By comparing a group of people who receive a basic income to an otherwise identical group of people who do not, we can isolate and quantify the effects of a basic income.”

However, wealth alone doesn’t bring happiness. According to the figures from the World Happiness Report, a high GDP doesn’t always equate with a high happiness ranking. Qatar, which has the highest contribution from GDP to its happiness ranking, comes in at 35. Likewise, while Hong Kong is in eighth place when it comes to GDP contribution, it only rates 71st in the overall happiness rankings. Norway, the highest ranking in terms of happiness, comes in third in the GDP rankings.

measure is based on real GDP per capita, social support, healthy life expectancy and people’s perception of their freedom to make life choices, generosity, and perceptions of corruption.

guide their public policies towards making their citizens happier, rather than just increasing GDP.

inequality research focuses on the growing divide between the richest and poorest in society.

Is it fair to focus only on financial inequalities, or should we consider quality of life too?

Each of the alternative options for social security reform thatwe dis-cuss combines the existing pay-as-you-go system with a new system ofpersonal retirement accounts (PRAs)

choiceamong the three possibilities is not atechnical economic issue, because itinvolves a value judgement about how the costs andbenefits should bedivided among current and future population cohorts. Aseconomistswe can show the possibilitiesand trade-offs, but the choice is inevitablyone that must be decided by thepolitical process

There are only threepossible responses to this situation: reduce future retirementincomes,increase the taxes used to finance future benefits, or save more nowandinvest those savings in a productive way.

om old age has morphed into one thatincentivizes workers to lose their earnings soon upon attaining the age offirst benefit eligibility (age sixty-two)

tax-induced reduc-tions in the amount of labor that workers choose to supply—causing evenlarger economic losses. Those include losses to workers in terms of reducednet-of-tax compensation and to consumers in terms of fewer and costliergross-of-tax prices of the goods and services

ncing structure, current payroll taxes—that are fully used to pay cur-rent OASI benefits—also create valid public expectations of additional fu-ture benefits beyond the seventy-five-year budget window. A finite budgetwindow, even one that is seventy-five years long, excludes sizeable benefitobligations beyond the budget window created by payroll taxes within thewindow. It implies that focusing on solvency—whether the government canpay benefits through a finite period—is inadequate. Hence, official reportsof Social Security’s financial condition include measures of sustainability toassess whether the program can cover its current-law benefit obligationsthroughout the future

PRIVATIZATION STILL MAKE SENSE?

On balance, Social Security appears to be a regressive tax-transfer systemand provides minimal wage insurance. Many of its features, especially the ex-treme complexity of its tax and benefit rules, weaken and mask the link betweenpayroll taxes and benefits to induce large economic losses from dislocations toparticipants’ labor market choices. The program over-provides longevity insur-ance, with benefits commencing well in advance of the time when work abilitiesare depreciated and participants approach the end of their expected lifetimes.By providing benefits to retirees in excess of their past contributions, SocialSecurity transfers resources from younger and future generations toward olderones in the form of annuities. These features stimulate consumption during re-tirement to reduce national saving, capital formation, and prospective economicgrowth

At this point, what makes more sense is some sort of pooled solution, in which there might be some sort of return smoothing mechanism and some protection from the risk of outliving assets.  And it goes without saying that, because the funds would be privately managed, this would be a true funded system.

The key, though, is that the contributions would only apply after a certain income threshold coordinated with the flat-dollar benefit,

What's more, the progressive nature of the formula, however well-intentioned it is in providing a disproportionately generous benefit level to lower-income recipients, makes it more difficult for middle-class recipients to really understand how Social Security fits into their retirement future, or identify how much they really need to save. 

Fundamentally, Social Security tries to do two things, but does neither of them well:  it wants to be an anti-poverty program for the poor, and it wants to be an income-replacement program for the middle-class.  To meet the first objective, it provides 90% pay replacement up to the first "bend point," $10,740 in annual income.  And that's great -- but 9.3% of seniors (over 65s) still have income (counting Social Security as "income") below the poverty line, because of low wages over their working lifetime, and use a patchwork of programs such as SSI and SNAP to supplement their Social Security benefits.  Doesn't it make more sense to simply provide a flat benefit to all recipients?  And it makes more sense to fund such a benefit out of general revenues than to tax the poor, with FICA, from the first dollar of income earned, then effectively refund that income, to some extent, through the Earned Income Tax Credit.

aybe we're still OK with that, and maybe we can recast it as, "the rich subsidize the poor and we, the middle class, pay in what we get out." But if that's the case, then why stop with removing the ceiling?  These proposal amount to raising taxes by 12.4% on wages above $127,000, or $250,000 or $400,000.  Why not, then, apply the tax to investment or other non-employment earnings?

The longstanding argument for the existence of a cap in the first place is that Social Security is not a welfare program but an insurance system; it

And, to be sure, there are other countries in which the system is funded rather differently:  Norway and Ireland, for instance, each collect payroll taxes on one's entire income.  Australia funds its (means-tested) system wholly from general revenues, and the first of Canada's two parts in its system is also funded from general tax revenues.  Heck, even my own pet proposal for Social Security reform funds its flat first-tier benefit from general revenues, and,

the idea of an earnings ceiling is nearly universal and that the relatively high American ceiling is an outlier. 

ed off earlier legislation which applies Social Security taxes to income over $400,000 (with no apparent inflation adjustment) with trivial benefit accruals.  (The proposal also includes other changes including setting a minimum benefit at 125% of the single individual poverty line, that is, $18,825, for a 30-year working lifetime with average-wage increases afterwards, increasing employer and employee contributions by 1.2 percentage points in a graded fashion, and merging the Old Age and Disability Trust Funds into a single Trust Fund.)

There is no one clear solution to the problem of increased cost for retirees because of fewer work-ers available to support the retirees, which in turn is caused by lower birth rates. This issue is not specific to Social Security, but also affects Medicare as well as many other private and public retirement income systems. The decline in birth rates has been far more dramatic in Japan and many European countries that are struggling with the effects of aging populations because of declines in birth rates even more severe than in the United States.

Social Security Bulletin, Vol. 70, No. 3, 2010125a combination of benefit reductions and payroll tax increases

mplied number of workers per beneficiary. For the past 35years, there have been about 3.3 workers per beneficiary (consistent with the ratio of 30 beneficia-ries per 100 workers). After 2030, the ratio will be two workers per beneficiary (consistent with 50 beneficia-ries per 100 workers).

However, this favorable cash flow will be changing in the future as the large baby boom generation, born from 1946 through 1965, moves into retirement. The oldest people in this gen-eration have already reached early retirement age (62), and the transfer of this generation from working age to retirement age will continue for the next 20years. The substantial increase in the cost of the OASDI program from 2010 to 2030, both as a percent of taxable payroll and GDP, is founded in an even more basic shift in our economy: the change in the ratio of beneficiaries to the number of workers

Projected OASDI cost is expected to rise from about 4.5percent of GDP since 1990, to about 6per-cent of GDP over the next 20years, an

). The Social Security Amendments of 1977 and 1983 made sub-stantial modifications to the program that reversed the cash flow of the program to positive levels and caused the substantial buildup of assets to the $2.5 trillion that exists today. The 1977 amendments included a funda-mental change in the indexation of benefits from one generation to the next. The 1983 amendments included increases in the normal retirement age (NRA) from 65 to 67 and the introduction of income taxation of

How-ever, that report also indicated that well before 2057, program cost would rise above the annual tax income to the program, requiring redemption of trust fund reserves to pay full benefits.

on will be continued into the future with modifications deemed appropriate by their elected representatives in the Congress

As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.1 At the point where the reserves are used up, continuing taxes are expected to be enough to pay 76percent of sched-uled benefits. Thus, the Congress will need to make changes to the scheduled benefits and revenue sources for the program in the future. The Social Security Board of Trustees project that changes equivalent to an immediate reduction in benefits of about 13percent, or an immediate increase in the combined payroll tax rate from 12.4percent to 14.4percent, or some com-bination of these changes, would be sufficient to allow full payment of the scheduled benefits for the next 75years.

Gillespie: America's last trade war exacerbated the Great Depression in the 1930s, when unemployment rose to 25%. Claiming it was protecting American jobs, Congress passed the Smoot-Hawley Act in 1930. The original bill was meant to protect farmers. But to build political support, many lawmakers asked for tariffs -- or taxes -- on all sorts of goods in exchange for their vote.Read MoreSeveral nations, such as Canada, slapped steep tariffs -- or taxes -- on US goods shipped and sold abroad. For example, US exports of eggs to Canada fell to 7,900 in 1932 from 919,000 in 1929, according to Doug Irwin, a Dartmouth professor and former trade adviser to President Reagan.The result: US imports fell 40% in the two years after Smoot-Hawley. Banks shuttered. Unemployment shot up. Surely, there were a litany of factors at play. But economists widely agree Smoot-Hawley made the Great Depression much worse than otherwise.