SOCIAL SECURITY, A BREAK THROUGH?
Dale Coberly discussing the latest news on Social Security.
SOCIAL SECURITY, A BREAKTHROUGH? Dale Coberly
For years I have been trying to inform people that the great big, huge horrible “Looming Trillion Dollar Unfunded Deficit” in Social Security could be fixed forever with a one tenth of one percent increase in the Social Security tax whenever the Trustees projected “short range financial inadequacy. This would amount to about a dollar per week per year while wages are going up ten dollars per week per year and would be limited to an ultimate increase in the tax of about 2% of payroll.
No one seemed to care or even notice. Or understand.
But two days ago, The Fiscal Times reported;
Actuaries Weigh in on Social Security Shortfall
The Social Security system is facing a shortfall as its combined trust funds become depleted in 2034, which could result in a roughly 20% cut in benefits if Congress fails to act to correct the problem. A new paper from the American Academy of Actuaries takes a close look at the problem and provides a menu of options for policymakers as they work toward a solution.
Here are some of the options discussed by the actuaries:
*Increase the payroll tax rate by 25%. Raising the current payroll tax of 6.2% to 7.75% – for both workers and employers – would head off any benefit cuts. The increase could come all at once in 2034, but the actuaries recommend phasing in the increase starting in 2025. “Increasing the tax rate will be financially difficult for some people with very low income,” they write. “It would be less disruptive to employers and workers if increases in the tax rate were gradually phased in.”
In the Actuaries’ paper, they suggest that “gradually” there be a one tenth of one percent increase per year. The Actuaries do not suggest the “short range insolvency” trigger . . . which does not matter as we are already in the Trustees “short range insolvency” warning period.
Is this a breakthrough?
Yes . . . but no. if we cannot get the Congress to pay attention. What it does do for us is put the gradual small increase in the tax on the table from a source with credibility and a forum. What it does not do is explain what this means to the people who have to make the Congress pay attention.
I will try to explain what it means in comments below. I need your help to get the people to make Congress understand what it means.
So far, the Congress is still planning on a “Deficit Commision” which will cut or destroy Social Security without open debate or recorded votes.
The Big Liars win and the people . . . even “the young” . . . lose their security from desperate poverty in old age or disability.
Just a couple of notes before we get to comments:
A “25% increase in the tax” is misleading: it’s a 25% increase in a 6% tax . . . or about a 2% increase in payroll deduction. It’s not even a “tax” because you get the money back three times over or more when you need it.
Social Security has nothing to with the Federal Deficit or National Debt. It is paid for by the workers themselves.
Pay as you go is not “the young paying for the old.” It is the young paying for their future needs while they still have the money. This is ordinary finance: ALL finance is a transfer of money through time. All finance depends upon “future investors,” that does not make it a Ponzi scheme.
It is not paid for by the rich or “the government”. But the rich DO pay their fair share.
The highly paid “nonpartisan expert” liars have spent over eighty years confusing the people about this. That’s why it’s so hard to get them to understand the truth.
“Reforming Social Security Sooner Rather Than Later,” American Academy of Actuaries, October 2023
Social Security — an individual-family matter — would much more likely have a chance of being saved if it was REMOVED ENTIRELY from the destructive monopolistic control of our Fed GOVT and moved to that of each and every RESPECTIVE STATE … where it belongs.
Our Fed GOVT has certain enumerated responsibilities — SSA is NOT one of them — the result being that in all Fed GOVT budget “competitions”, Social Security is used primarily as a political pawn … where the primary motivations of the JUDAS politicians, deciding its future, are something VERY DIFFERENT THAN the best interest of the American People.
Among other things: [1] centralized govt control of the SSA — void entirely of any meaningful competition other than that jockeying for political power — has PROVEN, time and again, to be a near total disaster; [2] per our Unanimous Declaration of 4 July 1776 — and our Fed Constitution; to wit, the Bill of Rights — all such matters are to be addressed by the States and the People; and, [3] if States, for their own citizens, are not able to address this matter — in THEIR respective method of choosing — why are such entities even permitted to be a State?
Such basic PRO-USA solutions, compared to others, are rather simple and are FUNDAMENTAL to Americanism. MAGA!
Nefty
I am working hard to be polite to commenters, but I wish you would take your insane ravings somewhere else.
Nefty’s ” an individual-family matter” is a stone age view of families and economics. it worked then because families lived together and far from neighbors, who were as likely to be enemies as helps in time of need. Even in the age of agriculture families could mostly support each other in times of need…and mostly had no choice because there were no political or financial instuments to manage mutual help. but famine, war, plague, or evil landlords, could wipe out a family or part of a family.
but by the time of industrial economies and capitalism, families became less and less able to rely on themseves to get through hard times. some form of social security had to be invented. first something like a “poor tax” and “poor farm” was considered adequate if harsh prison-like conditions were enforced. finally europeans (Bismark in Germany) invented state social security, a form of “socialism.” works fairly well today in Europe and other countries. Roosevelt invented American Social Security paid for by a tax on the workers themselves because he understood American politics and understood that “making the rich pay” would insure that the rich destoyed Social Security at the first chance. That “the workers pay for it themselves” has saved Social Security from “the rich” for over eitghty years. But the rich have become so rich now that theyown the Congress and can pretty much decide who wins elections. The question now is wheter the workers are smart enough to save themselves. We are here testing that proposition.
*Increase the payroll tax rate by 25%. Raising the current payroll tax of 6.2% to 7.75% – for both workers and employers – would head off any benefit cuts.”
Increasing a regressive 6.2% tax-that-is-not-a-tax to 7.75% is really only a 1.55% increase, which sounds way better than a 25% increase. So let’s not call it that.
And, honestly, it’s really just mandatory contributions from earned income into a retirement plan that will pay back all that’s put into it, and then some. Full faith & credit wise.
It’s just tougher to make the mandatory contributions when/if you are self-employed.
So, I’ve been converted. Go for it!
Both my adult children have been self-employed at various times (one is currently) but have enough investment income, evidently, to make these extra payments. And I am all for making such contributions to retirement funds.
Dobbs
Both of my children are self employed. They pay their taxes, including SS. Arguably they also pay their employees taxes..after all, if the employees paid no tax, the employer would not have to pay them so much.
oldest child was very successful until 2008 wiped her out. Now she is glad she paid her SS taxes. youngest child has a calling, she is very talented at doing something good, but it doesn’t pay all that well. She has reached the age where her SS taxes look like a very good investment….even though paying them reduced what was already a small income to something close to “just enough.”
Be of good cheer. You can think of taxes as evil, or you can think of them as what makes civilized life==your life==possible. I will admit that i don’t like a lot of what Congress spends money on, but I don’t mind it when they spend some of it on what I like.
There are some people who destroy their happiness by hating everything they don’t like…or understand.
I fully agree with this:
As U.S. Justice Oliver Wendell Holmes, Jr. opined in a landmark trans-Pacific case, “Taxes are what we pay for civilized society.”
Dobbs
I agree with that too. But it seems that uncivilized societies collect taxes too.
it may be that straight slavery is too hard to manage as well as inefficient, so it is easier to pay people a wage and then tax some of it back in order to pay for the needs and wants of the people with power.
Or it may be that taxes began in societies without money, so farmers paid their landlords part of their crop so the landlords could feed the soldiers who collected the taxes.
see Nefty above. what I just said could be understood to be just like what he said. The difference, of course, lies in the sanity of the civilization.
I’ll put a link up in this afternoon’s Page Two, around 2 …
Ten Bears
thank you. i think people like you may be what saves us.
I headlined it, and thank you, doubly
Ignore the curtain apes …
thanks. i promised myself i would, but i haven’t learned to stop myself in time yet.
In President Biden’s phrase: c’mon, man! Start paying in 2025 so it’s less disruptive in 2034? How does that work really? Why not give death row prisoners just a bit of the toxic brew now so when that last appeal fails, the lethal dose is less disruptive? I don’t care if it’s just a buck or two a week: let people keep that money. Anyway, the whole topic needs much more thought. Somewhere in those models I bet there is a darn good chance that the foundations rely on abundant, reliable energy coming from burning way more carbon than other parts of our society are busy working for us not to burn.
The additional FICA will go to “buy” special treasuries. Okay some of it to be cash for current SS outlays.
It is forced saving, that cashes discretionary (e.g. pentagon etc.) funding so that the government does not issue bonds for bankers to hold and receive interest checks.
Could the FICA receipts be better invested?
Well,
welcome aboard, those who understand it. i don’t know what to do about those that don’t.
as for for the special treasuries…first, with tax increase the special treasuries will not be necessary. the present trust fund becomes essentially a “paper debt.” second, the special treasuries were a necessary means to allow the large baby boon generation to pay in advance for their own benefit and not be an unfair burden on the next, smaller, generation, for whom the normal pay as you go financing would not cover the needs of the boomers at a tax rate that would pay for the future needs of that following generation. this is hard for some people to understand, but third, investing in treasuries is exactly what big businesses do to manage extra cash they don’t need now but will need later without putting it at risk in the stock market. the big guys think it’s the “best investment” for the purpose.
thing about “special treasuries” is that they don’t change their value with the bond market. this provides extra security. Social Security is all about security.
there are people who don’t think they need security. like teen-age drivers they just know they are better drivers than everyone else on the road. maybe they are but they make life harder for us ordinary drivers, and when they run out of luck we pay for it.
I probably didn’t say the above very well. The speial treasuries nomally only hold enough money to tide SS over the occasional mismatches of income and outgo (taxes to benefits). But since 1983, extra money has been collected beyond what was needed for current expenses in order that the baby boomers could pay in advance for their own retirement and not be an unfair burden on the following, smaller generation.
right now that is exactly what those special treasuries are doing. social security is not buying treasuries but selling them. the needed tax raise will not require SS to buy new treasuries, except to replace turnover as the old ones mature. the new tax will pay SS expenses barring a major depression without needing to either buy treasuries or sell them. the existing treasuries will just be rolled over maintainig a paper Trust Fund that will need neither to be drawn down or built up. this wipes out at a stroke the part of the nationl debt that the government OWES TO Social Security because it BORROWED FROM Social Security to buy all the toys government needs without raising income taxes…in a mutually beneficial transaction just like all businesses engage in all the time since the invention of “debt” (finance) about 5000 years ago.
Dale:
Be careful in how you say stuff. I am not Bruce. I can help as I understand the Northwest plan you, Bruce, and Arne put together. I do not want to fight unnecessary battles with people who can support us. Mark is one of them. He is awfully smart.
Bill
I agree with part of that. I need to not respond at all when I reach the point of sounding like I am trying to insult someone. But did you notice his “you need to get an education” and his assuming i did not know that most money was not in the form of the stuff we carry around for everyday shopping (forgetting for the moment debit cards and credit cards.” I don’t know why you think he is smart. feel free to delete this and any replies to him you found problematic. copy and paste them to me so i can review them and see what i could have said better.
I think I understand well enough. Around 2034 the system will need increased revenue not coming from debt redemptions. You would have people started putting in more cash soon, with the idea that there is value to getting used to it. I think that value is very low and people ought to retain these “getting used to” dollars for their own purposes, which could include saving it for retirement, but if the want an extra Diet Coke a week, okay, their life. If we start to take more cash right away, a consequence is to slow down the net redemption of the balance in the Trust Funds, which otherwise gets to zero about 2034. I am happy to describe these debt instruments as assets for the system, and agree that bond price risk is zero, but think these have a major risk to them anyway, and the risk is organizing the system so it never gets redeemed. The instrument might be worth $10,000 but if the plan is to never give that $10,000, what is the true value then? Since the 1983 reform, workers paid extra payroll tax which offset the need for general taxes or regular debt. Redeem that, don’t hunt for ways to slow it down. People do not need 9 years to get used to the new rate needed in 2034.
Eric377
Thank you for a reasonable comment. It might take a bit of ink for me to try to explain why I think you are wrong.
First, the gradual increase is not just so people can get used to it. It actually makes the eventual full increase less than it would otherwise be. This is because the interest on the remaining Trust Fund over those years helps pay for benefits, allowing taxes to be about 1% lower.
Second, it is easier for people to pay an extra one tenth of one percent of their pay each year than it is for them to pay an extra 2% of their pay all at once… even though their pay in 2035 would be about ten percent higher than it is today. With the gradual increase there is never the shock…mostly psychological rather than financial…that a 2% all at once increase would cause, and the full needed 2% increase would not be reached until at least 2045, because…as I think you noticed…those gradual tax increases are fillin in the deficit and pusing the need for the full 2% increase into the future.
Third, psychology counts; the one tenth of one percent per year increase would go unnoticed, the all at once increase would be noticed and used by the bad guys to promote hysteris and “fixes” that would ultimately destroy SS altogether.
Even the full 2% would not be noticed if it was not pointed out to them by those who want to destroy SS..it is less than ordinary fluctuations in incomes and prices that we all experience every year. But the dollar per week per year increases would be less than the pocket change you spend every day or just lose in the couch cusions.
I am not sure what you mean by the system never gets redeemed. The people paying the tax get what they paid for. This can go on forever. What needs to be redeemed? The normal size Trust Fund never needs to be redeemed, so the income tax payers will have just gotten a gift from the payroll tax payers…a gift that does not hurt the payroll taxpayers at all: they got what they paid for, as will every payroll tax payer in the future. it works a little like the national debt it never needs to be paid back: while we are using the money to pay for present needs, normal inflation is reducing the size of the debt to nothing, and the lenders get to use their money over time in the form of interest witout needing the principle paid back forever, or if they insist, the principle can be paid back in inflated dollars. this may not be the way the bond market looks at it, but it’s they way it works, has worked since about 1700 when the Britished invented the National Debt and conquered the world.
to understand this you need to think about where the money comes from, what it buys, and who gets paid back (the debt is rolled over but the bond holder gets his money back, and eventually the guy who buys his bond gets his money back too.
Maybe a MMT-er coulc explain it to you. But rather than get involved it what are essentially imaginary numbers (nothing to do with the square rood of minus one) it is more profitable to just look at where the money goes, and is needed, today.
I am not trying to slow down the rate of redemtion of the special treasuries, that is just a–almost imaginary–bonus to meeting the needs of the day. The people who paid for the enhanced Trust Fund were paying for their own future needs. They are right now “getting their money back.” The people paying the higher tax..either gradual or all at once…will get their money back in the form of benefits over a longer life expectancy. It’s like a river. Works fine as long as you don’t try to stop it.
Or it’s like the paradox of Achilles and the Tortoise. Achilles actually passes the Tortoise.. if you don’t stop the movie first.
I can’t believe that people would be working so hard to avoid a dollar per week increase in the payroll tax unless they started by hating Social Secuity for other reasons.
Eric
something I forgot to say:
Last year rhe amount of money that had to be withdrawn from the Trust Fund to pay that year’s deficit between taxes in and benefits out was almost exactly one tenth of one percent…the same as the amount of the increased tax I am proposing.
By not raising the payroll tax and letting the Trust Fund run to zero (be redeemed?), not only would you have to cut benefits by 20% or raise the tax rate all at once by 2% for the worker and 2% for the employer, but you would have to rebuild the Trust Fund up to what it is today in order to restore the one year’s “prudent reserve” that now protects Social Security benefits from the usual monthly variation in tax receipts in versus benefits paid, but also protects them from any longer term shortfall like a major recession.
Really, you gain absolutely nothing by waiting to raise the tax “as needed.’
additionally, if less important. by delaying the tax increases you get twenty years worth of retirees who will not have paid anything toward their own projected longer life expectancy.
lots of moving parts here. you really need to study them to understand the whole story.
Erik377
Social Security is not a lethal injection. It is a way to insure you will have something to live on when you can no longer work.Even if you are smart and lucky, you would not be so rich if you lived in a country where half the people were desperately poor. People who understand this have made this conntry great. People who don’t understand this, or don’t give a damn about others, are what is tearing this country down, Thing about liars is that after awhile they believe their own lies. And people who can’t really think on their own believe them too because they just know that all their troubles are caused by “the other.”
oh, by the way, most people understand the value of “gradual” as opposed to “all at once.”
if there weren’t mortgages that allow you to pay for your house gradually, most people would never own a house at all. the beautiful thing about paying the needed tax increase in social security gradually is that it makes the ultimate cost less [while buying a house with a mortgage makes the ultimate cost more]. this is the difference between being a buyer and being a lender.
paying for social security [or medicare] is you lending money to your future self. the nice thing is that when you have to pay yourself back, you are paying …yourself.
[that’s all meant to be a kind of koan. which is a kind of paradox meant to promote enlightenment. the paradox does not resolve itself, but takes you within shouting distance of understanding reality.]
i should have said difference between bing a borrower and being a lender.
Dale, this “getting used to it” money only helps the general revenue stream, not the Social Security system. My interpretation of this is simply that building up the Trust Fund was an okay process, but redemption is too onerous (for Treasury), so let’s just chisel it out of the workers for a decade in advance.
Eric
i tried to explain this in answer to your comment at 4::00 pm today (EST).
Treasury is paying back the loan right now and has no interest in not paying it…it is scheduled to be fully repaid in 2035 or so.
my interest in gradual has nothing to do with “chiseling it out of workers.” it is simply the easiest way for them to pay the extra money they will need because they will be living longer. try to keep in mind that the workers are paying for their own benefits.
It’s an age-old GOP insistence that, Constitutionally, the guv’mint can raise taxes but is not permitted to require ‘mandatory payments’ otherwise. (Ok, maybe tariffs also.)
So, the Dems got Social Security deductions officially labelled as taxes. Otherwise, the GOP would not accept the program. Just as with mandatory insurance under the Affordable Care Act, which got past objections from the GOP initially because they proposed it, certain that the Dems would object & it would never be enacted. Pah!
They call it Socialism, and will have none of that!
It’s in their DNA. Alas.
But Social Security? Well, they seem to know they are stuck with that. Maybe Affordable Care too. But don’t expect them to be happy about it.
Dobbs
car insurance is mandatory too (though not a “tax.”
at first i hated it. it was a big expense on my small income. but i had to pay it. only thing i hate about it now is that the insurance companies are crooks.
gradually i have come to realize that even so, car insurance is necessary and it has to be mandatory of the people who need it most would not pay for it..but the rest of us would pay for their accidents.
SS is in a similar situation. we hate taxes. we hate “mandatory.” but they turn out to be necessary even when they are not perfect according to our current understanding.
the R’s have gone from hating taxes to believing that they can take over the country by playing on our natural dislike of being told what to do and having to pay for the privilege.
typo
should have been “has to be mandatory or the people who need it most would not pay for it”
Full disclosure: my father was a life-long insuance agent. I was raised understanding that insurance is all about risk-sharing. Unfortunately, there is a tendency in the industry to try too hard to hold on to the funds collected, at the expense of the policy holders.
At the risk of further tangential discussion…
Dobbs
thanks for the information. seems like 500 bucks (a year?) should buy a reasonable insurance policy. and who is on the hook if the uninsured driver has an accident?
similarly it sounds like virginia has found a way to tax the poor but not the rich…if i hhad a hundred thousand dollars in stocks, say, I would save the cost of auto insurance. sounds like a deal to me. of course the poor have to buy insurance from….the insurance execs who buy those stocks. the deal gets better and better.for them.
then there is this…i had two cars insured. sold one of them and informed the insurance company i no longer needed insurance for a second car. they raisd my rates.
“ALL finance is a transfer of money through time.”
I think this is exactly how simple you have to keep things in order to get them across.
Arne
thanks. i had to read it in a book about finance. i did not think it was simple at all. but may be simpler than how i was trying to say it.
The thing I think is missing from this is a simple explanation of why Social Security costs more now than it used to.
Social Security has set into approximate balance in 1983.
The expected retirement in 1983 was 17 years (life expectancy at 65). In 2035* it is expected to be 21.2 years. 25 percent longer. Living longer takes more funds.
Changes in fertility and in income distribution also have impacts, but life expectancy is why everyone who wants to retire with some life left should expect the cost to go up and be willing to pay for it.
* 21.2 years is the average of male and female at 65 years in the 2022 report. It does not account for the increase to 67 for the Full Retirement Age nor for differences in benefits for male and female.
* and, as we know, although the SSA annual report does not break out life expectancy by income, there is a significant impact. Better health care would be the best way to address that, but perhaps it should be on the table for improvements to SS. I would like to address the reasonable FICA deductions first.
Arne said
“The expected retirement in 1983 was 17 years (life expectancy at 65). In 2035* it is expected to be 21.2 years. 25 percent longer. Living longer takes more funds.
Changes in fertility and in income distribution also have impacts, but life expectancy is why everyone who wants to retire with some life left should expect the cost to go up and be willing to pay for it.”
Exactly. don’t spoil it.
The U.S. Treasury makes Social Security payments; NOT the trust fund!!!! Have you ever seen a Social Security check? It looks like every other Treasury check. The Treasury can always make any payment authorized by Congress even if the trust fund is completely exhausted. The only consequence of government spending above any taxation is inflation. Nobody knows what inflation will be 10 months from now let alone 10 years from now. Please, please, please stop perpetuating the myth that the middle class needs to be taxed more to save the Social Security system!!
The reason Social Security is “self-financed” is political. It would be the first program to go if it were marked as financed from tax revenues.
P.S. Don’t be confused by the name on the check. When I bought my house, there was a check from some bank to cover the purchase price. It was decked out with that bank’s logo, auto-signed by its treasurer and had the banks routing number on it. No, the bank didn’t buy me a house.
Kaleberg:
I would agree with your comment on SS.
Try screwing with an old lady’s monthly check. It means nothing to politicians, banks, treasury, etc. t means a whole lot to people collecting SS. They put their funds into it, expect it back with a meager interest added, and do not give a hoot if the gov has to print more money so the banks can give them cash.
And politicians would do it too. Obama supposedly offered it up.
The US government runs two (that I study) retirements systems in addition to SS.
Military (low retirement age, high payout) retirement has a trust fund filled with special treasuries created with no cash from soldiers or tax payers.
OPM (low retirement age, high payout, civil service) retirement fund is mixed: some cash from current and a huge amount of special treasuries created from air.
Maybe instead of increasing FICA receipts the shortfalls could be handles like the other two retirement systems.
Retired soldiers/civil servants are not on welfare?
paddy
no they are not. the retirement benefit is part of the wages they earned while working (and getting shot at for you and me). i don’t know the details of how this is financed, accounted for. but i think envy destroys people’s minds, and i dont see any reason to change the way SS is financed. what do you have against saving for your own retirement, paying in advance for your own groceries when you can no longer work? why spend so much of your time hating Social Security, when it has kept millions of people out of poverty for almost ninety years without costing you a dime more than you would have to pay for your own future needs anyway?
oh, the way it is financed:
the wages were not paid at the time they were earned. instead it was to the mutual benefit of both the employer (government)and the employee to withhold the payment at that time and pay it later when the emplyee would need the money more.
Markg
from what i hear people are more concerned about inflation than about recessions (loss of income) or taxes…not even the dollar per week increase in the tax needed to enable SS to feed you if you outlive your income. inflation runs about 2 or 3 percent in normal times, 8% recently in fairly normal times. no telling what it would run to if the government could just print money whenever someone “needed” it. the increase in the SS tax is one tenth of a percent per year over the next few years…actually it is less than that because after paying it for a few years the taxes are taking up the slack and the “Trust Fund Zero” date recedes into the future making the needed increases less than one tenth of a percent per year.
you don’t seem to understand the difference between SS and the Treasury. If you ran a business you would have a “treasurer” who would keep track of the money in and out of the business and what was “cash on hand” (most likely in the form of government bonds) and was dedicated to certain different uses. by law the money you pay in FICA cannot be spent for anything other than Social Security. The people who like to say “money is fungible” are embezzlers. oh, yes, whenever your company paid any of it’s bills it would pay for it on the same checks printed for all of its expenses..whether they were for wages or taxes or bills from suppliers.
go back and check on that “by law” thing.
Dale, you don’t seem to understand the government is NOT a business. Businesses do not issue their own currency or have a central banks. Look at Japan. Monetary system almost identical to the USA. Debt to gdp ratio of 244%, long term interest rates under 1%, inflation lower than most of the world.
Does anyone say we need to raise taxes to pay for aid to Israel or Ukrainian? Humanitarian aid to Gaza? No, because the government can make any payment it wants without regard to having the tax revenue. We abandoned the gold standard over 50 years ago; it’s time educate yourself on a fiat money system with floating exchange rates and fractional reserve banking!!!
Markg:
I am assuming you are referring to MMT? He knows it. He is talking the fundamentals of SS.
Markg:
You are correct in your comment. The same could be done with SS without increasing the 1 tenth of 1% yearly and what is paid into it. The point being made is by increasing the rate to pay into SS, citizens own it and they pay for it out of the SS tax.
Bill,
“We the people” also own the government.
All this talk about SS failing is playing right into the hands of the wealthy oligarchs who want to keep the middle class working longer for less.
Mark,
of course it is.
but we do not “own the government” in the sense that we “own our own social security benefits.” we paid for those benefits personally. we do not pay for the government personally. we and 300 million other people pay for the government, then we are supposed to negotiate for who gets what benefits…including defense and welfare.
Mark:
It was failing 10 years ago and each time the limit was pushed back. This is not new stuff and maybe it was good we waited. One tenth of 1% on $40,000 is $40. or $3.33 monthly
$50,000 is $50.
$60,000 is $60.
$100,000 is $100.
It is not failing. Dales plan was recognized and accepted by the Social Security Admin. He wrote them and I read the letter myself.
If you wish people to retire earlier, they have to demand it. Bring retirement back to 65. Older than that and you have health issues. If AI is to replace Labor (which I highly doubt), then people need to retire sooner and at a reasonable wage that reflects costs.
Arne
I am not sure that cutting spending is the same as raising taxea. But I think I know what you mean.
The bad guys use “the debt” as an excuse not to spend money on things the people need (including defense from Russian expansionism and Hamas/Iranian conquest by terrorism). But it never crosses their minds to pay for the debt by raising taxes on the poor multi-billionaires who can’t afford it.
Bill,
yes, exactly. “ownership” of your SS benefit is exactly the point.
i get a little uneasy with people who want–expect–something for nothing.
the MMTers think a magic fairy creates the goods and services the government can just print money to pay for. when the government, or a bank, creates money, it does so in the expectation that that money will be used to create value, otherwise the printed money will just mean more money chasing the same goods and services. this is inflation. MMTers expect the government printing money will create value from “unused” resources. to some extent that can and does, work. but then, as you say, no one has a right to ownership of that value, and the same people who say we can’t spend on social needs because of the debt will be the ones who decide what the the printed money will be used for….probably given to the rich so they can “create jobs” which pay poverty wages to workers and handsome profits to owners.
ever since the invention of man, humans have had to work to earn their bread. they also learned..what makes them human…to care for those who cannot work. but using your own time and money to care for the needy is not the same as sitting down and demanding “the rich” or “the government” or the “magic money fairy” care for you so you don’t need to work or can spend your own money on fast cars instead of “your right” to be cared for.
Coberly:
Printing $dollars based upon the worth of the country is legit. Mark is correct on that basis as was another person whose name will go unmentioned here. The basis for the latter person’s was an attack on you and uncalled for then. The world trades in US dollars and as long as it continues to do so, the US $dollar will be in demand as it is the safest currency available.
However, when the US dollar goes up in value, countries like the Philippines spend more internationally to obtain the goods they need globally. Our one Filipino commenter is not here to say such as he said before. Hope he is safe.
Should we carry a deficit the size of Japan’s? I would think not. Our productivity should pay for this.
Bill
printing dollars based on the wealth of the country may be legit, i don’t really know what that means.
but to borrow a phrase that has been heard around here a few times: the subject of this post was how to pay for Social Security. MMT does not currently exist as a way to pay for anything. i doubt it would work, for reasons i have tried to suggest. But in any case it is not here now to work for SS.
I prefer to talk about reality and real possibilities. MMT paying for SS is not currently real or a real possibility. This does not mean that the country cannot “print money.” It does. Just like all banks. But there is a limit to how much of that you can get away with before your bank fails, or the world stops demanding your money.
Markg
see Arne’s answer to you. then let me return the favor…you say i need to educate myself: I am sorry to have to say it but it is you who is showing your lack of education. repeating the half-thought out theories of someone else is not education.
i do understand the government is not a business, I am trying to explain that what Social Security does is a lot like what businesses do every day. yes the government could just print the money, but that would only work for a little while until inflation accomplished just what too much debt would accomplish, and deciding who gets the printed money would be done by the same people who decide where the “real” money goes, as well as the borrowed money, and the printed money..all the time lying about the debt in order to cheat the people while cutting taxes for their friends.
Come on Dale… the government doesn’t print money and spend it. Does your tax return or any other government spending come in an envelope full of cash? The government doesn’t do that. ALL government spending is done by crediting a private sector bank account by the central bank. From the public’s perspective, ALL government spending is money creation. The term “print money “ is just a scare tactic used by politicians to fool people that government spending will lead to inflation. Apparently it works.
Yes Arne, the republicans want to cut spending to pay for the aide, but “want to” and “have to” are not the same thing.
Markg
you are testing my patience. “print money” is a well accepted way to say create money ….usually by printing someting in a bank ledger or just in a computer memory. all governments do it. so do all banks. MMT is just the idea that we can do this anytime we feel like it without regard to the creation of value.
most people like to feel there is some relation between the money they get and the value they create.
in any case MMT is not the way things are done now, and I am more interested in solving the problem of SS finances the way things are done now than in talking endlessly about something that does not exist.
can you join an MMT club and talk to other people who believe in it and leave the rest of us alone. we could not help you create an MMT regime even if we wanted to.
by nw you must get tired of teling people about MMT so you can feel smarter than them when they tell you they don’t agree with you.
Dale:
The US dollar is the international currency of trade. It is this that makes the dollar so valuable. If it was not in demand, fixes to SS would be moot, hard to come by, expensive, etc. Mark has good points. I like him here as I know what he is talking about. He is not the enemy Dale.
To wit, we are already printing money to back up the trump tax cut which is going to cost $2 trillion. When it sunsets, corporations will keep their tax cuts and peons will pay again.
“Does anyone say we need to raise taxes to pay for aid to Israel or Ukrainian? “
Yes. Cutting spending is the same as raising taxes. That is exactly what Republicans propose.
A simple solution is to eliminate the cap. Everyone pays. Everyone collects. The big earners will get the money if they need it later in life or it will get clawed back in taxes. Seems too simple.
Hi Richard:
You ran into security which stops first time commenters. When you do that, you create greater rights. I think the cap is fine right where it is. Maybe qualify them to see if they really need to collect SS.
I haven’t read the report, but will try to look into it. There’s obviously a lot of history in this discussion thread that I know nothing about. But, I have been interested in the issue of “needs testing” for SS benefits and it was discussed the other night in the Republican debate. Chris Christie made the point that other programs are paid for by everyone but benefits only go to those who need them, so why not SS.
My question is fairly simple: If we set a number, like those making over say $400,000/yr. (or even a $millilon), don’t get SS checks. Has someone figured out the magnitude of what the savings would be — i.e. is it a significant amount? I’ve always thought it was silly for the very rich to be getting their SS checks every month.
I won’t get into it now, but I’m also interested in discussions about the complete termination of a spouses benefit upon death. An elderly, 2-SS family, without other investments (many btw) can immediately have its income cut nearly in half. Considering the cost of housing & assisted living and the desire to keep seniors in their homes, it seems counterproductive.
But, the real issue, as with all issues, is how do you get a dysfunctional Congress to address critical issues responsibly, that absolutely must be addressed? (like maybe keeping the government open).
J>P>McJefferson
means testing is expensive and ugly. with American Social Security the worker pays for his own benefits, so there is no more reason to means test than there is when you go to the grocery store. it is true that returns for those who pay more because they earn more are less as a percent of what they paid in, but that is what makes SS insurance: your return on your insurance policy is less if you don’t have the fire than if you do. not reasonable to demand your money back if you don’thave the fire. and no one asks you to prove you need the insurance payment when you have the fire: you get the payment you paid for.
why work so hard to mess up something that has worked well for eighty seven years?
J.P.
This table is from 2018Tax Policy Center, T18-0117 – Distribution of Federal Payroll and Income Taxes by Expanded Cash Income Level, 2018
Those making greater than $500,000 (no $400,000 on the chart) are ~1.34% of the tax paying population or an ~ 2.31 million units or families in the federal income tax paying population. Between $500,000 and $1 million, 4% of their income goes to Payroll Taxes. Greater than $1 million in income pays 2% of their income to payroll taxes. All the way to the right of the chart. You wish more?
As Dale will tell you, everyone pays into it and everyone gets SS. Once you go down Christie’s path to selective need, than the door can be opened wider for other exceptions. I am pretty sure Christie’s thoughts are; if we start with the income wealthy, we can add other exceptions later. Nobody will complain about the income wealthy being kicked out of SS as long as they pay into it. The next argument will be, if I am not going to get it, why should I have to pay into it? Christie’s idea is a lead-in to other cuts or changes impacting people who are not income rich.
Moving on . . .
Assisted Living belongs under healthcare and should be made accessible to all. I believe we need more qualified healthcare personnel caring for the elderly which now includes me. There should be a public option which Kennedy pushed for after opposing Nixon’s plan. Biden spoke on Kennedy’s healthcare plans in 2020. Edward had plans for Long Term Healthcare. He died before he could sponsor it and push it through the Senate. A terrible loss for all of us. Commercial LTC is expensive just as Supplemental is and now Part D with its co=insurance on top of deductibles which we will never reach. There is a lot which happened and has been stopped from being passed.
This does not mean we should stop trying. I believe Biden has the gumption to do more for healthcare in spite of his age and being criticized for his verbal faux pas. For what he has accomplished, he is allowed to say silly things or forget.
My wife will get my SS monthly payments once I pass. It is 50% more than hers. It will also be time to sell the house and step into something for one. The funds are there, we take what we need for extra stuff, and it grow. At 2.6% mgt rate, the house is like a piggy bank accruing interest. We are fortunate and still not rich. It may be easier for assisted care at home and that I agree is a possibility.
How do we get a better congress? Keep talking up what Democrats did to prevent another 2008. We lack a true Kennedy to speak for us.
“Senator Edward Kennedy learns that the Medicare Prescription Drug and Modernization Act of 2003 would, for the first time, allow private HMOs to compete with Medicare for patients, Kennedy works to amend the bill, criticizing the proposal for Medicare competition as “an untried, untested, unworkable program.” His efforts ultimately prove futile and he opposes the final bill. The Medicare Prescription Drug and Modernization Act of 2003 passes Congress and is signed into law by Bush on Dec. 8, 2003.” This would be fine as long as the commercial plans were not subsidized by CMS/government.
Ted Kennedy and Health Care Reform
A Timeline of Kennedy’s Health Care Achievements And Disappointments
Richard
raise the cap and the rich will kill Social Security. Social Security works because it is worker paid, and the workers get value for their money. Raise the cap and the rich no longer get value for their money.
That’s the trouble with simple solutions. They always leave out what happens to the other guy and what he might do about it.
if you read the Actuaries’ paper they tell you what happens when you eliminate the cap. Not counting the rich killing SS, eliminating the cap only pays for 60% or so of the actuarial deficit.
What is it about paying an extra dollar per week for your own groceries that bothers you so much…extra groceries that you will need if you are living longer as expected?
In 1632, Galileo published a book promoting the Copernicus idea of a heliocentric universe. The Roman Catholic Church tried him and found him guilty of vehemently suspect of heresy. He was placed on house arrest for the rest of his life and his books were banned.
I see Dale wants to do the same to me for promoting MMTs explanation of how a modern fiat money system works. Eventually the world will understand it. We have only been off the gold standard for 50 years. It took the Church much longer to accept the truth about the universe.
Mark:
I think most of us do understand the value of this country and its ability to pay for programs for its people using more $dollars in circulation. I believe we should sunset trump’s costly $2 trillion give away, most of which went to those making >$500,000 annually.
I do not know your background, so it is hard for me to measure the influence of Dales words upon it here at AB or anywhere else. I understand what you are saying. Sometimes people say things not realizing how what they say and the manner in which it is said can be harmful to them. As a result, they lose in getting their thoughts across.
My old Economist Prof. Tassos Malliaris and I discuss the issues, the importance of the stimulation to the economy, and it needing to be measured as to impact. He is on the right side and I on the left. I lectured at one class of his before we moved to AZ. For example, trump’s tax break and Biden’s early programs. And the impact? I think you already know.
Markg
Social Security is not Theology. and you have got your suspects backwards. The very rich are “the church” in your analogy..the bad guys trying desperately to preserve their source of income against the heresy of Franklin Roosevelt who discoverd that if workers put aside a small part of their wages, managed and protected by the government but not paid for by the government, they would not become desperately poor when they got old or disabled and could no longer work.
I have nothing against your promoting MMT. good luck with it. I just wish you wouldn’t do it here when I am trying to educate people so “the church of the rich” will not take away the security in old age that they…the workers… pay for.
The burden of selling MMT is on you. please don’t hijack my thread to do it. we are trying to deal with present reality here.
Coberly,
You will face the burden of proving your thoughts here as you had to in other places. MMT is one way to solve the issue of a SS deficit in 2034. However, it does open itself to much greater political influence. By the way, that is not a highjack when someone offers up an alternative plan and explains it.
Well Dale, I will give you my last word on the subject. The first people to receive Social Security never paid into it. So how could it have been a savings plan? Social Security in the macro sense is about taking away the ability of one group of people (workers) to consume a portion of the goods and services produced so another group of people (retirees) can consume that portion without causing a bidding war (inflation). The trust fund did not come about until 1980’s. My guess is Reagan wanted to cut taxes on the wealthy so he employed Greenspan to conjure up this plan to convince workers it was in their best interest to pay higher taxes to “save” for their future. Biggest con job ever pulled on workers because it worked like a charm!
Mark:
Do you realize what you sound like with your angry comment:
“Many thousands are in want of common necessaries; hundreds of thousands are in want of common comforts, sir.”
“Are there no prisons?” asked Scrooge.
“Plenty of prisons,” said the gentleman, laying down the pen again.
“And the Union workhouses?” demanded Scrooge. “Are they still in operation?”
“They are. Still,” returned the gentleman, “I wish I could say they were not.”
“The Treadmill and the Poor Law are in full vigour, then?” said Scrooge.
“Both very busy, sir.”
“Oh! I was afraid, from what you said at first, that something had occurred to stop them in their useful course,” said Scrooge. “I’m very glad to hear it.”
What program is fully funded in the beginning? I can not think of any. I could be mistaken. To make SS a part of the people, the funds are drawn from people to make it their own. Taxes paid for it the same as programs during the Roosevelt administration. The Trust fund is there not to cover babyboomer retirement but to cover shortages in or about 1983. some info:
Committee for Economic Development
To my knowledge, by law they have to keep a reserve also. Not 10 years of it either.
According to ‘Social Security History’,
Markg
the first people who received SS DID pay into it. They may not have paid the full cost of their own retirement, but Social Security is insurance, it was deliberately created to grandfather in those who had lost their savings because of the crash and depression…as well as paid for the retirement of their own parents and grandparents and destitute people on welfare before SS was invented. in return those who paid for the retirement of the first retirees got full value of what they paid when they retired themselves. Like PeterOrszag you think of Social Security as an investment club. It’s not. It’s a way the citizens protect themselves from poverty in old age. That would not have worked so well if the first retirees under the SS system had to pay into it for forty years before they could collect benefits. Everyone has gotten back what they paid in…more than they paid in….by the genius of pay as you go financing and avoiding “make the rich pay.”
the young “paying for the old” has been the normal way humans provide for themselves in old age since Neanderthal times. Some smart peope about five thousand years ago thought to write in their holy book “honor your father and your mother…so that your years in the land may be long.” think about that last part. about two thousand years ago a famous teacher had to remind his contemporaries that “honor your father and mother” was all about the money. SS is just the lates effort to manage this survival strategy that works in a nation of strangers and an industrial economy. unfortunately we don’t have a great teacher to remind us what is at stake and how it works.
@Mark,
“Social Security in the macro sense is about taking away the ability of one group of people (workers) to consume a portion of the goods and services produced so another group of people (retirees) can consume that portion”
Yes. Social Security is an intergenerational income transfer program. People who are retiring now and about to draw benefits made payments into the system that funded the previous generation’s benefits. When I start taking SS benefits in another 15 months, those benefits will be paid by (a) people still drawing paycheck and (b) treasuries redeemed by the trust fund.
I support increasing SS taxes to allow projected benefits after 2033 to continue to be paid and not reduced. And yes, I’ll still be paying taxes after I retire, so that’s not self-serving.
In some sense, Soc Sec is a means to do income redistribution, to the extent that it assists not-as-wealthy folks to live somewhat comfortably in old age. It would really be okay if there was no salary-cap, because whatever additional benefits the wealthy get will undoubtedly be clawed back in their annual income taxes, assuming they even pay such. They just don’t like the idea of income redistribution. At least they ought to appreciate that FICA, being a fixed % rate on earned income, is not going to be particularly noticeable to them even when the salary-cap does not cut in and increase their take-home pay.
oh, the way it is financed:
the wages were not paid at the time they were earned. instead it was to the mutual benefit of both the employer (government)and the employee to withhold the payment at that time and pay it later when the emplyee would need the money more.
Dobbs
all insurance is a form of income redistribution. nobody compains about it [except me when i look at how other people drive].
social security is mostly about income redistribution from your young self to your old self. otherwise there is some redistribution from people who get lucky and have high income their whole life and those who have bad luck and have low income their whole life. this is real insurance, not welfare. though welfare could be thought of as “social insurance” paid for by the government. SS is insurance paid for by the workers themselves. the big difference is that SS insurance automatic based on taxes paid, welfare requires “needs testing” which means something like going to the government proctologist every six months to have your assets examined to make sure you are not cheating the rest of us…who are very worried about being cheated.
Insurance benefits are not taxable, in most cases.
So, it’s not exactly income per se, so I guess it’s NOT income redistributuon.
I think most would understand that soc security benefits, to the extent that they excede what one puts into FICA payments, is income redistribution from folks now paying into the system.
dobbs
when you receive interest from a bank, or bonds, or make a profit on your stocks, or receive an insurance payment..is it an income redistribution?
wel, i am certainly not preaching to the choir here.
i am aware that some people have said different things about the history of SS and the purpose of the enhanced Trust Fund. I think they are wrong…as most people are wrong about Social Security.
the workers pay into Social Security and then Social Security pays for their retirement. You can think of this as the young paying for the old. or you can think of it as the workers paying in advance for their own retirement. it amounts to the same thing. one way of looking at is saner than the other:
ALL investments are ultimately paid by “the young” or at least by the next investor who buys your investment, or pays your interest, or buys the product your investment made possible.
the actuaries knew exactly what they were doing in 1983. there was no other reason to build up the trust fund other than to enable the boomers to pay in advance for their own retirement …because it could not be fairly paid by the mormal pay as you go financing by the following generation.
everybody has different “facts” according to what lies they have believed or misunderstanding they have heard. i am trying to explain a truth which has the advantage that all the parts fit together.
i suggest you all sit down and think about what you will need when/if you can no longer work. how you expect to meet those needs. what are the risks and costs. try to sweep aside what you know or think you know about Reagans, or Tips, evil intentions. What you know or think you know about other financial instruments. What you think is some way this can all be done better by some future. but not yet, blazing insight into the nature of money. Just think about the problem… and how SS solves it. If you can do it better, rush your solution to the actuaries. they will build a statue to you on the Mall.
On the way to paying enough for their own benefits boomers had to put in more than their parents were taking out. This caused the trust fund to increase. The Greenspan commission tried for a 75 year balance. They did not try for a permanent solution. They did not tell enough people it was not permanent and people started shouting “keep your hands off my Social Security”.
All through that 75 year window, which made it for only 50 years, retirees kept living longer, so even though the trust fund sounded like a big number, newer participants were not putting in quite enough. The increase we propose will make it so that newer cohorts will be paying in enough so that it balances out properly. That is exactly how a program by workers for workers should work.
Why did the trust fund get so much attention part 2:
I normally don’t care for analogy, but I nonetheless have one for why the SS Trust Fund was forced to go from the desired level of 100 percent of one years costs to about 300 percent.
In order for me to get from where I live at 120 feet above sea level to the ocean, I go over the coast range. I don’t care what my altitude is – I just need to get to the coast. I have to go up before I go down.
The altitude is an analog for the balance of the trust fund. I don’t care how big it got. It had to go up to get through the Boomer wave. It will provide its primary function by now going back to 100 percent.
Arne:
I looked for reasoning on the size of the trust fund. Could not find a citation. This is a one thing we should know. Got something to that effect?
I suspect the 100 percent of annual costs as the target for the SS trust fund is somewhat arbitrary, but it has been enshrined in the annual reports for decades. If the report shows that the TF will not be maintained at that level for the next decade, they report that it fails to meet the “test of short-range financial adequacy” *.
* discussed on page 11 of the 2022 annual report
Arne:
Is this by law? I think it is or at least Congress must act when it drops below 100%.
not “must’. the Trustees just recommend they do.
For those who want to try to test MMT and improve social insurance: lets create a new program for universal basic income. I think there are going to be some implementation issues, but I think it is economically sound.
However, let’s not put a successful program at risk to try out your untested ideas.
Arne:
I am not advocating MMT except for trump’s $2 trillion tax break which will remain for corporations and the peeps will experience the rollback of the tax breaks.
MMT is being tested right now. It’s called the National Debt. The only difference between MMT and the National Debt is the National Debt keeps a record of the money created.
Well, and the need to actually sell those bonds. I don’t know how “Quantitative Easing” fits into the picture.
And, the big difference is that the Debt could eventually reach a size where it is a problem and we would have some idea how we got there. Meanwhile it is just an excuse to not pay for things the people need that the pFree Market can’t supply. For some odd reason it never occurs to the debt hysterics to pay down the debt by raising taxes.
I don’t like the idea of MMT..which only solves the problem of Congress using the Debt as an excuse to not pay for the needs of the people…because it is built on the idea that you can get something for nothing. You can’t. Someone always pays. The people have a right to know what they are paying for and not be left with “oh, it’s just the inflation,” or “we can stop the inflation by making the rich pay a ta”…despite banning the use of the word “tax” in any discussion about, say, Social Security.
but, like i tried to point out above, this is all “off topic” in a post about paying for Social Security.
MMT is not an option because it does not exist. it is not a thing, it is an idea that has no chance of becoming a thing by the time we need to start paying for Social Security the old fashioned way.
The MMT true believers should write their own post about MMT. I will refrain from commenting on such a post in order to avoid hurt feelings.
Dale:
The US borrows cash to by selling more Bonds to fund its deficit. Mark had told you this.
bill
i already knew that. what’s your point? what’s his?