger generations in the future because they'll be so much more affluent that they could afford to pay 20 or even 30 percent of their wages and taxes and still have a higher uh real income than people do today i i don't think that that that argument really really holds up holds up very well you know on either political or moral grounds essentially what it amounts to to saying is that it's okay you know to confiscate our children's economic progress so long as we leave them a little little bit better off than than we are today i think there is a point um but but i don't i don't know what that point is it's probably a hell of a lot lower in the united states than it is in uh than it is in france we're the actual you know payroll tax rate you know if you include the the the employer share you know as any good economist would is really what edward about 40 percent 46 46 percent that's for that's for all social benefit for all social benefits yeah yeah i mean the the yeah yeah yeah that's the scariest one is italy where it's 33 just for pensions and then there's other bits on top of that on the average for all the every city countries is 20 um um rufflings and and slightly more on employers than on employees but the average is is 24 pensions alone let me just throw in one one more related related point uh uh you're mentioning italy kind of kind of kind of kind of triggered this this line of thinking i i think it makes a difference whether a welfare state has a large investment component or not i mean a country like italy or japan or the united states is essentially you know we have a welfare state for old people um per capita per capita benefits especially at the federal level but but but indeed at all levels of government uh are are highly skewed benefit spending is highly skewed to the ld that's true in italy too um um you know it it all goes to to to pensions they hardly have unemployment insurance they don't have family benefits if you have a wealth if you're going to spend 40 or 50 percent of gdp you know for god's like you know for god's sakes have an investment component in your welfare state um where where you're where you're investing if that wouldn't be my choice okay i mean i'm not advocating a hugely larger public sector but if you're going to have one make sure it has an investment component and then i think you'll get less less less pushback but if the redistribution is all intergenerational right can i yeah yeah very quick point on it on italy strangely enough i collected statistics on how age biased is voting so what a voter turnout rates for for older people and what a voter turnout rates for younger people italy is the only country where more younger people vote than older people yet it has the most age biased welfare state in contrast my own country the uk has the most the most age biased electorate far more so than the united states and has a very unage biased welfare state so these things can go in very in in quite strange directions can i i just want to make a comment about the question and in the background of all of this and in a little bit of the background of your question is of course we have the aging of the population but really what's driving most of this is the plummeting fertility rates right i mean there is there is no solution to no workforce future workforce i mean the the famous konrad adnauer thing about you know building post war germany's welfare state was well we can afford this because we're all germans will always have babies you know that was sort of the the thought and 25 years later germans stopped having babies basically and really the the truth is that you cannot have a pay-as-you-go structure social contract built around pay-as-you-go financed repent you know uh payroll taxes essentially if the if the below level replacement rate and it's well below in many many countries not just it's not just a smidgen low right it's well well below that's catastrophic eventually just is the question is how does the dislocation occur and you're right i mean it's a slow motion thing and so in some ways i commend these other countries for dealing prospectively with their massive pension issues but they've done it in a way that hasn't you know you still have not solved the fundamental issue remains if you depopulate your workforce who's going to pay for this and uh there is you know i've reached the conclusion that there is no solution to that it's it's just large dislocation for that country slightly disagree with you there that i'm emigrate there there are there are significant differences between OECD countries in in the fertility rate and some countries examples would be the UK France and Sweden have reversed long-term secular declines and they're getting close to i think it's 1.96 is the latest number for the UK and similar for France and Sweden so it's gone down to 1.7 it's come back to close to replacement in Germany it is extremely low and Japan it is extremely low in if we look at back in the 1960s the proportion of women in work was positively related sorry negatively related to the number of children they had so it was stay at home moms they made more babies now the reverse is true and so countries which make it possible for you to combine working and having children both have more workers and have more children and that would be France Sweden the UK and you can see in Germany because school finishes at three o'clock and they don't give children school lunches it's very difficult for women to have children and work and in Japan it's just a social anathema for women to to have children and work so and they worked two long hours anyway so you end up in those countries fewer workers and fewer babies compared with other countries so if Germany Japan Korea allowed women to combine working and and having babies i think they would have more of both and so there are some differences out there and slightly more positive than you absolutely absolutely correct question in the back yes Eric Lechieker from US medicare in the Philippines uh some some of my colleagues from Europe have explained that they have a policy of portability of benefits that for example in Europe i just i just want to get confirmation on this is that they are providing incentives for Germans and French to retire in third world countries to save on the costs of retirement caregiving examples in Philippines that Philippines was chosen by the EU folks to send many of their elderly who choose to retire overseas and i've been to several of those retirement villages also in Japan has been opening retirement villages subsidized by the hospital chains is that one way of reducing the cost of the aging population of the industrialized countries by encouraging those migration of their elderly just like here in the US many retire in Mexico just to save on i i don't think you would get to a situation where that could you would be able to export sufficiently large numbers of elderly for it to make a meaningful difference i mean you know the Philippines would be full of retired Europeans there are population of the EU is about 350 million so say roughly 50 million retirees you can't shift you know it's physically impossible to shift anything that's going to make a make a meaningful meaningful difference to that and i think probably more likely is that what will continue to go on is that we'll import lots of people from the Philippines to look after our old people which is effectively what we do today there are very few British people who work in nursing homes and so on


It's going on everyone Sam here with late in sports cards, and I am ripping Three boxes for Steven a one twenty twenty two top sterling one twenty twenty one pretty contenders first off the line in One twenty twenty one pretty contenders basketball. The first off the line is football by the way as well so We'll start with basketball So Steven just so you know your base will not ship out of here All of your like all of your rookies inserts autos obviously numbered stuff will all ship just no No base out of football and a basketball, but it's contenders So usually you don't want the base anyway to be a hundred percent honest So we've got base up to Josh giddy on the lottery ticket rookie for the Thunder there you go nice start there on the giddy up Got James book night lottery ticket you con legend Yeah, that base won't shit there you go Thank you, so got 299 on the is that like velocity. I want to say it's called is Jeremy Grant for the Pistons Nice one there. Yeah that base. That's that's what I was looking for that base Got sweet shots Trey young For the Hawks Trey young playoff ticket to 249 nice quiet quiet Leonard claw 22 Double Jersey number eBay one-on-one Got rookie of the year contenders James book night That's true. So that's very true Always appreciate you in here though for sure man First autograph veteran for the Nets Patty Mills to 199.  Let's see a big Rook got Cade Cunningham lottery ticket. There you go. Nice, Cade Lottery ticket that is Chris Duarte for the Pacers See something huge See a cracked ice like Scotty Barnes So sick sweet shots KD Eric. Hi re excuse me Kyrie Irving Nets Nice rookie autograph on the variation. That's Joshua Primo on the like optic variation nice hit there That is on card as well For the spurs gonna be one of the focal points of that offense now that they got rid everybody Nice primo and last pack of contenders basketball Got die-cut of what is this superstar Jason Tatum for the Celtics nice one there So these Whatever you want to do with them throw them at me Eat them if you want your hungry man first off the line for football Probably yeah, we're gonna be off in the middle of middle of nowhere somewhere All right, so five autographs in this and we're looking for a red zone Parallel you get one red zone parallel as well Got legendary contenders. That's Ricky Williams Gladiators is Andre Johnson red zone Parallel chain movers Alan Robinson the third or the second redemption interesting Got football contenders rookie ticket Nick Bolton on the Contenders rookie ticket autograph nice one there that will be a sticker but Nick Bolton's kind of a stud on the Chiefs actually linebacker for the Chiefs and Rookie round numbers Davis Mills and Kellan Mon. He's got Chris Jones on the power players If I hit the camera one more time Rookie dear contenders Elijah Moore Jets got Brevin Jordan next autograph nut. What is that? Blue not numbered. I haven't seen that before Interesting Brevin Jordan on the rookie blue foil autograph There's no number on that that is that's interesting. I've not seen that before that's interesting. That's a cool card though Double check make sure there's no number on there. I don't think there is Tim Tebow playoff ticket nice one there anybody in chat know what that is. I Haven't seen that come out of first off the line. That's interesting Blue foil Weird New variation both hobby and photo. Thank you Lane. There you go MVP contender Stefan digs just called blue foil gotcha When in doubt just ask Lane. That's how I looked at it Lane will know they's got rookie to your terrace Marshall rookie to your contenders TMJ Does that land does that take the place of your red foil? I'm assuming it doesn't Chain movers Devonte Adams not numbered Got some blue or red foil is David Johnson That is your first off the line red foil parallel and Power of Chris Carson Assuming it doesn't if it's in both hobby and photo. It's got rookie round numbers Elijah more Devonte Williams second round Should not replace. Gotcha. That makes sense. That makes sense. Are they not in stock first rip it right now for a go Got nice Naji Harris on the red zone parallel Nice hit there Steven Congrats on the Naji Let's go man. Heck, yeah Nice Naji we've got legendary contenders Earl Campbell Way go if you want one I could put one into the I Could put one an inventory for rip it if you're interested It'll just be a little bit far out. I can do that for you. He's got supernatural Lamar Nice happier pump man. Let's go. That's a nice one too. Now. She's are hard to come by in contenders is what I've seen Winning ticket Lamar. There we go Bunch of Lamars in this what I'm liking that Lakin the Lamars Hacky a camo got Sean Wade on the rookie ticket autograph for the Patriots former Raven legend Traded him before the season even started Tom Brady on the playoff ticket as well Should have one more Think there's one more auto Pretty sure. I think it's right here. Actually, yeah Sage Sarat It's gonna be your last autograph for the Lions. Nice one there sage Sarat There you go MVP contenders Tana Hill Yeah, you like the thumbnail heck.  Let's pull a monster out of Sterling Hey Caleb liked it. I know Caleb liked it. We've got MVP award winners and 2000s MLB All-Stars Empty box Let's do 2000 MLB All-Stars first. Yes, we'll do that one first Good luck Steven.  See something big here Wow One Tom Clavin look at that Braves pack That is filthy. Let's go Steven.  I Would say so honestly, that's pretty it was a very solid What's it called? Um Very solid rotation to we've got MVP award winners. No, this is Dude what a box.  Let's go Steven Absolutely killed it killed it in Sterling.  That is so awesome. Oh my god.   I'm so pumped for you man. What a break. What a box of Sterling Let's go That'll do it for your break there Steven man. Congrats on everything. That was a monster box of Sterling We'll get those right out to you buddy. Thanks again