9 ms·

Social Security says system's costs will exceed income this year

72 points by gscott 8y ago

mjevans 8y ago
Why don't we focus on using government bulk and "peace"-time military support to provide some of the services that "social security" (tax the young now to support the retired now) provides; directly, instead of as money or vouchers?
- ahoy 8y ago
  That'd be because a lot of US politicians are ideologically opposed to any welfare program.
  - magduf 8y ago
    As are the countless people who elect them, even though those same voters as a bloc rely far more on Social Security than those who vote for the other party.
    - ahoy 8y ago
      If you poll those same voters on individual social welfare programs, particularly Social Security, you'll find they support them. It's really upsetting.
      - magduf 8y ago
        If the voters are so dumb that they're voting directly against their own stated interests, then maybe they shouldn't have those programs.
        mjevans 8y ago
        Maybe we should actually have a meaningful test that is based on scientific evidence of understanding things like consequences and the current (at the time) structure of the government. Failing the test, BTW, doesn't mean an individual can't vote (ever, just until they re-pass "high school"): it means society has failed them and they now qualify for extended schooling to correct their lack of education. Including provided room and board while they are studying as well as medical care to correct for sources of learning defects (such as poor vision, etc). If someone is too impaired to be able to pass high school in that supporting environment then they should be 'retired' the same way someone with a more obvious disability is.
- Avshalom 8y ago
  Right now Social Security is paid for from it's own special tax. The idea then is that it isn't subject to yearly budget concerns, it just keeps ticking along regardless of congress' priorities. If we start using the military, whether budget, personnel or infrastructure, then as soon as a war starts up or if we ever get a congress' that has the spine to cut back on military spending then those services get cut and we have to have a giant argument about how to replace them before settling on "do nothing and hope we get elected anyway".
gringoDan 8y ago
We've known this was coming for a long time...as a Millennial, I don't expect to ever see a cent of Social Security benefits.
- encoderer 8y ago
  As a millennial, I do. There are just too many easy mitigations here that will extend life several decades: - Remove the cap and tax income above $120k, just like medicare and income tax - Increased tax rate, possibly just on payroll not income (the employer-paid portion) - Limited forms of means-testing (Maybe, attenuated survivor benefits as your estate value clears a certain high mark like $3 million) - Eliminate "early" retirement ages and force the "full" age - Extending minimum retirement age to 70 and beyond
  - misterbwong 8y ago
    Came here to say the same thing. There are some very sensible fixes to extend SS to younger folks. Medicare, however, is another story.
    - deleted 8y ago
      [deleted]
    - maxerickson 8y ago
      The easy way to fix Medicare is to get medical costs under control.
  - maerF0x0 8y ago
    means testing is super unfair to those who sacrificed lifestyle in their youth to save for retirement. Consider the person that could have, but didnt, live a lavish lifestyle and instead responsibly saved. Then a benefit (which they paid into, and maybe rely upon) is removed after the fact? Bad news.
    - ryandrake 8y ago
maerF0x0 8y ago
"This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034. ... It should be stressed that the reports don’t indicate that benefits disappear in those years. After 2034, Social Security’s trustees said tax income would be sufficient to pay about three-quarters of retirees’ benefits." [1] We can argue about how honest this is, but the claim is that it will still be there for Millennials. It seems feasible because by the time Millennials are 67, the bulge of babyboomers will be gone. [1]: https://www.marketwatch.com/story/medicares-finances-are-getting-worse-as-social-security-taps-into-fund-for-first-time-in-36-years-2018-06-05 https://www.marketwatch.com/story/medicares-finances-are-get...
deleted 8y ago
[deleted]
imbokodo 8y ago
Congress repealed the creation of the Independent Payment Advisory Board, that would cut the cost of Medicare without cutting service much. Thus Medicare costs are higher, thus spending exceeds income. Reinstate this board, as well as some other measures, and it will be back on target. It is a manufactured problem. Anything benefiting the taxpayer like Social Security or schools is always being cut, while the funds to move the US embassy to Jerusalem or send the Navy to the South China Sea seems to be bottomless.
- assblaster 8y ago
  >Congress repealed the creation of the Independent Payment Advisory Board, that would cut the cost of Medicare without cutting service much. Medicare services are already being rationed covertly via wait lists and via the increasing numbers of physicians who refuse to take Medicare or Medicaid. The IPAB would most likely decrease access to services by cutting payments even further below market rates which would decrease supply of those services.
  - jeffreyrogers 8y ago
    Market rates are inflated due to lack of price controls in programs like Medicare and Medicaid, plus employer-sponsored insurance plans are not as incentivized to negotiate for lower prices as individual consumers are. Couple that with the supply side problems where doctors need 7+ years of training before they can perform simple procedures like testing for strep throat or prescribing antibiotics, and the fact that a large fraction of medical spending does very little to prolong life or improve quality of life and you can see that the current health care system is incredibly wasteful.
    - assblaster 8y ago
      Medicare and Medicaid are the definition of price controls for paying physicians: they pay below market rate such that private insurance is billed higher to offset. There are week price controls for medical equipment and pharmaceuticals and the failure to address overuse of unnecessary equipment costs way more than the savings from price controls. Testing for strep and prescribing antibiotics represent the smallest fraction of healthcare resources. Why didn't you include brain or spine surgery on your list of things that shouldn't require 7 years of training? Expensive end of life care isn't the fault of hospitals or clinicians: it's the fault of families who can't say no to excessive and futile end of life care. If you want to get into getting rid of "wasteful" spending, why aren't you recommending everyone should smoke a pack of cigarettes per day? Most people would work and live a productive life until they die of lung cancer at age 65? Saves 15-25 years of unnecessary "end of life" care.
vannevar 8y ago
There are two problems with SS, one fixable, one less so. The hard to fix problem is slowing population growth. SS depends on young workers to fund the payments to retirees. But this is really only a problem if aggregate income growth declines with population growth, and it hasn't; the aggregate income of all Americans has quadrupled since 1982, the last time this shortfall occurred. The problem is that the vast majority of the income growth has been captured by a small portion of the population, who don't pay withholding taxes on it. If we had sane progressive tax policy in the US, the SS shortfall would evaporate.
- rayiner 8y ago
  > If we had sane progressive tax policy in the US, the SS shortfall would evaporate. Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxes-really-are-unusually-progressive/252917 https://www.theatlantic.com/business/archive/2012/02/us-taxe.... The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo http://www.politifact.com/truth-o-meter/article/2013/feb/01/.... The system is set up so not only do the needy get a public subsidy, but most people do. Caps on retirement taxes are not specific to the U.S. Germany and France, for example, have similar ceilings. Germany, for example, has a 19.6% payroll tax up to $80,000. The U.S. tax is 12.4% up to $127,000.
  - mikeash 8y ago
    Is our tax policy still among the most progressive if you account for the full payroll tax (not just the employee side as apparently that study does) as well as the many other federal, state, and local taxes we pay?
    - rayiner 8y ago
      Yes: https://www.washingtonpost.com/news/wonk/wp/2013/04/05/americas-taxes-are-the-most-progressive-in-the-world-its-government-is-among-the-least/?utm_term=.82d39a834534 https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri... Looking at those additional taxes for both U.S. and Europe generally makes the U.S. even more progressive. For example, sales taxes are highly regressive. European countries rely heavily on 20-25% VAT taxes to raise revenue, while U.S. states typically have 5-10% sales taxes. The maximum rates and various caps just generally kick in much earlier. In Germany, the income tax rate is 42% for $63,000+, just a few percent below the maximum bracket of 45%.
mcthorogood 8y ago
Some comments by millenials say that they expect to receive SS benefits, but this is not a secure basis for financial planning. A person's retirement planning should be independent of any expected SS receipts and if you happen to receive SS then it's just a windfall.
- ams6110 8y ago
  I'm less than 15 years from retirement age, and I don't expect to get any Social Security.
chiefalchemist 8y ago
We have the resources. What we lack are necessary priorities and the resolve to fix them. The latest DoD budget is $700 billion. Russia's DoD budget is approx 10% of that. That's not a typo 10%. China might not be an ally - in the historical European sense - but given our symbiotic economic relationship it would like take quite a bit for a true military conflict to break out between the two countries. Even if our DoD budget was 2x Russia's, the ~$550+ billion is still a lot of money. Money cant love, nor evidently priorities rooted in the 21st century.
- eximius 8y ago
  I've fantasized about this as a solution before. If you tell the military that in 10 years you're cutting their budget to $250 billion and somehow manage to instill in them that a) you're serious and b) you will not repeal your decision, I have no doubt they would successfully adapt (just like every industry who complains about regulations have ultimately adapted). I am curious, however, in HOW they would adapt. I wouldn't want them to drop their research budget (much). Research is almost always good. For one, you could discharge some of our 1.5 Million active troops [1]. I don't really know why we have that many. That'd measurably cut down on the second largest chunk of the budget (wages) [2]. The highest is 'Operations and Maintenance' and the third highest is 'Procurement'. With a reduction of manpower, they need to procure less. They can retire many assets. I would prefer they NOT sell them to more local police, but thats a different discussion. Procurement could be done MANY times smarter. The F35 is a disaster of design by committee and if each military branch had designed their own plane, I'm sure they'd each have gotten a better one. And, of course, with less money, they have more incentive to push back on the industrial part of the complex for more reasonable prices. [1] - https://en.wikipedia.org/wiki/United_States_Armed_Forces#Personnel https://en.wikipedia.org/wiki/United_States_Armed_Forces#Per... [2] - https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_Spending.jpg https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_... (it's 2010, but the proportions should be similar)
  - chiefalchemist 8y ago
    2 wks ago on one of the NPR shows these was an interview with one of the members of Congress, Dem from VA I think. He has something to do with the Russia hacking investigation. In the middle of the interview he mentions the DoD budget and more or less says - as an active member of Congress can - we're wasting too much money on 20th century warfare and not enough on 21st century (cyber) capabilities. General + POTUS Eisenhower is in heaven laughing, "I warned you. I told you so. You morons."
ghouse 8y ago
Social Security is a insurance program, not a retirement program. Old-Age, Survivors, and Disability Insurance (OASDI) https://en.wikipedia.org/wiki/Social_Security_(United_States) https://en.wikipedia.org/wiki/Social_Security_(United_States...
- dragonwriter 8y ago
  “Retirement” and “insurance against becoming aged and/or disabled” are different framings for the same thing.
- Avshalom 8y ago
  >>Income derived from Social Security is currently estimated to have reduced the poverty rate for Americans age 65 or older from about 40% to below 10% When 40% (or an extra 30%) of a country ends up in poverty without it kind of does become a retirement program. Or at least an 'old-age' program.
AnimalMuppet 8y ago
One interesting side effect of this will be on the interest rate. Social Security has been investing the surplus, most (or all?) in Treasury bonds. As outflows exceed income, they're going to have to sell bonds. That should drive prices down, and therefore interest rates up - to what degree, I don't know.

72 points by gscott 8y ago

Why don't we focus on using government bulk and "peace"-time military support to provide some of the services that "social security" (tax the young now to support the retired now) provides; directly, instead of as money or vouchers?

ahoy 8y ago
That'd be because a lot of US politicians are ideologically opposed to any welfare program.
- magduf 8y ago
  As are the countless people who elect them, even though those same voters as a bloc rely far more on Social Security than those who vote for the other party.
  - ahoy 8y ago
    If you poll those same voters on individual social welfare programs, particularly Social Security, you'll find they support them. It's really upsetting.
    - magduf 8y ago
      If the voters are so dumb that they're voting directly against their own stated interests, then maybe they shouldn't have those programs.
      - mjevans 8y ago
        Maybe we should actually have a meaningful test that is based on scientific evidence of understanding things like consequences and the current (at the time) structure of the government. Failing the test, BTW, doesn't mean an individual can't vote (ever, just until they re-pass "high school"): it means society has failed them and they now qualify for extended schooling to correct their lack of education. Including provided room and board while they are studying as well as medical care to correct for sources of learning defects (such as poor vision, etc). If someone is too impaired to be able to pass high school in that supporting environment then they should be 'retired' the same way someone with a more obvious disability is.
Avshalom 8y ago
Right now Social Security is paid for from it's own special tax. The idea then is that it isn't subject to yearly budget concerns, it just keeps ticking along regardless of congress' priorities. If we start using the military, whether budget, personnel or infrastructure, then as soon as a war starts up or if we ever get a congress' that has the spine to cut back on military spending then those services get cut and we have to have a giant argument about how to replace them before settling on "do nothing and hope we get elected anyway".

gringoDan 8y ago

We've known this was coming for a long time...as a Millennial, I don't expect to ever see a cent of Social Security benefits.

encoderer 8y ago
As a millennial, I do. There are just too many easy mitigations here that will extend life several decades: - Remove the cap and tax income above $120k, just like medicare and income tax - Increased tax rate, possibly just on payroll not income (the employer-paid portion) - Limited forms of means-testing (Maybe, attenuated survivor benefits as your estate value clears a certain high mark like $3 million) - Eliminate "early" retirement ages and force the "full" age - Extending minimum retirement age to 70 and beyond
- misterbwong 8y ago
  Came here to say the same thing. There are some very sensible fixes to extend SS to younger folks. Medicare, however, is another story.
  - deleted 8y ago
    [deleted]
  - maxerickson 8y ago
    The easy way to fix Medicare is to get medical costs under control.
- maerF0x0 8y ago
  means testing is super unfair to those who sacrificed lifestyle in their youth to save for retirement. Consider the person that could have, but didnt, live a lavish lifestyle and instead responsibly saved. Then a benefit (which they paid into, and maybe rely upon) is removed after the fact? Bad news.
  - ryandrake 8y ago

maerF0x0 8y ago

"This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034. ... It should be stressed that the reports don’t indicate that benefits disappear in those years. After 2034, Social Security’s trustees said tax income would be sufficient to pay about three-quarters of retirees’ benefits." [1] We can argue about how honest this is, but the claim is that it will still be there for Millennials. It seems feasible because by the time Millennials are 67, the bulge of babyboomers will be gone. [1]: https://www.marketwatch.com/story/medicares-finances-are-getting-worse-as-social-security-taps-into-fund-for-first-time-in-36-years-2018-06-05 https://www.marketwatch.com/story/medicares-finances-are-get...

deleted 8y ago

[deleted]

imbokodo 8y ago

Congress repealed the creation of the Independent Payment Advisory Board, that would cut the cost of Medicare without cutting service much. Thus Medicare costs are higher, thus spending exceeds income. Reinstate this board, as well as some other measures, and it will be back on target. It is a manufactured problem. Anything benefiting the taxpayer like Social Security or schools is always being cut, while the funds to move the US embassy to Jerusalem or send the Navy to the South China Sea seems to be bottomless.

assblaster 8y ago
>Congress repealed the creation of the Independent Payment Advisory Board, that would cut the cost of Medicare without cutting service much. Medicare services are already being rationed covertly via wait lists and via the increasing numbers of physicians who refuse to take Medicare or Medicaid. The IPAB would most likely decrease access to services by cutting payments even further below market rates which would decrease supply of those services.
- jeffreyrogers 8y ago
  Market rates are inflated due to lack of price controls in programs like Medicare and Medicaid, plus employer-sponsored insurance plans are not as incentivized to negotiate for lower prices as individual consumers are. Couple that with the supply side problems where doctors need 7+ years of training before they can perform simple procedures like testing for strep throat or prescribing antibiotics, and the fact that a large fraction of medical spending does very little to prolong life or improve quality of life and you can see that the current health care system is incredibly wasteful.
  - assblaster 8y ago
    Medicare and Medicaid are the definition of price controls for paying physicians: they pay below market rate such that private insurance is billed higher to offset. There are week price controls for medical equipment and pharmaceuticals and the failure to address overuse of unnecessary equipment costs way more than the savings from price controls. Testing for strep and prescribing antibiotics represent the smallest fraction of healthcare resources. Why didn't you include brain or spine surgery on your list of things that shouldn't require 7 years of training? Expensive end of life care isn't the fault of hospitals or clinicians: it's the fault of families who can't say no to excessive and futile end of life care. If you want to get into getting rid of "wasteful" spending, why aren't you recommending everyone should smoke a pack of cigarettes per day? Most people would work and live a productive life until they die of lung cancer at age 65? Saves 15-25 years of unnecessary "end of life" care.

vannevar 8y ago

There are two problems with SS, one fixable, one less so. The hard to fix problem is slowing population growth. SS depends on young workers to fund the payments to retirees. But this is really only a problem if aggregate income growth declines with population growth, and it hasn't; the aggregate income of all Americans has quadrupled since 1982, the last time this shortfall occurred. The problem is that the vast majority of the income growth has been captured by a small portion of the population, who don't pay withholding taxes on it. If we had sane progressive tax policy in the US, the SS shortfall would evaporate.

rayiner 8y ago
> If we had sane progressive tax policy in the US, the SS shortfall would evaporate. Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxes-really-are-unusually-progressive/252917 https://www.theatlantic.com/business/archive/2012/02/us-taxe.... The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo http://www.politifact.com/truth-o-meter/article/2013/feb/01/.... The system is set up so not only do the needy get a public subsidy, but most people do. Caps on retirement taxes are not specific to the U.S. Germany and France, for example, have similar ceilings. Germany, for example, has a 19.6% payroll tax up to $80,000. The U.S. tax is 12.4% up to $127,000.
- mikeash 8y ago
  Is our tax policy still among the most progressive if you account for the full payroll tax (not just the employee side as apparently that study does) as well as the many other federal, state, and local taxes we pay?
  - rayiner 8y ago
    Yes: https://www.washingtonpost.com/news/wonk/wp/2013/04/05/americas-taxes-are-the-most-progressive-in-the-world-its-government-is-among-the-least/?utm_term=.82d39a834534 https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri... Looking at those additional taxes for both U.S. and Europe generally makes the U.S. even more progressive. For example, sales taxes are highly regressive. European countries rely heavily on 20-25% VAT taxes to raise revenue, while U.S. states typically have 5-10% sales taxes. The maximum rates and various caps just generally kick in much earlier. In Germany, the income tax rate is 42% for $63,000+, just a few percent below the maximum bracket of 45%.

mcthorogood 8y ago

Some comments by millenials say that they expect to receive SS benefits, but this is not a secure basis for financial planning. A person's retirement planning should be independent of any expected SS receipts and if you happen to receive SS then it's just a windfall.

ams6110 8y ago
I'm less than 15 years from retirement age, and I don't expect to get any Social Security.

chiefalchemist 8y ago

We have the resources. What we lack are necessary priorities and the resolve to fix them. The latest DoD budget is $700 billion. Russia's DoD budget is approx 10% of that. That's not a typo 10%. China might not be an ally - in the historical European sense - but given our symbiotic economic relationship it would like take quite a bit for a true military conflict to break out between the two countries. Even if our DoD budget was 2x Russia's, the ~$550+ billion is still a lot of money. Money cant love, nor evidently priorities rooted in the 21st century.

eximius 8y ago
I've fantasized about this as a solution before. If you tell the military that in 10 years you're cutting their budget to $250 billion and somehow manage to instill in them that a) you're serious and b) you will not repeal your decision, I have no doubt they would successfully adapt (just like every industry who complains about regulations have ultimately adapted). I am curious, however, in HOW they would adapt. I wouldn't want them to drop their research budget (much). Research is almost always good. For one, you could discharge some of our 1.5 Million active troops [1]. I don't really know why we have that many. That'd measurably cut down on the second largest chunk of the budget (wages) [2]. The highest is 'Operations and Maintenance' and the third highest is 'Procurement'. With a reduction of manpower, they need to procure less. They can retire many assets. I would prefer they NOT sell them to more local police, but thats a different discussion. Procurement could be done MANY times smarter. The F35 is a disaster of design by committee and if each military branch had designed their own plane, I'm sure they'd each have gotten a better one. And, of course, with less money, they have more incentive to push back on the industrial part of the complex for more reasonable prices. [1] - https://en.wikipedia.org/wiki/United_States_Armed_Forces#Personnel https://en.wikipedia.org/wiki/United_States_Armed_Forces#Per... [2] - https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_Spending.jpg https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_... (it's 2010, but the proportions should be similar)
- chiefalchemist 8y ago
  2 wks ago on one of the NPR shows these was an interview with one of the members of Congress, Dem from VA I think. He has something to do with the Russia hacking investigation. In the middle of the interview he mentions the DoD budget and more or less says - as an active member of Congress can - we're wasting too much money on 20th century warfare and not enough on 21st century (cyber) capabilities. General + POTUS Eisenhower is in heaven laughing, "I warned you. I told you so. You morons."

ghouse 8y ago

Social Security is a insurance program, not a retirement program. Old-Age, Survivors, and Disability Insurance (OASDI) https://en.wikipedia.org/wiki/Social_Security_(United_States) https://en.wikipedia.org/wiki/Social_Security_(United_States...

dragonwriter 8y ago
“Retirement” and “insurance against becoming aged and/or disabled” are different framings for the same thing.
Avshalom 8y ago
>>Income derived from Social Security is currently estimated to have reduced the poverty rate for Americans age 65 or older from about 40% to below 10% When 40% (or an extra 30%) of a country ends up in poverty without it kind of does become a retirement program. Or at least an 'old-age' program.

AnimalMuppet 8y ago

One interesting side effect of this will be on the interest rate. Social Security has been investing the surplus, most (or all?) in Treasury bonds. As outflows exceed income, they're going to have to sell bonds. That should drive prices down, and therefore interest rates up - to what degree, I don't know.