Republicans Plan to Use Debt Limit Leverage to Cut Social Security and Medicare
Introduction:
FFS Medicare Overhead costs are ~2%. Medicare Advantage overhead costs are far higher. The same can be said for commercial healthcare costs paid by insurance companies. Neither MA administered healthcare or commercial insurance plans can compete with FFS Medicare for costs and care.
I will touch on a few reasons why on Medicare at the end of this article which came by way of Dale Coberly, the resident expert of today’s SS.
As Dale will tell you Social Security is 100% funded by citizen contributions to a Trust Fund. The TF is made up of special treasuries. If it has not started by now, soon the nation will be redeeming those treasuries and the TF will begin to decrease as was planned. With a degree of prudence, Social Security can be made secure after the depletion of the TF which was planned to be depleted and still, still be owned by Labor. Social Security does not need funding resulting from taxing the rich exclusively or a change in economic philosophy such as going to MMT. As Dale will tell you, it may take as little as a dollar per week to replace the TF in 2035 and eliminate shortfalls.
Few (if any) politicians will tell you this and some financial experts’ poo-poo the idea such a plan will work. Read on and catch Dale’s commentary in the Comment Section.
“Entitlement, Spending Cap Plans Linked by GOP to Debt-Limit Deal,” Bloomberg Government, Jack Fitzpatrick
Republicans in the House are planning to use a potential showdown next year over raising the federal debt limit to make changes in Social Security and Medicare, Bloomberg’s Jack Fitzpatrick reports.
The developing plan hinges on Republicans winning control of the House in the midterm elections, an outcome that is looking likely. Four GOP lawmakers who are vying for leadership of the House Budget Committee in the event of a Republican victory told Fitzpatrick, the need to raise the debt ceiling could give them the leverage they need to force Democrats to make concessions.
Rep. Jason Smith (R-MO), the senior Republican on the current Budget Committee,
“The debt limit is clearly one of those tools that Republicans — that a Republican-controlled Congress — will use to make sure that we do everything we can to make this economy strong,”
Republicans are still discussing exactly what changes they might try to enact. Rep. Lloyd Smucker (R-PA), who is interested in the top spot on the Budget Committee.
“What would we consider a win? What would we consider to be a fiscally responsible budget?”
Although the details are still up in the air, one theme is clear: House Republicans want to reduce federal spending, and the major entitlement programs are a target. Rep. Buddy Carter (R-GA) Carter said that Republicans’ “main focus has got to be on nondiscretionary — it’s got to be on entitlements.”
Shrinking the safety net: One option reportedly being discussed is raising the eligibility age for Social Security and Medicare, the two largest mandatory spending programs. Each faces financial squeezes in the coming years as the baby boomers age and continue to retire. Under current rules, the Social Security system would be forced to cut benefits starting in 2034, while Medicare could run short of funds by 2028.
Earlier this year, the Republican Study Committee released a plan to raise the eligibility age for Social Security to 70 and the eligibility age for Medicare to 67. The increases would be phased in over time and once the target is reached, the eligibility age would then be indexed to life expectancy. The lawmakers also called for increased means testing in the Medicare program, and a privatization option for Social Security.
Other options being considered include more stringent work requirements and income limits for what Smith called “welfare programs,” including the Supplemental Nutrition Assistance Program more commonly known as food stamps. And new caps on discretionary spending could limit spending increases over 10 years.
One thing that won’t be cut: defense spending. Rep. Jodey Arrington (R-TX) told Bloomberg that he wants to cut nondefense spending in order to provide more money for the military.
Democrats Responding
Henry Connelly, a Pelosi spokesman, said in a Tuesday statement to Bloomberg Government.
“House Republicans are openly threatening to cause an economic catastrophe in order to realize their obsession with slashing Medicare and Social Security,”
As House Republican leaders’ own words constantly reveal, dismantling the pillars of American seniors’ financial security is not a fringe view in the extreme MAGA House GOP. It is a broadly held obsession at the core of their legislative agenda.”
Reasons Why Overall Medicare Costs are Going Up
That may happen if Republicans can gain control of the House and the Senate. Looking at the issues for cost in Medicare. In 2020 (MedPac), differences in diagnostic coding caused FFS Medicare (CMS) to pay MA plans $12 billion more than it would have spent if the same beneficiaries had been enrolled in FFS Medicare.
Research demonstrated favorable selection of enrollees led to Medicare spending on private plans 5.7% higher in 1989 and 7% higher in the mid-1990s than spending would have been under FFS Medicare (Brown et al. 1993, Medicare Payment Advisory Commission 1998, Newhouse 2002, Riley et al. 1996).
Using data from 2007 through 2013 to test whether beneficiary risk scores grew faster in MA than in FFS. Cohorts of beneficiaries spending their first full calendar year of Medicare enrollment and subsequent years through 2013 in the same program (either FFS or MA). For example, one cohort pair consisted of beneficiaries who joined FFS Medicare in 2006 and then either (1) remained exclusively in FFS through 2013 or (2) switched into MA in January 2007 and remained in MA through 2013. Also examined five similar pairs of cohorts for beneficiaries whose first full years in Medicare were 2008 through 2012. Beneficiaries were assessed starting with their first full year of Medicare enrollment, so that the subsequent differences in the risk score growth between the cohort pairs could be attributed to differences in coding.
From year 1 to year 2, average MA risk scores increased by about 6 percent more than FFS scores across all cohorts For each subsequent year, average MA risk scores continued to increase more than FFS scores by about 1.5 percent across all cohorts.
Dale Coberly said he may add words on Social Security in the comments section.
“Why is CMS Overpaying Medicare Advantage Plans?,” Angry Bear (angrybearblog.com)
“Aggregate Medicare payments to Medicare Advantage plans,” Angry Bear (angrybearblog.com)
“Kip Sullivan and Ralph Nader Talk Tradition Medicare vs Medicare Advantage'” Angry Bear (angrybearblog.com)
Social Security has nothing to do with the Federal Budget. It is paid for entirely by the workers who are paying, while they are working, for the income they will need when they can no longer work.
A longer life expectancy does not mean you will be able to work when you are older, or even be able to find a job. Social Security is insurance for those who can’t work when they are old or disabled…or die young with dependents.
Because we are expected to live longer, we need to save more for a longer, not later, retirement. The cost of saving more via Social Security “payroll tax” will be about 2 percent of payroll, which can be reached painlessly by raising the payroll tax about one tenth of one percent per year. That is about one dollar per week, per year.
There seems to be something like a conspiracy to keep the people from knowing this, but the Chief Actuary’s Office has confirmed it, and you can find out for yourself by reading the Trustees Report…a little more carefully than the politicians and pundits.
But if you don’t DO something about it, you and your kids and grandkids will not have Social Security when you need it,.
Keep up the good work, Sir. Much thanks.
How does the Trust Fund balance change if nothing is done or under your proposal? I don’t see the real value of “boiling the frog” slowly by 0.1% per annum if the end state has to be 2%. Just burn the Trust Fund down to a few months and then start the 2% if that is the critical number.
Eric
over the twenty years needed to raise the tax the 2% that will be needed for the forseeable future, ages will have increaseat least 20%. Can you see the point now?
Even if wages were not to go up, increase the tax gradually will be eaiser for people to manage than do get hit all at once. Though 2% is not a big deal, it would like the end of the world after the paid liars are done screaming about it. and the people will not understand that it is money they will get back with interest when they need it most.
The trust fund balance changes because you are adding income to it every year. up until last year adding that income one tenth of a percent at a time would have been enough to keep the trust fund from having to be paid back (by the governmetn TO the people it borrowed the money from..do you understand that much? it ..the existing trust fund would have remained a paper debt never being repaid, but yes, paying interest, which would hold the ultimate payroll tax down about 1% from where it would be without the Trust Fund. This is not complicated, but you probably need to try to understand it one step at a time. a pencil would help.
since i have been telling people about the one tenty percent solution for ten or more years, the fact that it will no longer completely avoid paying the Trust Fund back, should not come as a surprise. this year the one-tent percent per year will still avoid long term insolvency, but it won’t avoid short term “financial inadequacy” (not itself now a problem, but will become so if not addressed). which could be fixed by a two-tenths percent raise for a couple of years, then falling back to one tenth…or just keeping two tenths and getting the whole thing over with in ten years instead of twenty.
would two tenths break your heart? having to save that much to avoid starving on the streets when you can no longer work?
you think this is a college bull session, or a graduate seminar in which everyoone can talk and have their own opinion and having it not matter if they are talking nonsense or not?
tenth, not “tenty” or “tent.” have to keep track of the important stuff.
Fred
Thank you for the announcement of the COL increase for SS and the explanation.
yes, Fred, thank you for repeating the established misdirection about Social Security so we can look at it.
COLA raise “tempered” by the fact that it’s a cost of living raise…not quite equal to the cost of inflation, so not a raise at all. it is also tempered by the fact that the charge for part B Medicare is raised quite a bit to cover the cost of a hugely expensive experimental drug that may or may not help Alzheimers…so old folks will at least know they are starving. maybe.
the Trustees Report says that SS will be unable to pay full benefits…unles we cut benefits or increase the payroll tax. guess what will hurt more..a 2% (eventually) increase in the payroll tax, or a 20% cut in benefits which are currently set at just about the amount necessary to avoid desperate poverty.
by the way, if we were having real wage-driven inflation, the wages of workers paying into Social Security would be increasing and the payroll tax would…at the same tax rate…be increasing automatically, and this would automatically pay for the increased cost of benefits. it’s like a miracle that pay as you go financing which makes idiots think that “the young are paying for the old” and not their own eventual needs in retirement…including the costs of inflation.
it seems likely to me that Medicare could find a way to live on just 90% of its current income if only, say, they could cut the cost of the drugs they are currently not allowed to negotiate the prices of…a provision of the Bush administration designed to save the free market, don’t you know.
the Pew poll fails to discriminate between those who want to make social security sound by paying for it, and those who want to make it sound by cutting it. more important…when you ask people who are kept from knowing anything about a subject, it is probably unwise to base your policies on what they say they want. and completely dishonest to tell the people that “we, the politicians” are doing what the people want.
“phase them out” means kill Social Security. and there is nothing “phased” about Rick Scotts plan. he wants to kill them the first chance a Republican majority gets. It is unclear if he, they, plan to pay back the people who have been paying into Social Security their whole lives in order not be able to buy groceries when they can no longer work. but don’t expect “the people” to understand this. most people entertan themselves with “words” carefully designed by non partisan experts to keep them from thinking about what Social Security is, does. why they need it and how much it costs and what they get for their money.
McConnell “publicly” rebuked the plan for being released before the election. Biden is of course shamelessly using the Republican plan to bludgeon Republicans before the election…”politically,” of course. We don’t know what either of them plan to do “not politically” after the election.
There was a time when the Dems could be counted on to block the Republicans because they knew what was politically good for them. But now that the Democrats have their own plan to kill Social Security by turning it into welfare, we can’t be sure that even Democrats, or “progressives” will come out and fight for what they will absolutely (not politically) need. After all, isn’t “compromise” a good thing?
‘Social Security has nothing to do with the Federal Budget. ‘
If it doesn’t already, it will have to do with federal tax revenues.
The ‘Trust Fund, which pays out retiree benefits, (could) be depleted in 2034. At that time, the fund’s reserves will run out, leaving the system reliant on incoming tax revenue.’
You are misinterpreting the words you quoted. The “incoming tax revenue” reference is payroll tax. SS is considered off-budget, so coberly really is correct. SS cannot spend more than it has taken in, but it is not really part of the federal budget. “Fixes” that would make it part of the general budget have been proposed, but they are a bad idea, and they are not the way it has been done in the past.
The Greenspan Commission proposed changes in 1983 when they were close to being short of income. Congress implemented it by making changes to the SS budget – not by mixing it with the general budget. Even the bulk of the bad plans won’t do that.
Fred
the “incoming tax revenue is alos known as the Federal Insurance Contribution Act…that has nothing to do with the Federal Budget.
If I did not want to avoid confusing people I could add that The money paid out to beneficiaries who have a lot of other income is partly taxed and that money is returned to the Trust Fund. whether this is a “on-budget” or off is a matter of semantics and a detail that is a distraction from the essential nature. bur most people it seems like to dazzle themselves with words whose meaning they do not understand, but insist is more important than what Social Security actually does, and why it is important to people, and important that they understand they pay for there own benefits and no one else’s.
Oh! FICA, Federal Insurance Contribution Act
The tax that isn’t a tax.
That regressive ‘thing’ that was a contribution to my ‘future’ social security benefits. Or actually, to the social security benefits to people that were receiving them when I was paying in. What other people are now paying in to provide benefits for me & Mrs Fred. Yes, feel free to increase that with abandon.
Some of this also has to do with what becomes of the excess income tax we pay on our social security benefits, I bet.
(Don’t get on me for calling it regressive. All flat ‘things’ are regressive, because highly paid folks pay the same percentage as those who are just getting by. Up to $160k per year these days, when such payments stop entirely.)
Dobbs
I am sure you think you are saying something that meakes sense. You aren’t.
if i buy a ham sandwich I pay the same price as a millionaire or as a pauper. Anything else would destroy “economics,” not as science, but as a way of managing the “household.” We rightly have welfare for those people who just don’t have enough money to live. And we rightly requre those who do have more than they need to pay a “fair” share for that welfare as well as for the army, the police, and the courts, and all the subsidies businesses get while pretending to themselves that they are brave independent free marketers.
But we also jave Social Security which was a genius invention to allow ordinary workers to save a part of their paychecks against the day when they could no longer work… and to insure first that their payback would be fair and second that it would be adequate.
You are attempting to redesign in your head something like a sophisticated modern automobile, and your knowledge and mechanical aptitude are not sufficient for you to ds\esign, even on paper a child’s tricycle or even a pull-along wagon.
At the end of the day the worker who is just getting by will get someting like a ten percent return on his money, while the “over the cap” worker will get something like 2% (both figures “real” interest.” The rich guy gets back more money because he paid in more. but he gets less “interest” on what he paid in that the poor guy… that’s what makes it “insurance.” There is a cap on wages against which the tax is collected so that “rich” people will not have to pay more than the insurance is worth to them.
You are NOT paying an excess tax on your benefits. you are paying a normal tax on (part of) your benefits like everyone else who pays income tax on their retirement income. The tax is NOT collected on SS for people who have no or very little “outside” income. this is so they can live a less desperate life.
You seem to be crying because you have to pay an “excess” tax on your benefits and at the same time crying because you think Socisl Security is a “regressive” tax. if only the world could be fair according to the ideas of fairness that a six year old has.
I realize there is no point trying to explain any of this to you, but maybe it will help someone else understand
I guess it’s good to know that me and a millionaire can both pay the same price for a ham sandwich.
I think it’s odd that you don’t seem to understand how regressive taxes can be unfair and exacerbate income inequality.
Much of stock market trading (and share pricing) depends a lot on the Greater Fool theory, which works for wealthy people at least.
Also great for buying expensive homes, art work, luxury yachts and private jets.
It doesn’t work nearly as well for ordinary, ham-sandwich-buying people.
dobbs
and you apparently still can’t understand that “someone else” paying in so you can be repaid thre money you paid in in your turn is no different than someone buying your stocks when you decide to cash out, or dpeositing their money in the bank the same day you decide to withdraw yours.
without that perf
it would be better if you understood that it was good that you and a millionaire pay the same price for a ham sandwich.
i understand that a regressive tax might be unfair. but Social Security is not a regressive tax.
but yes, stock trading is not very good to poor people.
i don’t worry much about income equality. I worry about “enough” and about “too much” when too much means you can buy congressmen.
and also when too much means you can buy up all the land, meaning poor people can’t afford houses or “open spaces” . other than that it doesn’t bother me in the least that some people have more money than i do.
Eric377
yes, you could raise the payroll tax about one and a half percent right now and that would keep SS sovent for the next seventy five years. the 2% would keep it sovent forever and avoid having the bad guys yell that social security is broke, flat bust (George W Bush, about twenty years ago).
the 1.5% now would burn up the trust fund by the end of that seventy five years, and the tax would still need to be raised about another one, or half a, percent at that time. This is the end of the world to some people “kicking the can down the road.” I think the people alive in seventy five years will be able to handle the problem, if there is one, according to how they see the situation then, but “kicking the can down the road” has such a nice ring to it, even if it utter nonsense.
there is nothing boiling the frog about any of this. it’s just the moral way money works.
to specifically answer your original question: doing nothing will deplete the trust fund by about 2035..requiring a big cut in benefits or a 2% increase in the tax all at once. not a serious problem, but the gradual approach will slow or stop the depletion of the trust fund. by the time it reaches that 2%, people will have more money to pay for it. and the Trust Fund not being depleted, its interest contribution will keep the tax rate about a percent lower than it will be without it.
Eric
i don’t know anything about you. your questions might be perfectly sincere. but i have answered them so many times to people who don’t give a damn about the answers, they just want to sow doubt. so i get grouchy. don’t take it personally.
The Social Security Tax – Investopedia
The Social Security tax is a regressive tax, meaning that a larger portion of lower-income earners’ total income is withheld, compared with that of higher-income earners.8 Consider two employees, Izzy and Jacob. Izzy earns $85,000 for the tax year 2020 and has a 6.2% Social Security tax withheld from his pay. The federal government, in effect, collects 6.2% x $85,000 = $5,270 from Izzy to help pay for retirement and disability benefits.
Jacob, on the other hand, earns $175,000 for the tax year 2020. The Social Security tax rate will only be applied up to the limit of $137,700 (The Social Security tax limit for 2020 is $137,700; the limit jumps to $142,800 in 2021).9 Therefore, Jacob will pay 6.2% x $137,700 = $8,537.40 as his contribution to the country’s Social Security account for older people and people with disabilities, but his effective Social Security tax rate is $8,537.40 ÷ $175,000 = 4.87%. Izzy, with a lower income per annum, is effectively taxed at 6.2% (i.e., $5,270 ÷ $85,000).
Even households that earn a level of income to which little to no federal income tax will be applied may still have Social Security tax taken from their pay. A single taxpayer who earns $10,000 gross income in a given year, for example, will have zero income tax liability, but 6.2% may still be taken for Social Security. …
The FICA income limit keeps get raised, so now both Iggy & Jacob are paying about the same rates. So, thats good.
A case can be made that a regressive tax of only about 5% isn’t THAT bad. Which is to say that a regressive tax of 10% is much worse. However, if you are self-employed, you are required to pay FICA twice, once as an employee and again as your own employer, so you get to pay 10%.
BTW, I am aware that other, younger people are paying this regressive tax to keep my monthly checks coming, and I really do appreciate this. I hope they are also putting whatever they can afford into IRAs or 401K plans. (Assuming of course that things improve in the stock markets at some point. Meanwhile, buying opportunities abound!)
I am also not complaining about paying extra income tax on my social security benefits. It’s an alternative to means-testing which I presume you would object to.
Dobbs
i know what the payroll “tax” is and does. it is still not a regressive tax.
and i don’t mind if a poor man pays the same price (including tax) for a cigarette as a rich man.
your idea of “fair” is the same as that of a six year old who cries because her sister got a bigger piece of the burfday cake.
you think it’s fair for the rich man to pay for your retirement. he doesn’t think it’s fair. on the other hand it would not be fair for you to pay the same tax rate as the rich man for general government expenses, because twenty percent of a hundred dollars leaves you with only eighty dollars to live on, while twenty percent of a million dollars leaves him with only eight hundred thousand dollars to live on.
the difference is that the poor man gets his 620 dollars back when he retires plus a lot of interest.
meanwhile the oung person paying his FICA insurance contribution is not paying for your retirement. he is paying for his. if you don’t understand this you don’t understand money, banking, investment, or life itself.
bback before Social Security…even WAY before Social Security..parents paid for their kids needs…and for their own elderly parents needs. and when the kids grew up and their parents grew old, they paid for their own kids needs and their own parents needs, you know…”honor your father and your mother that your life may be long in the land.”
you might want to think about that, but what the hell.
Coberly,
Uh, keep up the good work and clearly you have a LOT OF work cut out for you. Thank you so much.
Coberly:
The minimum SS payment is $886 per month in 2020. Special Minimum Payment The numbers of people getting the minimum payment has declined since 1990 due to increased income.
Progressive?
Run
I don’t keep up with the latest figures, but the principle is the same.
otherwise, i don’t understand your point.
just off the top of my head and assuming some numbers.
assuming a worker was paid twenty k (constant dollars) average over 35 years. at 6% he would have paid in to SS 1200$ per year or 100$/mo.
for 35 years. if he lives for 20 years in retirement and gets $886$/mo he paid a total of $42,000 and gets 10000 per year for 20 years = 200,000
all in “adjusted” (for inflation and generl rise in average wages)
the guy who made 100,000 or more paid 12000 FICA per year for 35 years or about 420,000 total and gets back about 30,ooo per year for 20 years or about 600,000.
so the rich guys gets back one and a half times as much as he paid in, the poor guy gets back about five times what he paid in,
i’d call that “progressive”. check my arithmetic, i have run out of fingers in my old age, check your thinking (note to Dobbs) and see if you can avoid semantic traps.
I get that the ‘payroll tax’ is not really a “tax” at all.
It was just called that during the New Deal era because the Constitution as amended gives the guv’mint the authority to tax income.
So it has to continue to be called a tax.
As you have said at various times, it’s really a payment into a retirement plan operated by them.
It is regressive however. Wealthy people pay less into it, relative to their incomes, than less wealthy people do. It is regressive because it’s a flat rate, not progressive as ordinary income taxes are, as far as most taxpayers are concerned. The fact that highly paid people enjoy an income-cap on their FICA payments adds to the regressiveness. But benefit payments are also capped at the same income limit, so that there is no benefit paid to recipients beyond that limit may offer some alleviation.
Uber-wealthy people, relying mainly on capital-gains income, pay into it only to the extent they have ‘ordinary’ income, but get no benefits either, and they manage to get by somehow.
Nonetheless, it is a valuable and important program, and keeps many people out of poverty, as convoluted as its rules are (IMO), so we had better keep it sound & effective.
My issues with my sister about birthday-cake slices are my business, not yours.
I still remember the fuss she made over the transistor radio that I got for my twelfth birthday was better than the one she got for her tenth birthday three months earlier, because of (then as now) technology advances in the far-east.
Try to avoid trivial explanations. It’s patronizing.
Ron
if people were smart enough, and if i could guarantee I will necer go out of business
I could start a private insurance company and sell insurance that would pay my customers about one million dollars when they reached the age of 65….in the form of an inflation protected annuity of aabout 30,000 dollars per year as long as they lived (expected to be an average of 20 years after reaching 65. the premiun for this annuity would be 15,000 dollars per year…expected to be forty years over a working life time so 15 times 40 equals 30 times twenty. assuming the money is adjusted for inflation everything comes out equal. it is worth noting that even if the eventual payback is LESS than the total premiums, the insurance is a “good buy” because it is a good idea to guarantee you will have the money when you are 65 than to just hope you will.
of course, people are not smart and not everyone would buy my insurance, and i can’t guarantee i will still be in business forty years from now, unless
I am the United States of America. Then I can “force” people to buy my insurance, AND guarantee will still be here in forty years.
This is just the start of how you (I, in this case) would have to set prices and payout schedules…but that is pretty much just a matter of actuarial science. The point here is to note that SS is not doing anything a perfectly reasonable private insurance company could (would?) do if it met the “compulsory” and “forever” requirements.
this would, i hope eliminate all the semantic stupidity about regressive tax and “unfair cap” and whatever godforsaken else the people who can’t understand, or don’t want you to understand, what social security is (does) come up with and can’t let go of.
America needs the mandatory insurance (savings) because without it the economy would go to hell, people would starve, and even the rugged businessmen would find it difficult to get rich.
I think you, Ron, can complete the exercise. I don’t think Dobbs can…that’s why it has to be mandatory.
Dobbs
since you “get it” why do you keep arguing about it? just for the pleasure of wasting my time and getting my goat. or because you are unable to remember that you “got it.”?
Dobbs
I am “patronizing” you because you are thinking like a six-year old. I really don’t give a damn about you and your sister. I was trying to show you that you were thinking about “fairness” like a six year old.
It’s possible that, if it weren’t a tax, then its regressiveness could not be an issue. But it if it isn’t a tax, the guv’mint cannot collect it. Semantics can be a bitch.
Dobbs
“semantics can be a bitch.” so can stupidity. if I buy, say a tract of land, from the government, and the government collects my payment, is that a tax? if i buy a savings bond, and the government collects my payment, is that a tax?
if the government passes a law to protect the people (say the state government posting a speed limit, or the federal government enacting environmental protections so your company does not poison the people) and you break the law, if the government fines you and collects your payment, is that a tax?
SS has to be a “tax” because people are too damn dumb to know they need it. but it is not a “tax” because you, they, get their money back with interest, beause the goernment has saved and protected it for them until they need it more than they do today.
(What else would you expect from the American Enterprise Institute?)
Social Security on the Ropes
AEI – July 2022
Say, you are politically naive and can not understand why Congress has not taken action on something so important as minimum retirement for the elderly. What other options do we have, soylent green? The meat would be tough coming from these old critters. We would have better with the younger more tasty versions.
In it, the author addresses two important questions. First, why have lawmakers thus far failed to address Social Security’s financial shortfall, despite having ample warning? Second, what action are they likely to take as the trust fund approaches depletion? …
If you do not know the answer to these questions, you are politically naive. Why don’t they address healthcare, pollution, the environment discrimination more thoroughly, etc. Because they do not have to. There is no pressure on them to do so. They lack for the moral foundation to do so. It is not within their political sphere endangering them to do so. So they ignore it.
No action by Congress will be taken until it is politically expedient for them to do so. Funny thing too, most people will not do anything either. They are part of the now population just like becoming energy efficient. What action will be taken? The one most likely to preserve their status. It won’t be the one where they toss ma and pa kettle off the old farm and snatch their pension for back taxes either.
There are other resources which can fund Social Security. You should know this by now.
run
i’m not so sure they won’t toss ma and pa off the farm. they have already found a way to do that to pay the loan sharks for “student debt.”
your comment is right on, but “should know this by now” is misplaced. they don’t know…even the people who read AB don’t know (they block it out because they love the lies they live by).
I can’t say that “telling them” will make them know. I have tried, and the word certainly has not gone beyond a few people on AB. the response I get on other blogs is vicious. they hate me for trying to tell them..because they would have to unlearn the lies by which they live their lives. but we have to find a way to tell them…better persuaders than i am…or the liars will win and the people will never even know what happened. by the time they are old and poor they will think that SS just ran out of money because it was unworkable. and vote (their votes won’t be counted, but it will make them feel better) for a dictator who blames the “socialists” and promises to Make America Great Again by beating up the socialist and putting them in jail.
people love that kind of solution.
re Dobbs…
I assume you are quoting and this is not your opinion
“tough decisions” this is a lie. now How can something so obvious and ambiguous be a lie? it’s because there are no tough decisions to be made. raising the payroll “tax”… that is the amount you save for a longer than previously expected retirement…about a dollar a week per year until youare saving enough to retire is not a tough decision,
what makes it “tough” is the liars who first are concealing the fact or facts from you..first, that YOU pay for Social Security, no one will pay it for you. second that it is so cheap to “fix”, and third, that you get the money back with interest when you are going to need it most.
“rate of return” does not really matter. even if you got a negative rate of return, the certainty of having “enough” when you are going to need it badly is worth even “paying more” than you are going to”get” if you otherwise do not have a way to guarantee you are going to “get it,”
but the “rate of return” is in fact positive and always will be..unless we do something stupid. even “the rich” get back more than they pay in, adjusted for inflation and even the general rise in real wages. but they don’t get as high a “rate of return” as the poor, who are assured of getting “enough” by paying a lower rate of effective interest to those who have “enough” in order to pay a higher rate of return to those who otherwise won’t have enough.
to make this work, the system has to be “mandatory”… just like speed limits or laws against murder…because the people simply are not smart enough to understand that they need it,
and therein lies the problem. first, there are people, very rich people, who hate the whole idea of “security” for the poor and pay lots of money for the finest liars to lie to the people about “socialism”, “huge unfunded deficits” SS going broke… and on the other hand “regressive tax” and “make the rich pay” “their fair share.” most people are dazzled by words and never even try to think about the reality that the words are being used to conceal.
the other lie “pay higher taxes” what makes this a lie is that the higher tax would be an extra dollar per week while your wages are rising ten dollars per week per year.
they know people “hate taxes” and are too dumb to ask “how much higher” and “what do I get for it?”
Well, “ooberly”, I may not be the only one who believes that ‘an extra dollar per week’ is going to make enough of a difference. But I won’t be paying it anyway. I am done with that. I don’t particularly care for the idea of younger people paying for my soc-sec benefits either, but I will admit that the system was designed that way. I have long since gotten over objections to paying taxes anyway, per Oliver Wendell Holmes Jr.
The Price of Civilization
A better link…
“I like to pay taxes. With them I buy civilization.”
Both my adult children at one time or another (one still) has been self-employed and required to pay (excuse me) ‘regressive’ FICA as both employee and their own employer, which is awful.
In the current gig economy, this has got to affect many, many people.
That FICA is not really taxation does not make this any better.
Oh, but you say it is, so that makes it worse.
Dobbs
I am afraid I can’t excuse you. Calling SS a “regressive tax” is both stupid and dangerous. It’s not even a tax; you get the money back with interest. You are paying for your own old age. The liars want you to call it a tax because they know that people resent taxes. The “left” wants you to call it regrssive because they are too stupid to see that it is the most progressive “tax” in history. It works like insurance: most of the money that goes to the people who end up otherwise too poor to retire, comes from the “excess” interest earned by “the rich” who pay more payroll tax than the poor.
As for the self employed paying for the employer’s share as well as the empolyee’s (themselves) share.. it’s funny that the employers of labor (other people’s) in this country lke to call the “empolyer’s share” “really” the employees money. But then they call it a “jobs killing tax” meaning they wouldn’t pay the employees that money if the government didn’t force the to. Self-employed people pay “both” shares because “both” shares are what it takes to save enough money to be able to retire. There are advantages to being self-employed. But it still takes the government to force the employer to save enough money so he can retire even if his business fails and he would otherwise have to go on welfare at the expense of other taxpayers.
There is no hope that most people where ever think carefully enough to see the whole picture. They stop thinking when they see “their” money on the table so they can have the pleasur of bitching about “the government” forcing them to take care of themselves.
Fred:
and what else should they have done at tax time??? Tell the rest of it . . .
Perhaps . . .
There are two income tax deductions that reduce
your taxes.
First, your net earnings from self-employment are
reduced by half the amount of your total Social Security
tax. This is similar to the way employees are treated
under the tax laws, because the employer’s share
of the Social Security tax is not considered wages
to the employee.
Second, you can deduct half of your Social Security
tax on IRS Form 1040. But the deduction must be taken
from your gross income in determining your adjusted
gross income. It cannot be an itemized deduction and
must not be listed on your Schedule C.
self employed
Fred:
Did you help them???
“Did I help them?”
I taught them to be investors. I invested for them long ago. That was help enough I think.
Run, never having been self-employed myself, I was not aware of the deductions available for those who are. I hope my kids are aware, and I will remind them of this. Thanks for the insights.
well, “Dobbs,”
I don’t suppose it matters much what you think. But it does matter that the paid liars have managed to convince everyone that the kids are paying for the old people.
but here’s another clue for you: if all the kids disappeared, the old people would certainly be in for hard times. so for selfish reasons alone we need to keep the kids alive until they are old enough to understand how the world works. you see, back in the old old days, people raised their kids and supported their own parents in their (the parents) old age. in turn the kids grew up and suported their own kids and their their now old parents… and this seems to have worked out well for everyone.
until, of course the “family” become economically unable to guarantee that it would always be able to care for either children or old parents. at first we tried “welfare” like the “poor house”… which, oddly enough, relied on taxes taken from ‘the young” to support. but that did not work out very well…and so on..until a genius named Roosevelt invented a system whereby people put aside a certain percent of their own money…in a very secure government “vault” where it was kept for them until they needed it, and then returned to them with “interst” according to the ancient order of time and the nature of money.
you can, if you are determined to misunderstand how the world, much less social security, works keep calling this “the young paying for the old.” or you could look at it as the working paying for their own old age in advance of the need, while they still had the money. in a system that looks very much like ordinary savings and investment, except for the guarantee by the full faith and credit of the United States of America that they would most certainly get their money back when the time came. That is, unless the people became stupid and listened to the haters and liars who want them to go around thinking that it’s “really” the young paying for the old.
I’m glad you and Holmes figured out why paying taxes was not theft. Ayn Rand would be so disappointed in you,
shorter version
this idea was so important that thousands of years ago people enshrined it into a “commandment” to live by: “Honor your father and your mother, so your years will be long in the land.” You really need to understand that bit that comes after the comma.
By the time we entered the industrial age the family could no longer guarantee the arrangement, and the “community” and the “state” had to take over. Nobody needed traffic laws when we all walked. Now that everyone drives a car, we do need some government regulation to keep us from killing each other.
I did see a cartoon in a national magazine way back before Social Security was an issue, but well into the new days:
it picures a well dressed young man sitting behind a big desk, with an old woman in rags is sitting on a chair in front of the desk. “Yes, Mom, says the young man, “I know all that. What I meant is what have you done for me lately.
As you & have both pointed out, our mothers got NOTHING from Social Security, but hopefully did not pay too much into it either.
And FWIW, I did not gain anything from what my mother paid in, because that all went to the people who were receiving benefits while she was still quite young.
We need the Social Security system to keep people out of poverty, but we also need to put aside 401K/IRA savings to augment it, because soc-sec is never (again) going to be sufficient. It was for my father 30 years ago, but that was then. (He was neither a saver nor an investor.)
Dobbs
i have answered this already. many times. it has made no impression on you at all. you still think like that six year old whose sister got the biggest piece of the burfday cake.
Alas, we are never even going to agree to disagree.
I posted a reply to this continuing insult that didn’t make it.
I don’t get much from your quaint explanations and less from biblical references. Maybe it’s just me.
Dobbs
I have lost track of which insult and which Biblical reference. It pains me to insult you, but I run out of polite answers and cn’t remember the polite words for “you don’t get it”.
another parable for you “lest the wicked hear, and hearing turn, and I should save them.”:
I when you go to claim your SS benefits, do they ask you, “okay, tell us who is paying for you?” or do they ask you “how much did you pay in?” actually they don’t have to ask, they have a record. they pay you according to what you paid in, not what your imaginary friend paid in.
II You get your paycheck. you put some in the bank to save for your old age. the bank lends it to the baker. the baker uses it to buy flour from the flour mill. the flour mill uses it to buy wheat from the farmer. The farmer puts some of it in the bank to save for his old age. You go to the bank and withdraw your money.
But wait! cries the Dobbs. That means the farmer is paying for my old age! That’s no fair!”
There is nothing of yours in trash or spam.
Fred
I want you to know that I apologize completely and sincerely for insulting you. I am told by one of those relifious references that doing so puts me in danger of hell-fire. I don’t think that means what most people seem to think, but it’s not fear of that that makes me sorry if I hurt your feelings. That was not my intent. But there is something more important at stake here than either of our feelings. And my feelings, at least, run high, I when I see someone threatening, on purpose or not, the welfare of my children and grandchildren and all the future grandmothers and grandfathers.
If it helps, you are no more stupid than I am or the rest of humanity. If it helps you more, the smartest person I ever knew personally said “Social Security has elements of a Ponzi Scheme when I tried to show her my proof that a dollar per week per year would keep it solvent forever… a proof endorsed by the Social Security chief actuary’s office. This caused me to wonder, if I hadn’t already, what “smart” means. Not what most people think, I think.
You don’t know me. There is no reason you should feel bad if I insult you. People insult me all the time.
“you get the money back with interest. You are paying for your own old age.”
No, I am getting some young person’s money back ‘with interest’, in that they are presumably paying in far more than I ever did. Just as I paid for someone else’s old age long ago.
This is a lot like a Ponzi scheme. But I will never call it such.
But it’s a system we have to have. It just needs augmenting, from personal savings.
Dobbs
they are paying more in becuase they will get more back.
it’s not a Ponzi scheme. ALL investments and savings depend upon there being future “buyers” to supply the money you get when you cash out.
The United States has an infinite supply of customers that will never run out as long as people need some way to guarantee their savings…not only agaist loss due to inflation or market failure…also loss due to their failure to thrive, or their failure to save.
If you want to “save” a little more to have a little more (if your luck holds out) by all means invest, use IRA or 401K if you like. but hang on to that SS in case the best laid plans of mice and men gang alie [i have spelled that wrong, but so has spell-check.]
The US doesn’t have an infinite supply of anything.
you are expecting America to run out of people?
I hope our kids think they got more from you than advice on the stock market. food? housing? education? you paid your taxes to make America prosperous and strong?
you paid your Social Security so they didn’t have to support you in your old age?
I need to go weep for my country.
Dobbs
typo
your kids, not “our kids”.
though in an industrialized interdependent economy it is likely even my kids got something from you.
now, i really can’t stand any more of this.