Will Millennials Ever See Social Security?

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Kate Harveston

Kate Harveston is originally from Williamsport, PA and holds a bachelor's degree in English. She enjoys writing about health and social justice issues. When she isn't writing, she can usually be found curled up reading dystopian fiction or hiking and searching for inspiration. If you like her writing, follow her blog, So Well, So Woman.

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52 Responses

  1. Avatar Philip H says:

    One of my many, many issues/critiques/problems with the modern Republican narrative on social safety net programs is a book keeping one – the taxes paid to support Social Security, Medicare, and Medicaid are not the same as the income taxes that support the rest of the federal government, nor are they the ones affected by Republican sponsored tax cuts. SO to say we need to cut these earned benefits because we aren’t getting enough revenue to cover the operations of the rest of government is really a lie in that the revenue streams are separate.Report

  2. Avatar Pinky says:

    “Medicaid: $1.5 trillion in funding, gone.
    Medicare: $845 million in funding, gone.
    Social Security: $25 billion in funding, gone.”

    Except, according to the Vox article you linked to, the $1.5T in Medicaid funding is going to be replaced by $1.2T in block grants, so that’s only $300B. The Medicare number is trivially small, and the SS number against $10T in payouts is also trivially small.

    As for people dying destitute, that deserves a longer response, but I’ll just say that everyone was a lot closer to destitute in the 1930’s than anyone is today.Report

    • Avatar Philip H in reply to Pinky says:

      One of the many problems with the proposed block grant approach is it apparently won’t be inflation indexed the same way benefits currently are, nor will it have the same requirements for states to provide a consistent set of benefits (through a lenient waiver process). This means many states are likely to impose undue barriers on their citizens to claim an ever decreasing set of benefits being paid from a small pot of funds. It may take years to play out, but it doesn’t increase benefit stability.

      As to destitution – with the significant declines in pension availability in the private sector and directed underfunding in the public sector we may well arrive at that intersection sooner rather then later.Report

  3. Avatar j r says:

    I apologize for being overly critical, but just about every paragraph in this post has some deep factual or conceptual error. For instance, here’s the methodological used to get Jeff Bezos’ wage:

    To calculate their hourly rate, we used the best available annual earnings and net worth for each person based on Forbes estimations. For the billionaires on the list, we found the difference between their 2017 and 2018 net worths (as provided by the Forbes’ 2017 and 2018 richest people in the world lists, published every March) to determine their annual earnings.

    That’s a meaningless number. Bezos’ net worth is a function of Amazon’s stock price. Throwing around those numbers make it look like this is taxable income, which in turn creates the illusion that we can close our entitlement gap by “taxing the rich.” I probably sound like a broken record, but if you want a comprehensive, cradle to grave, European-style welfare state, then be prepared to pay European levels of taxation. Everyone.

    By the way, I’m all for means testing social security. But once you do that you lose the fiction that social security is just insurance that gives you back what you paid into it and admit that it’s a social transfer scheme. Better yet, why not just replace social security with some form of income support not based on age and come up with a new public retirement scheme that works through forced/incentivized savings.

    My guess is that we won’t be doing that anytime soon, because our political discourse is dominated by the need to turn every policy dilemma into a morality tale. So, more than likely, we will continue to do just what we’re doing now until it stops working and then we’ll cobble together some other less than optimal solution that doesn’t require us to make any serious trade offs. All the moral hand-wringing is something, I guess. But at the end of the day, this is going to be resolved by the math. And the math doesn’t care about any of our feelings.Report

    • Avatar Slade the Leveller in reply to j r says:

      In 2018 the Social Security tax on wages was capped at $128,400 of earnings. This level of income puts you in the low 90s percentile. There’s an awful lot of untaxed income out there.

      You’re right about the likelihood of this being addressed in 2019 Washington, D.C. A funding crisis will happen someday, and then the problem will get a less than ideal solution.Report

      • Avatar Philip H in reply to Slade the Leveller says:

        The funding crisis exists (such as it is) because of two things – fewer people paying into the system presently then drawing out of it owing to the Baby Boomers, and Congress using the Trust funds as an IOU bank account to make the deficit look better then it is. Lifting the wage tax cap addresses the first issue, as would some sort of excise tax on compensation that isn’t wages – which would be how you get Bezos and the others to foot more of the bill.

        The IOU bit requires an honest reckoning about revenue and expenditures on the other side of the federal balance sheet, and i agree that’s a non-starter until the next collapse happens.

        But once you do that you lose the fiction that social security is just insurance that gives you back what you paid into it and admit that it’s a social transfer scheme.

        While that’s a popular misconception, you have never gotten back what you put into it, since the initial recipients never put into it. It just so happens it was created at a time when the wage earning portion of the population was large then the retired portion of the population and at a time when real, functional corporate based pensions were still an economic thing.Report

        • Avatar Morat20 in reply to Philip H says:

          I hate the complaints about the IOU system. The IOU system isn’t a dodge, it isn’t something Congress foolishly decided to do. It’s not even an IOU system, it was literally the only way the US government could save trillions without distorting the economy.

          The US government needed to save trillions. It needed to do so without causing unwanted economic pressures (recall, this was in the 80s, not long after the rather unpleasant economic issues of the 70s). The only place it could save the money was T-bills (it’s not like it could be invested in the market, or commodities, or other government’s debt). But if Congress hiked up FICA taxes on everyone and took no further steps, that’d be yanking money out of the economy. At worst, it might even cause a surplus — which is problematic when you’re trying to buy your own debt. At best, you’re effectively throwing a brake on the economy.

          So the basic resolution was simple: Raise taxes on one group to invest in debt. Lower taxes on another. Government spending stayed flat. In 40 years, when it came time to unwind the T-bills, you just reverse the process. The folks who got 40 years of very nice tax breaks would, of course, through the miracles of capitalism have gotten much, much richer (their investments and hard work having, of course, yielded much higher returns than the government could) and thus they’d have made far more money than they had to pay back.

          Of course, now that the debt is due and bargain to be fulfilled, it’s time to explain why we can’t possible hike those taxes back up and pay for it. Unthinkable. The proper people to screw are the ones who dutifully paid higher taxes for the last 30 years to fund their own retirement. Or perhaps their kids.

          At no point should we, of course, raise the capital gains tax rate back up or increase the top bracket rates. That’s crazy.Report

          • Avatar Dark Matter in reply to Morat20 says:

            The solution was individual retirement accounts.

            If the politicy and be summed up as “If elected I promise future politicians will find the money… they will make the painful choices and moves I will not”, then there’s a problem.Report

          • Avatar j r in reply to Morat20 says:

            To me, the Social Security Trust Fund isn’t a problem per se. But to call what happened “savings” is to torture the English language in unnecessary ways. Savings involves forgoing present consumption, which as you point out, didn’t happen.

            The problem with the trust fund isn’t solvency. The problem is that SSDI is a pay as you go program, so the trust fund is meaningless. The level of taxes and benefits are completely up to Congress. They face no constraints based on how much they’ve saved or pledged in the trust fund.

            The sooner we admit what SSDI is, the better off we will be. I don’t expect this to happen anytime soon.Report

            • Avatar Morat20 in reply to j r says:

              Well, to be honest, something like the US government can’t “save” money. Where would it put it? How would it deal with the economic effects?

              But there doesn’t exist a useful, public-understandable term for “we’re going to time-shift taxes by a few decades to cover an upcoming shortfall, by investing in our debt, which is as close to “Socking away several trillion for a rainy day” as something as big as the US government can get to without screwing the whole economy”.Report

              • Avatar Dark Matter in reply to Morat20 says:

                “we’re going to time-shift taxes by a few decades to cover an upcoming shortfall, by investing in our debt

                What we did was attempt to force future politicians to put Social Security first and find the money somewhere else.

                With the Trust Fund, to fund Social Security we redeem bonds to ourselves… which forces to us to issue more debt, reduce spending in other areas of the gov, or increase taxes.

                Without the Trust Fund, to fund Social Security, we could… issue more debt, reduce spending in other areas of the gov, or increase taxes.Report

      • Avatar Dark Matter in reply to Slade the Leveller says:

        There’s an awful lot of untaxed income out there

        “Untaxed” is a very different animal than “untaxed by social security and medicare”. A lot of these “rich” are already being taxed at 50%(ish) percent from federal+state+local. 12.4%+2.9% is 15.3% That’s 30% of their take home income.

        That’s way more than enough to change behavior, and this is affecting the group who control fluid income and can hire expensive tax attorneys.

        If we effectively raise taxes by 30% we’ll find that we don’t actually collect anywhere close to that kind of revenue.

        And that’s ignoring that Bezos doesn’t pay (and shouldn’t pay) 15.3% on his net worth every year.Report

        • Avatar Slade the Leveller in reply to Dark Matter says:

          OK, right, currently, at least according to the U.S. government, income is defined as what the wages are on your paycheck. Who’s to say that Congress can’t define what income is so that it actually is, say, what’s coming in, no matter the source?

          “And that’s ignoring that Bezos doesn’t pay (and shouldn’t pay) 15.3% on his net worth every year.” No one’s saying that, at least not me, but I’ll bet he has a fair bit of realized capital gains every year.Report

      • Avatar j r in reply to Slade the Leveller says:

        In 2018 the Social Security tax on wages was capped at $128,400 of earnings. This level of income puts you in the low 90s percentile. There’s an awful lot of untaxed income out there.

        Rolling back the SALT deduction just rased taxes on this very group. And the result was a lot of otherwise “progressive” folks jumping up and saying, “No, not us rich people. Tax the other rich people!”

        So sure, tax away. We’ll see how that ends up.Report

    • Avatar Swami in reply to j r says:

      “…just about every paragraph in this post has some deep factual or conceptual error.”

      This is the issue with most of the stuff written by KH. It is factually and logically inaccurate propaganda disguised as a blog post. Reading her arguments has a similar effect on me as listening to a Trump speech — I am so offended by the delivery that I find myself disagreeing even with things I would normally agree on.

      Full disclosure, I think some kind of responsible SS plan is great for Americans. Yes, we should fix it.

      That said, over half of employees have a company supported retirement plan, most Americans can always choose to live in a smaller house (the average poor American has a significantly larger house than the average of all Europeans), a tax reduction is only a “heist” if the money was not theirs to begin with (and it was), average wages are up 42 to 63% over the past 40 years when adjusted for PCE and benefits, and so on.

      But, like I said, we should fix SS, and it is easily accomplished as per my comment below. Collections need to match payouts, thus we need to allow people to either choose a later date to collect benefits, or slightly increase contributions.Report

      • Avatar Chip Daniels in reply to Swami says:

        I keep seeing this phrase about how ridiculous it is to treat tax money as if it isn’t yours to begin with.

        It isn’t!
        A tax obligation never was, at any point in time, “ours”. In both the narrow legal sense, and in the larger philosophical sense, no one owns 100% of their property or income.
        There is always an underlying tax lien, a literal claim on that wealth which belongs rightfully to the community.Report

        • Avatar Swami in reply to Chip Daniels says:

          Such an active imagination today, Liberty. There is no “literal” claim that the community has to property created by individuals, and if there was, I would seek to no longer belong to said community (as would anyone who wasn’t a parasitic loser, hence why communism requires walls and guns facing inward). I have always seen you as the type to man the walls though.

          To the extent that participation in a community requires agreeing to pay our fair share of taxes, then I am fine with it, as long as we have representative ways to influence how fair is defined. But when we lower the tax rates on those paying the highest share of taxes, by these very representative means, it isn’t factually correct to call this a “heist.”

          Like I said, KH, and now you, are replacing argument with inaccuracy, , propaganda and some pretty wacky rhetoric.Report

          • Avatar Chip Daniels in reply to Swami says:

            Take a look at a title insurance report.

            It will tell you very explicitly that a certain percentage of the title is excluded from coverage. That percentage is a tax lien by the state.

            When you sign your name to a debt like a mortgage or car loan, you have at that very moment transferred the full amount of the debt over the the lender; Even if the bank doesn’t collect its payment for another 30 years, it already owns it outright.

            Likewise, when we the sovereign people placed a yearly tax on income, we claimed the right to some portion of that income. The citizens of the United States of America already own some portion of your income for 2019, even on the income you haven’t earned yet.

            Its ours, we own it, it belongs to us, right now.Report

            • Avatar j r in reply to Chip Daniels says:

              The citizens of the United States of America already own some portion of your income for 2019, even on the income you haven’t earned yet.

              The government can own what doesn’t exist? OK.

              It never ceases to amaze me how some of the people who rush to call out corporate accounting shenanigans will just accept the same sort of thing from government.Report

              • Avatar Chip Daniels in reply to j r says:

                A claim against future earnings is the very definition of debt.Report

              • Avatar j r in reply to Chip Daniels says:

                No. It’s not. You can go look up the definition of debt and that’s not it.

                More importantly, public finance makes a pretty significant distinction between above the line transactions like taxes and spending and below the line transactions, like issuing or paying off debt.Report

              • Avatar Chip Daniels in reply to j r says:

                Default on a debt, and the lender can most definitely get a legal claim to the paychecks you haven’t earned yet and deduct their piece before you even see your paycheck.

                Happens every day.Report

            • Avatar Swami in reply to Chip Daniels says:

              And when we use legitimate representative democracy to change or modify the terms or amounts of said taxes, it is not a fishing “HEIST.”

              There is no point in a discussion with ideologues who insist all taxes are theft, or those who insist all tax reductions are reverse theft. This entire line of discussion is absurd.Report

        • Avatar DensityDuck in reply to Chip Daniels says:

          If the tax money isn’t mine to start with, then why do they send the paycheck to me and not the IRS?Report

          • Avatar pillsy in reply to DensityDuck says:

            Wait, my employer sends the money to the IRS.

            There’s a line on every paycheck I get saying just how much they sent to the IRS.Report

            • Avatar DensityDuck in reply to pillsy says:

              That’s a matter of convenience for you, not a requirement. If you want, you can have your employer not send anything, and you just mail the IRS a check before April 15th.Report

              • Unless they’ve changed the rules, if that year-end check is too large the IRS will require you to pay quarterly estimated taxes the next year. I believe — but from memory, so possibly suspect — that if that year-end check is too big and you didn’t pay quarterly there are penalties.Report

            • Avatar Dark Matter in reply to pillsy says:

              There’s a line on every paycheck I get saying just how much they sent to the IRS.

              That line is based on how much you make, not how much you “owe”.

              The reverse is also true, the bank gets the same check from me every month for my mortgage (i.e. a true debt) which has no relation to how much I make that month.Report

      • Avatar Brandon Berg in reply to Swami says:

        I concur regarding the quality of these KH posts. My main objection is not that she’s left of center; it’s that she has no idea how to analyze an issue or construct a coherent argument. Every post is just a Gish gallop of links of varying quality, stuck together with some filler text consisting mostly of regurgitated talking points, with no evidence of understanding of the issues beyond the most superficial level.

        These are just utterly without merit. Consistently. I don’t know why you guys keep running them, unless it’s some kind of Cunningham’s Law play.Report

        • Avatar DensityDuck in reply to Brandon Berg says:

          I applaud the site operators’ interest in bringing in some new writers and their attempt to expand the OT circle beyond the same people who’ve been here for 10+ years.

          I think that the authors in question would welcome constructive feedback regarding their work, as well as a look at the sort of lively debate and discussion inspired by their writing.Report

          • Avatar Swami in reply to DensityDuck says:

            When has KH shown any interest in any comment, even of corrections for clear and obvious errors? Her posts may lead to a discussion among readers, but the actual posts seem the equivalent of a misleading political ad. They are better viewed as disinformation.

            If a conservative wrote a post that abortion causes AIDS, we would recognize that they are generating disinformation — propaganda disguised as insight. Reading the post would lower our understanding of the issue, not increase it. This is how I feel about most of KH’s stuff. It is propaganda packaged as a blog post, and frankly, I assume she knows it.Report

  4. “Robert Reich has served in four U.S. presidential administrations and was the Labor Secretary from 1993 to 1997”

    This is where you lost me. Reich is a hack, known for presenting distorted arguments and screaming blue murder when Republicans engage in tactics Democrats have (e.g., reconciliation).

    We have an aging populace with more people drawing out of the system every year. This is a pay-as-you-go system because the “trust fund” is little more than IOU’s used to fund the rest of the government. Raising the wage cap is a solution, but it also creates a problem: we cap SS contributions because benefits are capped. Raising that cap also raises our obligations. The rich get bigger SS payouts and you’ve only made the problem worse.

    To solve the problem, you can:

    1) change the COLA adjustments. Congress has whimped out on this before, over-riding the adjustment during the Great Recession because seniors complained they didn’t get increases during a *deflationary* cycle.

    2) Means-test. Good luck with that.Report

    • With two exceptions, things have unfolded almost exactly as the Greenspan Commission’s plan for the future of SS laid out. The first exception is the obvious one: Congress said they would be responsible and balance the budget. The second is that the Commission set the initial cap at a level that taxed about 90% of earned income in the US. When Congress wrote the law they bought into that cap, but changed the way it was increased and tied it to increases in the median wage rather than trying to maintain the 90% figure. From memory, the percentage of earned income being taxed is now down into the low 80s. If it were still at 90% things would be looking rosy for at least a few more decades.

      Given the current deficit, borrowing the money to pay the trust fund isn’t noise, but isn’t that big either (a couple trillion dollars over 30 years).Report

    • Avatar Slade the Leveller in reply to Michael Siegel says:

      Raising the wage cap is a solution, but it also creates a problem: we cap SS contributions because benefits are capped. Raising that cap also raises our obligations.

      Only if we define eliminating the cap that way. Congress can write any law they want, and who’s to say the benefit cap can’t stay while the contribution cap is removed. People are getting fished by the taxman everyday.

      Congress has whimped out on this before, over-riding the adjustment during the Great Recession because seniors complained they didn’t get increases during a *deflationary* cycle.

      Congressmen know who votes.Report

    • Avatar Brandon Berg in reply to Michael Siegel says:

      Even Paul Krugman couldn’t resist joining in the Reich-bashing:

      If you try to follow arguments about economics among intellectuals whose politics are more or less left-of-center, you gradually become aware that the participants in these arguments are divided not only by particular issues–deficit reduction, NAFTA, and so on–but by the whole way that they think about the economy. On one side there are those whose views are informed by academic economics, the kind of stuff that is taught in textbooks. On the other there are people like Kuttner, Jeff Faux of the Economic Policy Institute, and Labor Secretary Robert Reich. Some members of this faction have held university appointments. But most of them lack academic credentials and, more important, they are basically hostile to the kind of economics on which such credentials are based.

      A similar situation exists in other fields. Consider, for example, evolutionary biology. Like most American intellectuals, I first learned about this subject from the writings of Stephen Jay Gould. But I eventually came to realize that working biologists regard Gould much the same way that economists regard Robert Reich: talented writer, too bad he never gets anything right.

      Report

  5. Avatar JoeSal says:

    I’m kind of curious Kate, approximately where did you take economics at? NE, SE, or West Coast?Report

  6. Avatar Swami says:

    Easiest, least painful and most politically actionable way to fix SS:

    Allow every person in America to CHOOSE either a slightly later full retirement benefit age, OR pay slightly more in SS premium. This would be their choice — obviously those near retirement would choose the higher premium, those younger would choose whichever way they leaned.

    Increasing the wage cap could be added on to get political support for the idea with those on the left.

    The key of course is that contributions long term need to even out with benefits.Report

    • Avatar Pinky in reply to Swami says:

      You can’t expect people to accurately predict their retirement age. People decide on retirement based on the value of their investments, but also their health, the economy, their personal satisfaction, et cetera. The current system lets a person choose between a smaller amount of benefits or a delay in retirement, which is a decision the person can make at any time based on their immediate situation.Report

      • Avatar Swami in reply to Pinky says:

        When did I expect anyone to do any such thing?

        I would not change the current ability to retire early or later with adjustments in benefits. That seems great to me. I would allow an additional choice which would either increase “premiums” or allow them to choose a slightly later schedule. (If today the date of full benefits is 67, perhaps it backs off to 69, IF and only if they choose not to pay the higher premium needed to make the program self funding.)

        This allows anyone anywhere near retirement (and members of AARP) to avoid being harmed by later dates.Report

        • Avatar Pinky in reply to Swami says:

          If you’re asking people to choose between a later benefit age or paying more, then you’re asking them today to estimate their retirement age, at least implicitly. I get that you’re framing it as an opportunity to protect people near their retirement age, but you’re also offering that choice to people who aren’t. What happens in 20 years when a 65-year-old realizes that in his 40’s he overestimated his ability to work later in life?

          Remember, also, that Social Security has a disability component.Report

          • Avatar Swami in reply to Pinky says:

            Then encourage them to pay more to play it safe. Or are you so wise that you can decide to eliminate the option for them?

            What does the disability aspect have anything to do with it? I am offering a way to SAVE the system.Report

      • Avatar fillyjonk in reply to Pinky says:

        Health, too. I know people who have had to retire earlier than planned because of health things. Stuff that doesn’t raise them to the level of wanting to apply for disability, but that makes working not as possible as it was.

        As a Gen-Xer, I fully expect to be told “thanks for supporting our seniors with all your tax moneys! Hope you saved some bucks!” (I have, but….there are many things that could happen and I *really* hope I do not still have to work at 75, but I might. I am 50 now and I am not sure how much more changes to the workplace I can tolerate based on the changes I’ve seen in the 20 years I’ve been at this gig)Report

        • Avatar Pinky in reply to fillyjonk says:

          I’m a few years older than you, just enough that I would never call myself a Gen-Xer. I never thought I’d decide my retirement age based on health, and I hope that won’t be the case, but it’s easier to picture that happening now. Thirty years ago, I could do construction and feel fine; now I sit in a chair and worry about a limb falling off.Report

    • Avatar Jesse in reply to Swami says:

      Or we could slightly raise taxes on incredibly successful people and make it so that nobody has to work even longer, just because they’re living slightly longer, because of some weird idea that if you live longer, you owe another year of work to capitalism.Report

      • Avatar Swami in reply to Jesse says:

        Wow, someone just got out of Marxist indoctrination camp. I never worked a second for capitalism. I worked in voluntary reciprocal exchange with other voluntary parties (employers, investors, consumers) in positive sum, win/win arrangements for mutual benefit. But maybe that is just me, and everyone I ever met. Considering our standard of living adjusted for PPP is higher than any other large diverse economy ever (and thirty times higher than the last ten thousand year historic average), it seems to be working pretty good for most of us, especially compared to the alternatives, Comrade.

        I do not believe it is fair or just or moral to exploit people just because they are successful (especially when they were successful at adding value to others voluntarily). Obviously, as members of a collective society, we can all agree to pay our fair share of taxes for public goods and safety nets. But however we work out the details, the premiums need to balance the payouts longer term.Report

        • Avatar George Turner in reply to Swami says:

          I say we quit being chumps and use our unrivaled military power to quit paying taxes altogether and just loot the rest of the world. If they come up short of cash, we’ll take all their artwork, furniture, and televisions. I would suggest looting their libraries, but most of their books are written in foreign gibberish.Report

      • Avatar Pinky in reply to Jesse says:

        By definition, living another year means using resources for another year. Most of us spend about half our lives working, so it’s only reasonable to assume that longer lives would require more work. By the way, that rhetorical move was more ham-handed than you thought, where people are living “slightly” longer but they have to work “even” longer. You also propose a “slight” increase in taxes on “incredibly” successful people, as if a dad earning $130,000 per year in San Francisco can buy his kids ponies.Report

  7. Avatar Barry says:

    Kathy, I first encountered these claims back in the late 1970’s. Social Security is still here.

    IMHO, by the time that the Right destroys Social Security, any and all small investors will be lucky not to be cleaned out by the unrestrained Job Creators.Report

    • Avatar Michael Cain in reply to Barry says:

      This. The situation in the late 70s/early 80s was a real crisis — the trust fund was going to run out in five years (not 30, as was the case when the current “crisis” started). The Boomers’ grandparents and parents weren’t going to get their retirement. So I overpaid for 40 years in order to fund my grandparents’ retirement, and my parents’, and build the trust fund up to the point that a significant part of my retirement could come out of that.

      There’s a long term problem now. The root cause is that since the SS changes in 1983/4, increased income from productivity gains have accrued largely to people who make more than the salary cap. So by the 2040s sometime, SS revenue will only cover about 75% of the promised benefits. But because it’s a long term problem, it can be fixed with gradual changes over the next decade or two.Report

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