Discussion on Solutions to Social Security at Angry Bear
A different viewpoint by myself which is not so new and very workable. Dean Baker at CEPR offers up his viewpoint on saving Social Security. I believe we are in close proximity to a solution except I would suggest a different source of funds. Dale, Bruce, and Arne have talked this simple solution up until blue in the face. People still want to tax other entities and impair the existing Social Contract with Labor or the Worker.
“Big Victory on Retirement Income in Omnibus Spending Bill,” Center for Economic and Policy, Research, Dean Baker.
Defending Social Security was crucial, both because tens of millions of people depend on it for most or all of their income, but also because it was a model social program. The administrative costs are minimal, with the total program’s costs coming to less than 0.6 percent of annual benefits, with the costs of the retirement program alone coming to less than 0.4 percent of benefits. By comparison, the fees from private 401(k)s run in the neighborhood of 15 to 20 percent of annual retirement benefits.
Commenter skeptonomist in the comments section at CEPR
The Secure 2.0 Act seems to be another step in the replacement of defined-benefit retirement plans with individual retirement accounts. One definite outcome is that more of worker’s earnings will go into management by the financial system, and that is certainly one reason why legislators passed it. The Thrift Savings Plan would be a better option than current ones but it also puts retirement income into standard funds where it will be at the mercy of the ups and downs of the stock market and the decisions of the Fed to change interest rates as well as the fees of the financial institutions. The Thrift Savings Plan uses investment plans administered by Blackrock.
The way to insure a minimum retirement income is with Social Security. It should be expanded rather than expanding investment programs of any kind. If income from the financial system is required, it can – and should – be obtained from taxes on rents, dividends, interest and capital gains, which are not now taxed at all for SS. I suspect that most people are not aware that: a) SS is not really a savings or investment plan, it mostly just takes money from workers and distributes it to retirees; b) most of the money in the Trust fund is only a temporary supplement for baby boomers (who paid the money in), not the whole of the program; c) the “unearned” income from rents, dividends, interest and capital gains, which of course goes mostly to upper income people, is not taxed; d) the idea that the program will go “bankrupt” is nonsense – there is no moral or economic reason why it has to always be in the black, any more than other programs such as the military. Congress could change that arbitrary requirement at any time.
The media do a terrible job of explaining the real nature of Social Security. Apparently most younger people don’t believe they will get anything from SS when they retire. I don’t know whether editors and pundits deliberately give out or tolerate false information, or whether they don’t really understand the system. I am afraid that a result of the Secure 2.0 Act will be to increase the economic and political power of the financial system, and decrease the perception of need to protect and expand Social Security.
In classical free-market economics savings are needed to provide investment capital. But the US at least has no lack of investment capital – there is said to be a “savings glut” and corporations use the money from tax cuts to buy back their own stock rather than increase investment. There is no need to essentially tax workers by means of semi-voluntary deductions to provide more money to jack up stock prices and provide income for the financial system.
Hmmm . . .
Lot to answer here. Mostly agree.
The Trust fund was meant to get SS past baby boomers arriving on the scene. We are a large lot of hungry mouths, retired, and getting ready to retire. But there are issues.
Just some simple facts which I outlined over at Angry Bear. Prof. Baker is familiar with Angry Bear. In particular with Dale Coberly and also Bruce Webb.
– Reproduction is at ~1.7 people per family. Down from the 2.01 that Joel Garreau discussed in “300 Million and Counting” in 2006.
– Moreso, Statistical Replacement Rate in 2020 fell to 1,637.5 births per 1,000 women and down from 1.7 births per 1,000 women in 2019. Unless there is increased and younger population, the nation could have economic issues as a growing portion of the population ages out.
– The U.S. Census Bureau Vintage 2021 Population Estimates released December 2021 revealed the population grew 0.1%. The COVID-19 pandemic exacerbated the slower growth the country has experienced in recent years.
– The latest SSA projections indicate there will be 2.1 workers per Social Security beneficiary in 2040, down from 3.7 in 1970. This threatens the viability of SS unless something is done early on to minimize impact.
– In 2020, 1 in ~6 people were 65+ years of age and in 2040 1 in 5 will be 65+ years of age. Yes, people are working longer. That is people who have less risky or safer employment.
– Twenty twenty-one was the first year since 1937 the U.S. population grew by fewer than one million people. The lowest numeric growth since at least 1900 (Census Bureau began annual population estimates).
This reduction in population and other factors create a viability issue for Social Security beneficiaries by 2034. There are workable solutions to this dependent upon how much independence recipients want to surrender to politicians and investment interests. The data is from other AB posts and are backed-up with sources.
However . . .
Today’s issue is fixable. As Dale Coberly would tell you, incremental increases of 1 tenth of 1% for individuals and similar for companies would secure SS for 50+ years. A total increase would be 1% for each. This is called the Norhtwest Plan which was said to be workable by SS.
The other side of this is allowing funds to be invested by commercial interests . . .
Does it make sense for labor to turn their meager earnings over to Wall Street investors and banks who take their portions directly from those funds? And then invest in risky entities? Then taking fees from positive or negative returns?
Should states be offering retirement programs? It was not until recently states have demonstrated greater fiscal responsibility in their retirement plan funding. Pew has a recent article on the turn around.
However, this turnaround is recent. Since 2001 (PEW) state sponsored retirement funds have been in trouble due to politicians borrowing from the funds to subsidize programs or tax cuts. Large states such as Texas, Florida, Illinois, Massachusetts (as well as smaller states) still experience negative amortization (Pew). Don’t believe PEW? Other sources are out there. Illinois is a stepchild for political interests invading retirement funds. It is also a battle for other state spending needs and priorities. States are not sovereign either.
But why do this in such a manner?
For one thing . . . SS was and I believe still is the third rail to politicians which is why many politicians will not mess with it. SS belongs to the worker as they paid for it out of their taxes. Once you start adding other sources of revenue, political interests will want larger control and interest in adjusting it to budgets or using it for political interests it and the ability to adjust it.
I have gone back and forth on SS and its supposed issues. Issues which are readily fixable in the near term. However, my expertise is supply chain and manufacturing throughput. Supply chain has never had an impact on the economy, right? Then there is the rant is MMT or print more dollars as the US is sovereign. We probably could print more dollars to cover the need. Why do so when the fix is simple and maintains the social contract with Labor?
The overall solution is so simple and very workable. Keep SS as a part of the social contract with Labor. Increase SS withholding one tenth of 1% for both Labor and companies presently for future shortfall years. There may even be years an increase may not be needed. Maintain the social contract with workers keeping it the third rail for politicians.
Why mess with something and its funding that works? Perhaps, your opinion differs?
“Big Victory on Retirement Income in Omnibus Spending Bill,” Center for Economic and Policy Research, Dean Baker
i will comment later if the computer holds up.
just want to point out that neither baker nor skept0- point out the one tenth percent solution.
why? too easy? doesn’t ‘make the rich pay”? doesn’t keep the poitical game going?
Perhaps this is a nit:
The ratio of workers to beneficiaries is dropping both because (as you say) reproduction is dropping, but also because beneficiaries are living longer. The sensitivity analysis in the annual report (part VI-D) gives more weight to increasing lifespans.
I also give more weight to increasing lifespans because it should be obvious that if you want to live longer in retirement you need to save more for it while you are working. Setting aside more for the Social Security component means increasing the tax rate.
Your comment is not a bad one. The three of us have talked about this. I believe I gave a long explanation on this also.
We had this discussion back in October also. Living longer does not mean you can work longer. There is a fine line there. Workers can start taking Social Security at 66 years of age if born between 1943–1954.
You can take it as early as 62 under the premise you may collect more. If only that were true. I found it better to wait till 70 which my wife did also. If health is the issue, Medicare kicks in at 65 and is far less costly than the ACA with better coverage. Of course, you need other coverage and Part D.
I was fortunate to have a job that wanted me too. Does anyone know the impact of Covid on the older adults. Supposedly it was worse. The gains, less funds drawn out of SS.
not a nit. there are several factors affecting the actuarial deficit: living longer, lower birth rates, slower increase in real income. these can be looked at from a “macro” or economy total perspective, or frome the individual worker/beneficiary perspective’
since SS is structured as worker paid and not “welfare” (that is paid for by general taxes and treted as a budgert item, and because whatever happens to the economy at large is not under the cotrol of individual workers, i believe it makes more sense to look at the ratio of working years to retirement years as the critical measure…this one factor also influences the total money available to Social Security and the total money paid out by Social Security to beneficiaries.
Besides, that’s the way you look at non-Social Security retirement savings: you look at what you think you’ll need for retirement and how much you’ll need to save out of your paycheck to have that much money when you need it….guessing what interest rate, or return on investments you will get and what rate of inflation you will experience. the nice thing about Social Security is that it automatically adjusts for inflation and the “intersest” that automatically comes from the average increase in real income.
but the most important reason for looking at it from the increasing life expectancy is that is the easiest way for people to understant why they will neec to a save a little more in order to have “enough” when they retire.
i can’t go out and make everyone have more children, i can’t get everyone a raise, and only Republicans want to reduce life expectancy (not entirely a joke..remember the texas lt governor who wanted old people to die from covid so their children would not lose any money from business closures to prevent the spread of the disease)
but i can understand why if there is a good chance i will live longer than my parents i should save more for my retirement.
I have lost too much of my retirement money too many times to want to see SS in the market in any form.
Why not increase the tax rate and start taxing interest, dividends and cap gains both. I would go smaller on the tax increase and get more of the money from the upper income brackets who already pay a tiny fraction of their income compared to the average worker. Income is income, after all. I would like to see 85-90% of income taxable for social security. That would include any form of income someone could access and use. And make rate and base adjustments automatically if the reserves drop too low (or high).
Given that the full SS age keeps rising, longer lifespans automatically will generate more savings. Raising the rate depends on what that rate is applied to, and it should be most of the earnings of most everyone. A higher wage base and collecting SS on all forms of accessible income may or may not be enough to eliminate the need for a rate increase. It certainly would be far fairer over all IMO.
“Why not increase the tax rate and start taxing interest, dividends and cap gains both.”
That is a market-based fund input. It is outside or Worker’s input and more open to political and commercial attacks. Cobery had estimated the payout for a person making ~$50,000/years was an extra $1/week. As far as raising the age limit? Because you live longer does not mean you can work just as hard or fast. At 65, I was slower than when I was 60. At 70, I am even slower and tire sooner. I am weight appropriate. My Shepard and I go for hourly walks covering miles. Still not the same as when I was running or doing squats at 300#. Longer life does not give you the same capacity.
There are economic arguments too, to not sustaining longer work life too.
“Given that the full SS age keeps rising”…
Not quite true. The stepped in change from 65 to 67 was legislated in 1983. There have been no additional changes since then even though life expectancy has continued to increase. Early retirement at 62 is still possible, but those benefits were reduced each time the Normal Retirement Age was increase.
Ignoring your second paragraph, the solution to increasing lifespan is to put away a larger percentage of your wages while you are still working.
Younger and more valuable.
At a certain point in your lifespan, your value to a company decreases or may decrease. In which case, you may find yourself unneeded at 66 and 67. When we were young, we were very critical of older people in the workplace. So yeah, socking away more funds early on in SS or commercial savings makes a whole lotta sense. I was fortunate to work for Koreans from 66 to almost 70. They had a different outlook on age.
The impact of age and ACA healthcare insurance is one reason why age should not be used. Many people in their sixties re finding it impossible to afford commercial healthcare insurance.
Under the ACA, the premium charged for a 21-year-old is used as the base to calculate rates for all other age groups.
In most states, people 64 or older cannot be charged more than three times that base rate. Rates for children under 21 are lower than the base rate due to fewer health risks. How Age Influences Healthcare Costs
Even though I was in good shape, I found it to be harder physically. Expanding retirement may make a whole lot of sense for some. I do not think it is possible for everyone.
Last I heard they were talking about raising it again. Maybe the Covid related drop in life expectancy put a kibosh on that, but I am quite certain it will come up again. It is a way to reduce benefits without making cuts to cash benefits, and those are always popular.
Saving more is one solution, or part of a solution. Requiring all the people to pay a reasonable share of their income to support the floor under everyone is another. And the very wealthy, or even the highly paid, do not contribute anything close the the share of their income that the median wage worker does.
Not everyone can continue to work past 65, or even till then, even if the full retirement age is higher. Saving as if you will live to 90 or 100 is not doable for most workers.
The fact that no one has taken action to make SS more secure in 40 years is not a good thing.
Why do you think SS is insecure? I agree there is no need to raise the age. Besides sitting in a safe forum, I would like to see Senators and Representatives work past the age of 65 to ern their retirement.
the way to make SS more secure is to raise the payroll tax about a dollar per week per year for a few tears while real wages are expected to increase about ten dollars per week per year.
why do you keep looking for another way? if you don’t believe me you don’t believe the actuaries who made the predictions you are worried about.
your statements above are based on unstated, and wrong, assumptions. and the things you are worried about are already baked into the actuaries predictions…. they amount to a need to raise the payroll tax about a dollar per week per year…
the rich already pay more than ther “fair share”. it is their tax that makes it possible for SS to pay more to the people who are not able to save enough for their own retirement. you don’t believe that because you don’t know the facts. and because your idea of “fair” is “people who make more money should pay more for their bread than people who make less money. this is not fair. it may be necessary at times and for some people. but as a way ordinary workers who have enough money to pay for their own bread, it is not a good idea to have them demanding the rich pay for it.
you can’t seem to let go of the idea, and you can’t seem to put any numbers to it…how much should the rich pay so that you don’t have to?
why do you want someone else to pay for your retirement. do you want someone else to pay for your groceries? it is one thing to have welfare for people who need it. but it is another thing to have welfare pay for the ordinary expenses of living… and retirement is an ordinary expense of living. SS is the way for you to make sure you will have enough without having to beg, or “demand”, from other people that they pay for what you should reasonably pay for yourself… or at least pay the insurance premium for accidents you can reaonaby expect… such as reaching old age without having made enough, or saved enough, to live after you can no longer work.
the extra dollar per week per year will let you own your own retirement.
What I want is for everyone in this country to share the burden in a more equitable manner. Highly paid individuals pay a much smaller fraction of their income to SS. Not everyone earns enough to save. Some of the working poor already collect benefits because they do not earn enough to support themselves adequately. If you can get to Medicare age, you have a decent chance at living the average lifespan. I don’t see why SS taxes should not be structured to make everyone pay at least the percentage of income that the median worker pays, and use the extra money we don’t get now to make sure that the bottom end retirees have enough for decent food, clothing, and shelter.
at what level of income do you stop having the rich pay for your social security and start paying for someone else’s social security. what payroll tax rate would it take if the rich paid the same percent of their total income as “the poor.” In fact all workers pay the same percent of their income… up to the cap. do you demand the rich pay the same percent of their income for their bread as you pay for yours? is that the way it works at your grocery store. everybody pays with a credit card that tells the computer what their income is, so the price of a loaf of bread will be calculated according to their income and not be the same price for everyone who buys bread.
suppose they turned it around and everyone has to pay the same share of their income for the defense budget or the other needs of the country. in case you are not aware of it, the rich pay more for general taxes than you do. in most cases a higher percent of their income, but except for a few Donald Trumps, almost always a greater amount. Some of them think that’s not fair.
Most honest people are able to live with the idea that the rich are richer than they are. they understand the graduated income tax, but they don’t demand that the rich pay the same percent of their income for their groceries.
imagine you go into a grocery store and the clerk charges you four times as much for a loaf of bread as he charges the next guy in line, because “you have more money that he does.”
Why not increase immigration to offset the declining birth rates?
A valid technical solution if not a valid political solution except that increasing life expectancy is a bigger deal than declining birth rates.
go out and kidnap foreigners and bring them to America to work so you won’t have to save for your own retiremtent? or just open the door to the millions who want to come to America and pay for your retirement?
not to mention the fact that we keep losing elections because most Americans are scared to death that all those immigrants will take their jobs away and want to marry their daughters.
Most people do not understand how they, their parents, their grandparents, etc. came to arrive on the US shores. One or two generations and they blend as normal Americans. People want to come to the US. Hence, the thousands at the southern border. Out population growth is hampered by a failure to reproduce. The impact on our economy today is the result of an aging workforce.
We do need immigrants and more of them. Labor is still an important part of the economy. Manipulated supply chain had a large impact on inflation.
Yes. Thanks for posting this serious comment in reply to my serious question.
I suppose I failed to make clear that those immigrants would be paying for their own future retirement. When they “pay for yours” its an optical illusion. another form of money is the record created by: “John Doe paid one thousand dollars to First Bank, to be kept by said bank for ten years at three percent interest, principle and interest to be paid at the end of that ten years.”
they, the immigrants would be very annoyed to go to collect their benefits and be told, “oh, we used that money to pay…lets see….Mark Smith and Maggie Jones and, uh, Joe…. You’ll have to go find some young person who will be willing to pay for your groceries.”
Starting this month, SS increased in payouts to people like us (mostly). Beside the minimal interest accrued, who is paying for the increase and prior increases? Unless I am mistaken, it is the accruals of SS withholding and interest gains on past and recent deposits that are making up the difference. Here is where you and Arne can explain further. The funds have to accrue in some manner to account for the 8.7% increase this year.
The babyboomer trust was meant to cover the larger numbers of citizens born after WWII. We are slowly drawing it down. I believe the last report by Bruce was the drawdown was interest accrued to date. This is basically debits and credits to account showing accrued payments by citizens, interest, and withdrawals. There is no piggy bank with funds stuffed in it.
I believe these increases may be outside of the planned amounts of increases thought of in the eighties for the future.
Your, Arne, and Bruce’s premise of a need for slight increases as needed on both citizen’s and corporations for Social Security is exacting right. Such gives ownership to citizens and not banking, corporation, political, and monetary/fiscal theories. They paid for it. I detest the later even though I understand it and have discussed this with others.
When payments are needed, a fresh batch of money is supplied by the Treasury to make them. The dollars taken from our paychecks are electronic transactions from us to the treasury and accounted for there. No physical dollars are handed over. In a way this is a controlled version of MMT in that there are debits and credits backing up funds. Others or MMT proponents would prefer we toss the controls and survive by the natural wealth of the country. I am not sold on this. One of the reasons the US currency is used internationally as a financial mode of global transactions is the stability of the US dollar. Our one commenter from the Philippines commented on the rising Fed Rate as being detrimental to his country. Why, because global transactions are done mostly in US dollars and not the Philippines Peso. It takes more Pesos to be the equivalent of a dollar in international transactions to get US dollars. The rise in the Fed Rate hurts the Philippines population besides becoming a burden on lower income people in the US. Hence, the slaughter of the peasants, knights v pawns. An unfair battle over policy and corporate manipulation of supply chain (great post by New Deal democrat today – read it).
Roughly one million + people died of Covid. A large number of them were older who were drawing from SS or were on the verge of drawing from SS. There should be excess funds from this even after paying for newly disabled from Covid. We have not accounted for this the same as I (we) do not know the positive input from illegal residents in the US working. Unknown inputs.
Dale, you are correct on Social Security. I can defend your stance. I believe things have changed somewhat and here were impacts, potentially positive impacts to SS. I am not sure what they were or the impact. And no, SS is still not safe.
“I (we) do not know the positive input from illegal residents in the US working. “
The word “know” is doing the work in that sentence. But there are reasonable estimates (see below), and we do know that undocumented workers who use fake SS numbers (a) do contribute to the balance in SS and (b) will never see a penny of the money contributed on their behalf.
Any serious discussion of how to make up a future shortfall in SS benefits should include increasing *legal* immigration. I doubt it will cover all the shortfall, but the impact would be significant.
undocumented immigrants get social security benefits if they have paid for them…unless their employers have pocketed the money.
when you talk about “any serious discussion” you should know something about the available facts.
Marketplace is not a reliable source of information about Social Security.
My serious answer remains: why do you want someone else to pay for your groceries in retirement? do you have any idea of what unintended consequences may follow from increasing immigration so you won’t have to pay an extra dollar per week for your own future groceries that you will need more of because you will be living longer than your recent ancestors?
take it again: you can pay for your own Social Security by increase your own tax (savings rate) about a dollar per week per year for a few years. or you can “increase legal immigration” which has no political support, no direct affect on Social Security finances, and unpredtictaboe consequences… and you fail to account for the need to pay benefits to what would be mostly lower income immigrants after you have used their money to keep your “tax” (really savings) a dollar lower. where is the money going to come from to pay those workers benefits which they will have paid for? even more immigration? printing magical money…which even the MMT people understand will increase inflation (unless there is a magical increase in employment and production…. which is in fact exactly what we already do, except we keep honest-ish books about what we are doing…with results that vary somewhat unpredictably.
i’m running on because it astounds me that people keep looking for magic reasons to get other people to pay for their retirement,.. even thoughtheir real incomes are two or three times what their grandparents lived on while saving for their own retirement.
are we so debased that we expect other people to pay for our groceries….just as ‘the rich’ have always found a way to get other people to pay for their groceries…from serfdom to outright slavery to less than fair wages and cheating their customers.
can you wrap your head around the idea that someone smarter than both you and me came up with an idea to solve the “retirement problem” that does not depend on getting someone else to pay for it? (yes, there is an insurance factor…but you pay for the insurance, and we all pay into that insurance because we might,,,you never know…need it ourselves one day.
why is this so hard for you to understand?
I do not believe anyone is looking for someone else to pay for SS.
The issue is illegal immigrants can work in the US only if they have SS numbers. So they use someone else’s number and they get the credit. If an illegal immigrant is caught working in a meat packing plant, they are deported to their country of origin. The funds they accumulated by using a fake or stolen number more than likely go into the general SS funds.
Most recent numbers of legal immigrants were the lowest on record since 1900. Replacement Rate is ~1.69 or less than what is needed to maintain the present population. The numbers of workers per SS recipient will decrease as state in the post. I suspect that once the babyboomer bubble dissipates, there will be other issues. For reference, Europe has been facing the same population issues as the pressent population gets older. Joel Garreau documented this in 2006 with “300 Million and Counting.”
In the end, the US does need more immigrants.
two commenters to this thread are looking for someone else to pay for their groceries when they retire or become disabled. one wants “the rich” to pay and one wants immigrants to pay. you seem to be taking the side of those who want immigrants to pay. i already tried to point out some ways that could go bad, and is not likely to be adopted as a strategy.
it IS true that increased population helps pay for social security …keepoing the payroll tax less than it would otherwise have to be. but we already know that with things as they are the needed increase is only 2% for the worker to pay for what he needs himself.
you seem to think ome of the other statistics you have cited confirm a need for more immigration… but that increase in immigration only reduces the dollar per week per year increase needed with no chang e in immigration to something less than a dollar. why do you want to save less than a dollar per week. and if the immigrants are paying for your needs, who is going to pay for their needs? more immigration?
Identified as illegal immigrants who take jobs in the US, they already pay and get no SS from it. They use someone else’s SS number or false ones. If they do not have a SS#, few if any employers will hire them. If they apply for cards, they may be deported after being caught. Customs runs checks on employers who may hire ethnic people such as Hispanic, etc. Everyone must have a Social Security number.
Run the increased payouts are to compensate for inflation. preumably the taxes collected from the still working will be in the same inflated dollars as the benefits, preumably from the paychecks the workers get in inflated dollars. that is prt of the beauty of pay as you go financing.
it’s true that if workers do not get thier pay increased to compensate for inflation, the inflated dollars needed to keep benefits up with the cost of living will need to come from somewhere… that would be the Trust Fund being depleted faster.
The best answer to this would be for the workers to get pay raises at least enough to keep up with inflation. otherwise future inflation adjustments to benefits will have to be lower in order to keep the books balanced… this amounts to a benefit cut. it is a lot the same as waking up one morning to find out your expected return from stocks and bonds has fallen in real terms due to inflation,
there is no magic here. just ordinary financial consequences to highly expectable financial events. the best answer that is actually under the control of workers is to increase the amount of inflated money they save for retirement. it would help if people understood all this instead of looking for magic solutions that won’t happen and wouldn’t work if they did.
there is no guarantee that workers will be held harmless with every change in the economy..there never has been. inflation means the real income of poorish people will decline. they can still save more for their retirement…by accepting the need to spend less today in order to save more for tomorrow. richish people do better in inflation because to a considerable extent they can raise their own “pay”…or even, gasp, buy a smaller yacht until the economy “recovers.”
it’s “unfair” but it’s the way the world works, always has.
i was under the impression that Covid had pretty much solved our Social Security retirement shortfall problem. .we’ve had over 1.12 million Americans die from Covid, which everyone says is an under-count (based on deaths in excess of the prior trend) early on, around 70% of those dying were over 65; more recently, closer to 90% of those dying have been over 65….so there’s close to million of us already who won’t be collecting any Social Security…then US life expectancy is way down; we lost 1.8 years of our lives during the first year of the pandemic, another seven-tenths of a year on top of that during the second year…our life expectancy had been approaching 79 years, and now it’s down to 76 1/2….assuming that the average Social Security starts collecting at 65, each would now collect for 11 1/2 years instead of 14….isn’t that enough of a savings yet, or do we need more of us to die sooner?
the real problem with Social Security will be be disability funding – Brookings says 4 million Americans can no longer work due to long Covid…i don’t know, but if they’re all eligible for disability payments, we have a problem…
where did you get that impression? not from the Trustees Report.
It would be good to know the impact.
the last time I read the Trustees Report the “impact” of the Covid recession was “less that expected.” my memory is not good enough to quote details and i am much too busy today to look it up. I’ll get around to it, but by then the commenters here will have gone on to another subject or another brilliant idea for “fixing” Social Security,
don’t bother with cause and effect.
all serious people know Social Security needs to be fixed, so they don’t need to actually read the Trustees Report, or do a little arithmetic to reduce the huge unfunded deficit of Trillions of dollars for hundreds of millions of people over seventy five years to what that means for the average worker making 50k/y in his weekly paycheck. yep it’s a serious question; maybe we could just inject it with bleach.
As always, Thanks for keeping up the good work.
If it makes you feel any better, then SS is not the only important matter of public policy that is hampered by societal cognitive dissonance erupting from the general consensus of individuals right to their own opinions, as vacuous and fact-free as they may be.
Sitting on the sidelines throwing rotten tomatoes takes much less effort than wading into the deep water of political action. Our two party system has always made better theater than public policy when left to its own designs. However, what the Bonus Marchers brought to FDR and Eleanor was a far different thing than what right wing-nuts are trying to do now, possibly because MAGA et al, is not nearly so populous as it pretends to be. Really, how does anyone connect populists to authoritarianism without their head exploding?
I have been searching for a cogent movement to no avail. Learning about Ben Jealous (name is worrisome) I became intrigued, but abandoned that thread after learning that he had gone from head of the NAACP (2008-20013) to present head of Sierra Club. Both are useful organizations, but that migration does not spell out committed leadership along any line of cogent political action; i.e., more political leader than political action visionary. Not a day passes that I do not lament the loss of MLK, but Medgar Evers even more so.
thanks, I needed that.
back in the day when i was paid to teach math to undergraduates who were not math majors, i got vey frustrated that they refused to learn, at first i blamed myself. then i blamed them for not wanting to think but expecting me to put the answers into their heads. finally i blamed myself again for not “inspiring” them to think..
which apparently i am still not good at.
It is just easier to be herd than heard.
I am guilty of not updating myself before expressing an opinion. Much of my delving into the annual reports came when Bush was trying to privatize it. At the time, fertility was above 2. According later annual reports and FRED, https://fred.stlouisfed.org/series/SPDYNTFRTINUSA, fertility dropped below 2 in 2010 and has continued to drop. The annual report numbers go back to 1940, so you can see the rise and drop in fertility that produced the baby boomers.
The SS annual report currently projects returning to 1.99. If the long run trend were 1.69 the model (Appendix VI) indicates the cost rate will be 0.07 percent higher after 75 years. Less than one extra 0.1 percent increase per the NW Plan.
Variation in inflation is only 0.02 percent in the model. Variation in increasing lifespan is only 0.3 percent, but the cost rate increases more than that because the baseline assumption is for increasing lifespans.
The cost rate was 14 percent for 2022 and will peak at over 18 percent during the modelled 75 years. The trust fund can easily deal with the small variations from misestimating fertility, inflation, or death rates. The changes that will deplete the trust fund ratio from its baby boomer generated high are already baked into the demographics of existing workers.
Variation in increasing lifespan is only 0.03 percent.
Arne, you need to be careful…you mentioned thebaseline for the percentages… thoe numbers can be misleading.
the big example of this was the Trustees Report l calling the increase in the tax needed to fully fund SS as “30%”..but it was 30% of a 6% tax or 2% of payroll.
they stopped doing that after i started pointing it out at AB. i have no idea if that was just coincidence. the other percents you mention are subject to same sort of misleading. but if you look at the bottom line, the required tax increase to keep SS solvent forever (as far as we can see or have reason to expect) hasn’t changed in the 20 years i have been looking at it: 2% for workers 2% fore employers or 4% combined. my contribution to this was to point out that it could be reached one tenth of one percent at a time. and that amounted to a dollar per week per year. facts that are not obvious from reading the percents in the Report. oh, yes, i have also been trying to point out that SS is worker paid by design and by common sense and common decency once you understand it.
Absolutely, “cost rate” is tricky. However, the relative sizes of the numbers I was using show that variations in inflation or fertility are small compared to the changes needed over 25 to 75 years.
In a similar vane, and as has been said before, the tax rate needed (for solvency with no benefit changes) 50 years from now is very little effected by whether it is dropped in suddenly or reached more gradually.
yes but the difference might be bigger than you think. the Trustees Report considers only non-interest income (for some calculations) but the gradual increase in the tax rate preserves the Trust Fund at its present amount, raising the tax 2% (or 4% if you like) all at once when the Trust Fund runs out does not. this makes about a one percent difference in the ultimate tax rate necessary to maintain solvency.
Why not a post on your findings?
I suppose because I have never posted here before and don’t know the procedure.
You have several topics going on there. Do it like you would an engineering report. I will post it for you and attribute you. Here is your start:
People know little about those topics embolden. You can add detail to them to help people understand and citation showing where the detail came from also.
Look at some of the other posts too.
note that cost rate is an increase of 4% of payroll. since the current tax rate is 12% (including DI)..one would expect the ultimate tax rate to be 16%, or 8% each for the worker and the employer, or 2% more than the current 6% for each the worker and the employer. that should suggest to you that there is something else beside payroll that is helping pay for SS. that is interest on the Trust Fund and the tax on benefits paid by people with comfortable incomes in retirement.
unfortunately all of this is subject to misleading quibbles whcih do not change the basic fact that you pay for what you get, for what you will need. there is no way around that, but there are ways to fool yourself by reciting the lies generated by think tank highly paid non partisan liars.
SS and immigration
Upthread, I pointed out that increasing immigration in the US could contribute significantly to maintaining projected SS payments. For those who understand how SS works the merits of my point will be obvious. I was just surprised that it is often ignored.
“The Social Security system is underfunded, in part due to demographic challenges. Because the system is pay-as-you-go—meaning current workers support current beneficiaries—the combination of increasing life expectancies and stagnant birth rates is placing real strain on the system, which is scheduled to become insolvent by 2034, absent policy changes. Immigration, while not a silver bullet, can mitigate this challenge by providing additional workers to support the growing ranks of retirees. Immigrants to the United States tend to be of working age on arrival, which means they can begin contributing to the Social Security system as soon as they begin working. Immigrants also tend to consume fewer benefits than the native-born population, including fewer Social Security benefits. These two factors make increased immigration a powerful policy tool in the effort to maintain the Social Security program.”
I see “immigration” 24 times in this thread.
It is important to understand the impact, but that includes the fact that a 50 percent increase (which is what the annual report uses to assess the sensitivity to immigration) would have a 0.05 percent impact on cost rate, so on the order of 2 to 5 percent of the gap.
I do not believe anyone is saying not to increase the withholding increase of 1 tenth of 1% for both people and corporations. What Joel is pointing, increased immigration can also be a resource even if it is 2-5%. For the first time I have seen this phenomenon of a shortage of Labor as depicted by Participation Rate. How does Fed Rate solve the issue? It does not. At this point, we are shy Labor, Labor which can be part of a solution even if small. The country is huge, we have the space, and people are aging out of the Labor Force.
Exactly. I’m pointing out that immigration can be part of the solution. Never said the entire solution.
A 50% increase in immigration seems like an arbitrary cap. Why not triple the number of immigrants? What would the impact be then?
give a dog a bone.
2% of the gap is 2% of a 4% gap.
immigration is not going to be a measurable help and it opens a whole other can of worms none of us has any idea how to deal with.
you want more immigration…fine, just don’t confuse it with fixing Social Security. all it will do is tend to hold wages down.
So a million more workers would not pay 6.2% SS? That is an approximate calculation of what the number shortage is.
you’ll have to explain your question. I don’t understand it. But have you considered that any immigrants contributing to Social Security will also collect benefits?
Last I looked [at Arne’s comment] increasing immigration 50% over present best estimate would result in reducing the 4% gap by maybe 2% of the 4%. so instead of needing to pay a dollar per week more payroll tax according to the Trustees best projection, you would only have to pay 98 cents per week. Why is this even worth arguing about?
Ok, I am back. Extremely tired from all the running around today.
The US is shy Labor and not retirees. My million people comment implies the nation needs more Labor. From people working, you take in more receipts. The actual number is 1.5 million which is equivalent to 1% of Participation Rate. Now that can come in the form of immigrants or more births. Immigration has a quicker reaction.
Very tired tonight. Been in pain for a couple of weeks now.
very sory about your being in pain. get some rest.
i have a dog getting too old for stairs so i built her a ramp this summer…before the rains started and i realized my waterproofing would let the wood rot in one season. so i started building a roof for the ramp. just before the mud got too deep. now i have a dog that needs to go our every five minutes and brings back enough mud on her feet to paint the whole house. realized i could skip that problem by taking her out the front door on a leash…the front door being at ground level and leading to sidewalks and mud free grass (for now). realized i couldn’t keep up with her need to go out. so i am tired and morally defeated.
The US is not shy labor. it is shy labor at the wage offered. nor do we have an excess of retirees, we have enough labor for the forseeable future to produce enough for the needs of all the retirees for all the years they will live. what we need is for those workers today to save enough money to pay for their needs when they get old and become retirees, saving money does not mean putting it in a lock box not to be opened until needed, and never has, it means setting aside some money to be borrowed and used to increase production and repaid with interest. that interest in the context of social security comes from the general growth in productivity of the whole economy.
i have talked to enough people to see that a lot of them can’t wrap their minds around this concept. they truly believe that when when they put their money into social security it goes to pay for some old geezer they don’t know and wouldn’t like. that’s a little like getting upset when you find out the money you put in the bank is used by a builder to build a house for someone you don’t like. and then when the bank pays you back the money you put in plus the interest it earned, you get upset when they tell you the cash they put in your hand was deposited the very same day your are taking it out by some young person you feel guilty taking money from.
i don’t think we’d be having this problem if the well paid non partisan expert liars hadn’t been talking about “the young paying for the old” because they knew what confusion it would cause…not only to those too dumb to understand “pay as you go” but to those people who hear the same lie repeated hundred or thousands of times until it is effectively wired into their brains….which has a lot more to do with what we “believe” than most people realize.
social security does exactly what people have been doing about “retirement” since neanderthal took care of their elders and Moses said “honor your father and your mother so your life will be long in the land, and Jesus said, yes, it’s about the money.
only SS uses the government as the only way to organize and guarantee the process in an industrialized nation where the family or the tribe can’t be counted on to take care of their own.
but “the government” does not pay for Social Security. you do. and this would be true even if “the market” paid for it…or seemed to pay for it? the money comes from the production of the people in the day it is spent. one way or another you will produce what current retirees eat, and will eat what then-workers produce. only way to get around this is to kill off the people too old to work. and what do you think that will do to the economy?
This is also information I would hope you can contribute in a post on imputs to Social Security.
assertion is not an argument. and citing non partisan expert liars is not the same as actually knowing what you are talking about.
because there is always a supply of new generations who will need a safe way to protect their savings from inflation and market losses, as well as insure themselves against failure to thrive, the pay as you go system is actually a way to enable those people to pay in advance for their retirement needs while getting interest on their savings from the growing economy. those young people provide the money for current beneficiaries benefits by paying in advance for their own future benfits. this is not unusual: you do the same thing when you put your money in the bank, or stocks .
the non partisan expert liars fool you by talking fast and leaving out the details that make all the difference,
China has the world’s largest population (1.426 billion), but India (1.417 billion) is expected to claim this title next year. The next five most populous nations – the United States, Indonesia, Pakistan, Nigeria and Brazil – together have fewer people than India or China. …
half the Earth’s population live in just seven countries
Pew Research – July 2022
(The US is #3. Alas, perhaps we need to add more to fix our Social Security problesm.)
where have you been? we know how to fix the social security problen: pay for what we need, just like our parents and grandparents. it’s not hard. only an extra dollar per week per year while real wages are expected to rise ten dollars per week per year.
we don’t hve to turn ourselves into hong kong. but don’t feel alone. there are lots of people like you who are wandering around with some jingle in their head thinking they can fix social security with a few magic words they have no idea the real world meaning of.
Observations have been made here that we currently have more jobs available than people to fill them, and that immigration can resolve this. One suspects that going forward this will eventually put more strain on the retirement systems. But if we need to fill more jobs than we have people willing to do so, we either bring in more people or (shudder) build a lot of robots to make more workers less necessary.
Bearing in mind that new immigrants will be paying in to the social security trust fund long before they will be drawing benefits from it – very important!
In fact, going forward, into the next century & beyond, if birth-rates don’t pick up, the only way the population will grow (and more FICA will be collected) is from a steady supply of immigrants. Ignoring the possibility that birth-rates may well increase among the newly minted citizens already here.
Exactly. That’s why I suggested immigration as an important part of the solution. Any sensible person would see that.
The importatn thing is that we kick the can down the road, as far as possible.
When I was in sixth grade, I invented a way to propel an automobile without burning (much) gasoline – what today is known as hybrid propulsion. One simply connects an electrical generator to the drive shaft of an electerical motor, the motor then produces the power to turn the generator. What could be simpler? (You’d need a small gas engine to get the process goin, but after that, not.)
The smartest kid in my class talked to his father about this, who was a university professor, and I was informed that this would not work, because ‘perpetual motion’ was not possible. I was seriously bummed.
Well, apparently it turns out I was right, kind of. So maybe you are right also.
The professor would have told you you also needed a very long extension cord or a very big battery.
Apparently you are unaware of how hybrid autos work.
and you are unaware of the laws of thermodynamics or the conservation of energy. these are not just words, but observations, that fit into a general theory of of how reality works that seems to be a pretty good predictor of how everything will work.
My training as a physicist required that I knew quite a bit about ‘thermo’ and the basis for that professor’s comment about ‘perpetual motion’ was from that (although he was a statistics prof as I recall). Nonetheless, we have hybrid propulsion systems that approach p-m, or come as close as is physically possible.
Other than solar-power which is more so.
But not in a thermodynamic sense.
Hybrid autos have batteries that are charged by the engine in the auto. It allows you to get by on a much smaller engine and spend less fuel, but it does not do what you seemed to imply sixth grade you thought it would.
Of course, with marketing you can put an electric motor and battery in and stamp the vehicle “hybrid” without reducing the size of the engine.
When it comes down to it, ‘hybrid’ really only means that two different propulsion systems are coupled together. Caveat emptor!
i stopped paying attention to the perpetual motion man so i don’t really know what he invented in the sixth grade, but i can guarantee it lost something in the details.
[there might be (i don’t know) some gain in using the electric in ranges where the gas is less efficient..but that is not perpetual motion…that is, you can always build a more efficient engine, but you can never get more out than you put in.]
and i know you know this…probably better than i do.
As I said ‘invented, kind of’. Being in the sixth grade, I left out some details.
I don’t do the ‘ad hominem’ stuff, so you can just go on ranting on your own.
‘ but you can never get more out than you put in.’
Actually, that is not true for Social Security, as it turns out. Go figure!
“‘ but you can never get more out than you put in.’
Actually, that is not true for Social Security, as it turns out. Go figure!”
First, money is not physics. Neither is farming..where you put in a few seeds and out comes a whole field of wheat.
but if you count “the time value of money” then you, the individual investor may have put in as much time and money [and risk] as you get out.
I would not want to defend this proposition as a matter of logic, but it might be a good first step in understanding some things about money
including why MMT is an illusion. the whole point of accounting and money is to try to keep track of what “you” and everyone else “put in” so it can be matched to what you “take out.” The general growth of “the economy” is also reflected in “the growth of the soil” the mysterious process by which not only does the farmer get back more “seed” than he planted…but if he turns the non edible parts of the crop back into the soil..and lets the worms and fungi do their work..he also ends up with more soil.
Go figure indeed. I am sure that if you try it you will find that your “figuring” grows as well…it used to be understood to be the point of education.
‘time value of money’
Yes, you can get (much) more out of social security, in inflated dollars, than you put in.
“Yes, you can get (much) more out of social security, in inflated dollars, than you put in.”
coberly rants: that’s so you can pay the inflated prices with the inflated dollars. if you put money out at interest, you first have to make it back in inflated dollars before you can earn “real” interest. you may may want to get someone with more patience than I have to explain this to you.
is that “ad hominem”?
back when i was four I asked my mother “why is the sky blue?” she said “you’ll need someone who knows physics to explain that to you.” was that ad hominem?
or you could sit down with a pencil and paper and work it out for yourself. there is you with a hundred dollars. you’d ike to spend it. but you know you will want to retire some day and may need it more then.
but you ask your dad, and he say with inflation your hundrd bucks will only be worth ten dollars by then. then the man from SS tries to explain to you ” if you put your hundred dollars into SS, in forty years we will give you a thousand dollars ..in inflated money, of course, so you will be able to buy then the exact amount of groceries you can buy today for a hundred bucks. and ..if the economy geeps pon the way it is going now, we will give you two thousand dollars, so you can buy twice as much groceries.
But Dobbs shakes his head and walks away, ” i don’t want no steenking inflated dollars,” he says.
end of rant.
I stand (or sit) corrected.
It’s Getting Harder to Be a Pessimist on Inflation
NY Times – Paul Krugman – Jan 13
Thursday’s report on consumer prices was really good news. I mean, really, really good news. The overall Consumer Price Index actually fell slightly for the month of December. We can and should downplay that number, because it was driven in part by special factors like a plunge in gasoline prices and because monthly data are noisy. But even when you try to filter out the noise by excluding more volatile prices and looking at averages over several months, you get a picture of rapidly slowing inflation.
So what’s a pessimist to do? Inflation numbers have been getting better for a while, but the Federal Reserve — which is very unwilling to risk letting up on its inflation fight too soon — has been insisting that inflation is still hot if you look at what it considers more fundamental measures, especially the price of core services, excluding housing, purchased by men with facial hair.
OK, I made up that last part about the facial hair. But the rest is true: The Fed has decided to be pessimistic based on a quite narrow measure. …
And it’s also good to know that a fix is available that requires folks still paying in to pony up a dollar or so more each week, to keep my benefits flowing. At least for another few weeks, bearing in mind the coming guv’mint shutdown.
… But the attempt to stay pessimistic on inflation is starting to feel a bit desperate. Also, it represents a strange role reversal from the early days of the recent bout of inflation, when some economists, myself included, formed what many people called Team Transitory, arguing that rising inflation was a temporary result of pandemic-related disruptions and would soon recede.
Actually, at this point inflation is looking somewhat transitory, although it went much higher for much longer than I, at least, considered possible. But one of the ways I and others argued for transitoriness aged poorly. For a while we kept excluding particular parts of inflation that looked idiosyncratic, arguing that what remained looked OK. But the range of goods and services experiencing high inflation kept widening, and we were eventually forced to concede that this was an economywide problem.
Now, however, the upper hand is on the other foot, with inflation pessimists probably making the same mistakes inflation optimists were making a year and a half ago.
This is not to say that it never makes sense to try “looking through” overall inflation to get at some underlying number. Traditional “core” inflation, which excludes volatile food and energy prices, has been an extremely useful gauge over the years. Among other things, it helped the Fed stay the course in 2010-11, when a spike in gasoline prices led to unwarranted demands that it stop its efforts to fight unemployment. …
Until mid-2022, inflation just kept getting more widespread, and you had to work ever harder to claim that at some fundamental level it wasn’t that bad. Since then, however, everything has been moving in the opposite direction, and so you need to focus on a handful of bad things to stay pessimistic. In other words, back then optimism required more and more extra work, but now it’s looking like it’s the pessimists who are working overtime.
So what’s the true inflation story? I’d argue that pandemic-related disruptions were, in fact, an important part, and that they have been receding. But I’m also willing to concede that the economy got overheated in 2021, thanks to a burst of federal spending and a relatively slow realization by the Fed that there was a problem. And it seems as if inflation is much more responsive to excessive spending when the economy is running hot than previous experience might have suggested. In economics jargon, the Phillips curve is steep in an economy running at capacity.
The big question then became whether the curve would be equally steep on the way down — whether economic cooling would produce a rapid decline in inflation without the need for a big rise in unemployment.
And the answer appears, at least so far, to be yes. Inflation rose further and faster than almost anyone expected, but now it’s coming down with similar speed. As I said, the inflation news is really, really good.
I am sure Krugman knows more about “the economy” than I do, but sometimes knowing more means your perceptions are distorted by what you know so you can’t see what is in front of you. [Krugman bought the Death of Social Security lie until Baker convinced him to actually look at the numbers] so I’ll risk suggesting that the limited “covid related” price increases that Krugman thought would fix themselves quickly and was therefore surprised when more general inflation spread throughout the economy…did in fact spread throughout the economy, because that’ s what happens as people who can (who are able) try to keep up with higher prices…however limited those higer prices are at first to supply shocks. What keeps, or kept, this inflation from spiraling out of control…so far… is that labor has no power to demand higher wages to keep up with higher prices…so now Krugman is surprised to see inflation coming down as he originally predicted, Maybe this is an argument for keeping workers poor and powerless.
Maybe not poor and powerless enough for the Fed…though this need not be bad faith, but just following the old formulas…knowing too much from books.
still looks to me like “inflation” should “naturally” (earlier chapter in the book) be self limiting as people stop buying stuff that is too expensive for them…a natural self limit if workers don’t have the power to demand higher wages etc. So maybe Samuelson was right all along..in a perverse kind of way.
However, I note that the inflation in “volatiles” like food hits poorish people like me much harder than it does richer people who spend less on food as a part of their budget…so look out for that “inequality” thing.
Also, I have to thank the Soc Sec folks (and I’m sure my father would have also) for increasing monthly payouts due to inflation. Otherwise, they would be absurdly small. That’s ‘time value of money’ for ya.
“From people working, you take in more receipts. ”
More people working also means more people retiring and being paid benefits. Faster population growth does help SS solvency, but when you are losing ground on each individual, this would certainly be kicking the can down the road. Dale will roll his eyes at my phrasing, but you would be moving in the direction of a Ponzi scheme instead of in the direction of a solution.
And there is more, it would be short term gains at the cost of increased global warming.
We have yet to return to the percentage of the Noninstitutional Civilian Population in the Civilian Labor Force as measured by Participation Rate. This is measured from just before Covid February 2020 till December 2022. You are not adding people as much as returning to a norm.
Gonna go back to bed. Later . . .
Getting the same people back to work would be good. Good for that persons and good for SS. Adding for revenue from an individual who will already be receiving benefits will technically reduce his rate of return, but it will get him closer to what it actually takes to live.
Adding immigrants is probably good for the economy, but not good for SS finances. It is exactly the quip about losing money on each unit but making up for it by increasing volume.
Social Security needs a large adjustment to make up for increasing lifespans. Even after that it should be understood that small adjustments will be needed to account for fertility, immigration, wage distribution, …
you give me hope.
but just a discussion among friends:
what do you mean “large”? 2% for workers or even 4% for self employed?
against wage gains or losses due to unemployment or inflation or bad days on the market or thechanges in prevailing interest, or just being cheated by sellers of slightly sub standard or overpriced goods/service. or being cheated by employers backed by legislaters who think unions are communism but monopolies are “efficient”?
i guess that small changes can be absorbed into NW plan by the timing of otherwise necessary one tenth percent tax increases. changes in the other direction are supposed to be absorbed by the Trust Fund (which also “gives back”..or in this case gets back when times return to “better.”
i don’t follow your meaning” adding for revenue from…already receiving”
well yes about immigration, but it’s more like making money on each unit while losing it on volume.
Large and small are relative.
The tax rate adjustment needed is large is relative the “fix” you would get by increasing immigration. It is small compared to the cost of not having enough.
When run observes that the labor force participation rate is still depressed, I further observe that means some people with a work history are not working now. Putting them back to work will increase their Primary Insurance Amount – good for them, good for SS.
Right now each worker does not put in enough to cover his own benefits. There is a lag, but SS is losing money on each unit.
“Putting them back to work”
LOL! How? At gunpoint? Can you imagine that they may choose not to work and that immigrants may choose to work?
Workers pay into SS. Full stop. It doesn’t matter where they were born, as long as they’re drawing a paycheck in the US. Plus, more workers means more consumption, which means more jobs which means more workers which means more SS tax payments.
The job creators aren’t the 1%, like you’ve been told. The real job creators (and the ones paying SS taxes) are the middle class and working class.
clarification, not disagreement i hope: each worker is paying enough for his own benefits, but the system as a whole is not taking in enough money to pay for “promised” benefits to everyone who has “earned” them.
if there was no growth in the economy neither Social Security nor bank savings accounts, nor the stock market, nor “the government” would ever have enough money to pay “interest” or “profits” or even modern monetary theory magical money. the workers could be paying enough for “promised” benefits at the same tax rate if their wages were higher.
but we are not going to fix that nearly as easily as raising the tax rate about a dollar per week etc so that the workers will have “enough” money.
you can look at all the factors that are causing the expected shortfall, but it is critical you don’t lose sight of the fact that workers are paying for their own benefits, and the people who actually provide the cash at the time of need are providing that cash NOT to pay for the current retirees, but to pay for their own future retirement. it’s just one of those odd features about how money works. it’s also how retirement worked for thousands of years before social security was invented.
Adding immigrants is good for SS and good for the economy. Adding immigrants immediately adds to SS tax payments. And the way SS actually works is that today's taxes pay for today's retirees. In the long run, the immigrants will retire and many of them will claim benefits. In the long run, as Keynes noted, we're all dead. The point being that here and now, the problem is paying for the boomers until they die. In 25 years, most of them will be dead, and in 25 years, most immigrants admitted today will still be paying.
Any honest proposal will include an increase in immigration along with increases in taxes. Yes, one or two immigrants won't do it, but no serious person is claiming that. We need to double or triple immigration (at least) to help compensate for the baby boom retirements until they die from COVID or old age.
the boomers already paid for their own retirement..that’s in the Tust Fund .
who is going to pay for the retiement of all those immigrants who will be paying for your longer life expectancy and will have longer life expectancy themselves…more immigrants?
each worker pays in advance for his own retirement…allowing for the insurance effect whereby richer retirees get a smaller benefit as a percent (more tha 100%) of what they paid in, so that the poorest retirees can get a larger benefit (still less money) as a percent of what they paid in.
people who can’t understand money…as in who pays the money you take out of your bank account with interest years after you put money into the bank account… get confused because the dollars used to pay BACK the retiree what he paid in come from people who are paying in in order to be sure they have something when they get old. the “interst” comes from the general growth in the economy..just like the bank…and the automatic adjustment for inflation that comes from pay as you go financing,
your comments about “honesty” and “serious people” are just insults fro a person who doesn’t know what he is talking about.
Many people have not returned to work and will not because of Covid.
“full stop” as in stop thinking when you get the answer you want whether or not it is correct.
i have to quit this, it’s taking too much of my time.
Since you addressed me, what group is dropping out of the Civilian Labor Force? To get back to what the Participation Rate was in 2020, 2.0 million people would have to join the Civilian Labor Force. We have plenty of room for more Labor.
i was thinking of the complaints that post Covid recession wokers were not coming back. but in general, if i had options i would not work for low wages and bad conditions. this is considered a social crime by economists and business owners. to me it looks like a rational choice and supply and demand are supposed to work.
we always have plenty of room for more labor, and we have room for less, if that’s what people want and can afford it. its a choice between time and stuff. i prefer time.
in any case immigration is neither a significant part of the SS deficit nor a politically likely fix, and certainly not without potential unwanted side effects.
it’sjust a way the higly paid liars get you to waste your time thinking about magic fixes instead of what will work.
i can imagine people telling their congress they are willing to pay an extra dollar per week per year to keep their social security. i cannot imagine many people telling congress to to put a help wanted sign on the statue of liberty. though that did contribute to past growth in the economy.
not rolling my eyes. i assumed you were mocking the kicking the can folks who say we have to solve the forever problem right now, That 20 trillion dollar unfunded actuarial deficit is the money we would have to put in the bank today at 2% real interest, guaranteed, to fill the projected gap between taxes and benefits…so workers for the next seventy five years don’t have to worry about paying for their own needs, they can live on the interest, you see, like rich folks do.
and then I (we) offered them a forever plan and they refuse to even look at it.
Maybe we are still too far away from the crunch to expect Congress to enact your plan now. The heart of your plan is to increase the tax, not lower benefits, change source (cap gains, etc.) or increase age for benefits. That should work okay starting in the early 2030’s. Ramp up faster or just step change then. Not letting it go to the financial industry is the key now.
yes, thank you. Raising the tax 2% all at once would work fine, and no one would be noticeably worse off . but the screaming from the paid liars will stampede the people who don’t understand into doing something foolish like cutting benefits. or making the rich pay, which will lead to massive benefit cuts very soon thereafter.
However, at this point I think the game is already over: the people in Congress are no smarter than they need to be, and they only need to be smart enuugh to get contributions from the very rich.
oh, yes, raising the tax gradually would mean tiney raises that correspond to income growth..i.e. the ultimate raise will be reached when people have more money. and meanwhile the people who will enjoy the longer lifespans will be beginning to pay for what they will get….raising the tax all at once will mean those people paying the un-raised tax for the next 12 years will be getting a bit of a free ride while those just after the all-at-once tax raise will be paying for their free lunch. This is not a big deal, even the all at once taxpayers will get their money back in benefits, but it is just a tiny bit unfair and that bothers me a little…mostly because it’s not the best way to accomplish what needs to be done.
and yes, this does imply that in one sense the “young” pay for the old… but that is only when the system is badly managed. the fact that future retirees pay for their own benefits is still the “real” truth. if the idea that two contradictory ideas can be true at once, and one of them more true than the other, doesn’t make your head explode (not “your” = Eric, but “your” = “the average person who doesn’t like the fact that truth is complex”).
I did read the other day that in Europe (or Asia?), people in their seventies are still hard at work. As am I, I just don’t get paid for it. That would really complicate my taxes.
One also recalls that not too many years ago, younger people were complaining about olderworkers getting in the way of young people’s career advancement. And old people getting paid too much. So, some of us just got out of the way, thank you very much.
‘each worker is paying enough for his own benefits, but the system as a whole is not taking in enough money to pay for “promised” benefits to everyone who has “earned” them.’
I don’t understand that thinking. The money the system as a whole is taking in is the sum of what each worker is paying in. If the system as a whole is not taking in enough, then we have reached the point where each worker is not paying enough.
Arne, you are right as a matter of logic.
you may be expecting too much of language…at least my language. i would say that as a matter of logic you are right and i failed to say what i meant. i think i got trapped into responding to the prevailing assertion here that workers need someone else to pay for them..but maybe should have just stopped with something like “workers can pay enough for their own benefits.” in my mind…and i think in reality…there is an important difference between thinking that someone else needs to pay for my social security and thinking that I can pay enough for my social security. sorry for the confusion.
forgive me if i follow this up a bit. i am not disagreeing with you, just trying to explain how what i said is not what i meant:
“eah worker is paying enough for his own benefits….even if the benefits he gets are not the benefits “promised”, he will have paid for them. and if immigrants are paying the specific cash that “pays” his benfits, they will not be “paying for” his benefits. they will be paying for their own future benefits…which will need to be more than the present workers benefits because those immigrants will also live longer in retirement. meanwhile, the system “promises” a level of benefits according to its expectations of the economy…the growth of which is what enables the to “promise” the worker an effective interest on their own payments. if you think you “paid for” the profit you get when you sell a stock, then you paid for the “interest” on your social security payments. if the economy for whatever reason does not grow enough to pay the “promised” benefits then that is the same as a bad day–or year– on the stock market, or interest that does not keep up with inflation.
i hope this does not sound like weaseling. i beieve it is the important, fundamental nature of Social Security. the workers can and need to pay for whatever benefits they think they will need.
an extra dollar a week paid by the worker himself seems to me a lot simpler, easier and cheaper than “if we only raise immigration three times as much as the current level (Dobbs or Joel suggested this) then “Social Security” will be solvent.”
but note that solvent here means ony that the numbers in the book add up. it does not mean that the retired workers get what they need, what they paid for.
I actually agree that immigrants are good for the economy. We need to make things simpler, not more complex. But the numbers indicate that immigration is not even part of the solution for Social Security from where SS is right now.
If you look at the 2022 annual report you find that the model is for 788,000 net immigration out to 2100. I would have to agree that seems silly.
I push back on your comments because immigration and SS are two separate problems that need separate solutions. Yes, they really do interact, but the solutions need to be robust with respect to each other, so not tied together in any way.