5 ms·

It's called social security and it's enormously expensive and borderline unaffordable... And not even enough to retire on comfortably

wolverine876 3y ago
Yet it works so well that the public overwhelmingly supports it. > borderline unaffordable It's funded by your own income; it's a compulsory savings plan.
- missedthecue 3y ago
  No, I mean societally it's unaffordable. The government will eventually need to raise taxes significantly or begin means testing it. The current system is mathematically unsustainable
  - the_gastropod 3y ago
    The current system is mathematically unsustainable pretty much by the design of a certain political faction interested in demonstrating the incompetence of government. Removing the income cap—currently around $160k—on the social security tax would do a great deal to make social security sustainable (and more equitable).
    - wolverine876 3y ago
      Think how many problems could be solved by removing (democratically) that faction: Social security, climate change, immigration (to a significant extent), education, et al
    - dh2022 3y ago
      If they remove the cap on retirement contributions they should also remove the cap on retirement payouts. I would love to see social security pay former CEOs millions of dollars per year:)
      - yterdy 3y ago
        No, they shouldn't. SS is meant to prevent destitution, not enable luxury. Wealthy Americans owe the working and consumption classes whose sacrifices make their riches possible; there is no such obligation to ensure those elite earners get back even what they paid into that particular channel, at the expense of people who are much less well off, when they have other resources to draw from. You might not think that's fair. I do. Even under this hypothetical regime, I know who I'd choose to be: rich and paying a ton in taxes, in a heartbeat.
        bumby 3y ago
        Devils advocate: by subsidizing the “consumption class” you enable more consumption. I get that’s how our current economy works but there are probably a lot of negative externalities associated with increasing consumption.
        yterdy 3y ago
        That's fine. Sure, there are downsides that increase as consumption increases, meaning that overconsumption (however that's defined) is undesirable. However, consumption enables cultural expression that otherwise would be economically untenable. Art, design, music, etc. benefit from economic incentives to overproduce beyond subsistence. That people go above and beyond in their productive capacity in order to enable creators to create freely and contribute to the corpus of human expression is something that should be recognized as the sacrifice for the collective soul that it is.
        bumby 3y ago
        That's a good point, and I'm in favor of those 'cultural expressions'. But I think we're fooling ourselves if we think somebody is buying a gas-guzzling SUV, or the next iPhone, so they will have the ability to write the next great American novel. I'd venture that most consumption is a status game. I think my larger point is we have to zoom out for a systems level analysis. We shouldn't assume that the production is de-coupled from the consumption, and production can come with a host of negative externalities. I'm not convinced that wonton consumption (especially for the sake of itself) is a net positive, given human nature's tendency to be insatiable with regard to consumption.
    - AnthonyMouse 3y ago
      > The current system is mathematically unsustainable pretty much by the design of a certain political faction interested in demonstrating the incompetence of government. The current system is mathematically unsustainable as a result of politics. If you're going to untie benefits from payments then the first sensible thing to do is to make the same payments to everyone instead of giving more to people who made more money, but this would result in large numbers of affluent retirees voting against you. If you're going to untie benefits from payments then the second sensible thing to do is to eliminate social security tax whatsoever and fund the program from general revenues, which would remove the need for the farce of a "social security trust fund" (the government owes itself money: it's a debit and a credit in equal amounts and nets to zero). But then people would condemn you for "bankrupting social security" or "stealing the trust fund" or similar nonsense, funded by the people the tax burden would be shifted onto. Removing the cap while leaving the program as it is not only is worse than either of these things, it doesn't even solve the problem, because the program as-designed would then be making higher payments to all of those people when they retire which would consume more than all of the money they paid in because people who made more money tend to live longer.
      - bumby 3y ago
        >the government owes itself money: it's a debit and a credit in equal amounts and nets to zero Can you elaborate? It seems like the govt has a liability and the pensioners have an asset.
        vineyardmike 3y ago
        The government has a fund that is used to pay for SS. The fund is an asset they’ve committed to using to pay the liability of their pensioner promises. That fund is an asset full of assets. Those assets are government debt. Owning your debt basically nets to 0.
        bumby 3y ago
        I agree for a snapshot in time. I think the distinction is that if the liability includes future payments to current citizens posting into the system, the liability may outpace the asset.
- bumby 3y ago
  Most people will get more out of social security than they pay in, though. It’s possible that the general HN view is skewed because tech tends to pay well and this dynamic erodes at higher levels of income.
- pjlegato 3y ago
  This is a common and fundamentally incorrect misconception about Social Security. Many subsequent policy debates are then misinformed. Your money is not ever saved for you. Your retirement is NOT funded by your own past taxes. Your retirement is funded by those younger people who are then working and paying taxes. You can see the details at https://en.wikipedia.org/wiki/Social_Security_Trust_Fund https://en.wikipedia.org/wiki/Social_Security_Trust_Fund Payments to retirees are made out of _currently incoming funds_. That is, the money paid in taxes by people currently working is immediately distributed to retired people who are receiving Social Security payments. It is, in other words, NOT a savings plan. Full stop. This scheme sort of worked in the 1930s when life expectancies were much lower and only a few people survived to retirement age relative to the much larger number of working people paying taxes. Since 2009, Social Security has operated at an annual loss: the amount paid out has begun to exceed the incoming taxes. The deficit is expected to increase a lot in the coming years. (See https://www.cbo.gov/sites/default/files/cbofiles/attachments/43648-SocialSecurity.pdf https://www.cbo.gov/sites/default/files/cbofiles/attachments...) Whatever you may think about whether Social Security is a good idea or whether the goverment ought to provide for retirement, it's clear that the current structure is not going to do that for much longer. A large-scale reform of some kind is coming.
  - bumby 3y ago
    Isn’t the implication that solvency can be maintained by increasing the age of claimants? It doesn’t have to be a drastic step function, it could be slowly phased in.
    - pjlegato 3y ago
      That would be theoretically possible, yes; but all proposals along those lines so far have been met with staunch and bipartisan political opposition. Attempting to alter the retirement age seems to be political toxic waste.
- lotsofpulp 3y ago
  Social Security in the US is very much a wealth redistribution scheme, and more and more so as time goes on. See adjustments to retirement age and bend points in the benefit formula.

wolverine876 3y ago

Yet it works so well that the public overwhelmingly supports it. > borderline unaffordable It's funded by your own income; it's a compulsory savings plan.

missedthecue 3y ago
No, I mean societally it's unaffordable. The government will eventually need to raise taxes significantly or begin means testing it. The current system is mathematically unsustainable
- the_gastropod 3y ago
  The current system is mathematically unsustainable pretty much by the design of a certain political faction interested in demonstrating the incompetence of government. Removing the income cap—currently around $160k—on the social security tax would do a great deal to make social security sustainable (and more equitable).
  - wolverine876 3y ago
    Think how many problems could be solved by removing (democratically) that faction: Social security, climate change, immigration (to a significant extent), education, et al
  - dh2022 3y ago
    If they remove the cap on retirement contributions they should also remove the cap on retirement payouts. I would love to see social security pay former CEOs millions of dollars per year:)
    - yterdy 3y ago
      No, they shouldn't. SS is meant to prevent destitution, not enable luxury. Wealthy Americans owe the working and consumption classes whose sacrifices make their riches possible; there is no such obligation to ensure those elite earners get back even what they paid into that particular channel, at the expense of people who are much less well off, when they have other resources to draw from. You might not think that's fair. I do. Even under this hypothetical regime, I know who I'd choose to be: rich and paying a ton in taxes, in a heartbeat.
      - bumby 3y ago
        Devils advocate: by subsidizing the “consumption class” you enable more consumption. I get that’s how our current economy works but there are probably a lot of negative externalities associated with increasing consumption.
        yterdy 3y ago
        That's fine. Sure, there are downsides that increase as consumption increases, meaning that overconsumption (however that's defined) is undesirable. However, consumption enables cultural expression that otherwise would be economically untenable. Art, design, music, etc. benefit from economic incentives to overproduce beyond subsistence. That people go above and beyond in their productive capacity in order to enable creators to create freely and contribute to the corpus of human expression is something that should be recognized as the sacrifice for the collective soul that it is.
        bumby 3y ago
        That's a good point, and I'm in favor of those 'cultural expressions'. But I think we're fooling ourselves if we think somebody is buying a gas-guzzling SUV, or the next iPhone, so they will have the ability to write the next great American novel. I'd venture that most consumption is a status game. I think my larger point is we have to zoom out for a systems level analysis. We shouldn't assume that the production is de-coupled from the consumption, and production can come with a host of negative externalities. I'm not convinced that wonton consumption (especially for the sake of itself) is a net positive, given human nature's tendency to be insatiable with regard to consumption.
  - AnthonyMouse 3y ago
    > The current system is mathematically unsustainable pretty much by the design of a certain political faction interested in demonstrating the incompetence of government. The current system is mathematically unsustainable as a result of politics. If you're going to untie benefits from payments then the first sensible thing to do is to make the same payments to everyone instead of giving more to people who made more money, but this would result in large numbers of affluent retirees voting against you. If you're going to untie benefits from payments then the second sensible thing to do is to eliminate social security tax whatsoever and fund the program from general revenues, which would remove the need for the farce of a "social security trust fund" (the government owes itself money: it's a debit and a credit in equal amounts and nets to zero). But then people would condemn you for "bankrupting social security" or "stealing the trust fund" or similar nonsense, funded by the people the tax burden would be shifted onto. Removing the cap while leaving the program as it is not only is worse than either of these things, it doesn't even solve the problem, because the program as-designed would then be making higher payments to all of those people when they retire which would consume more than all of the money they paid in because people who made more money tend to live longer.
    - bumby 3y ago
      >the government owes itself money: it's a debit and a credit in equal amounts and nets to zero Can you elaborate? It seems like the govt has a liability and the pensioners have an asset.
      - vineyardmike 3y ago
        The government has a fund that is used to pay for SS. The fund is an asset they’ve committed to using to pay the liability of their pensioner promises. That fund is an asset full of assets. Those assets are government debt. Owning your debt basically nets to 0.
        bumby 3y ago
        I agree for a snapshot in time. I think the distinction is that if the liability includes future payments to current citizens posting into the system, the liability may outpace the asset.
bumby 3y ago
Most people will get more out of social security than they pay in, though. It’s possible that the general HN view is skewed because tech tends to pay well and this dynamic erodes at higher levels of income.
pjlegato 3y ago
This is a common and fundamentally incorrect misconception about Social Security. Many subsequent policy debates are then misinformed. Your money is not ever saved for you. Your retirement is NOT funded by your own past taxes. Your retirement is funded by those younger people who are then working and paying taxes. You can see the details at https://en.wikipedia.org/wiki/Social_Security_Trust_Fund https://en.wikipedia.org/wiki/Social_Security_Trust_Fund Payments to retirees are made out of _currently incoming funds_. That is, the money paid in taxes by people currently working is immediately distributed to retired people who are receiving Social Security payments. It is, in other words, NOT a savings plan. Full stop. This scheme sort of worked in the 1930s when life expectancies were much lower and only a few people survived to retirement age relative to the much larger number of working people paying taxes. Since 2009, Social Security has operated at an annual loss: the amount paid out has begun to exceed the incoming taxes. The deficit is expected to increase a lot in the coming years. (See https://www.cbo.gov/sites/default/files/cbofiles/attachments/43648-SocialSecurity.pdf https://www.cbo.gov/sites/default/files/cbofiles/attachments...) Whatever you may think about whether Social Security is a good idea or whether the goverment ought to provide for retirement, it's clear that the current structure is not going to do that for much longer. A large-scale reform of some kind is coming.
- bumby 3y ago
  Isn’t the implication that solvency can be maintained by increasing the age of claimants? It doesn’t have to be a drastic step function, it could be slowly phased in.
  - pjlegato 3y ago
    That would be theoretically possible, yes; but all proposals along those lines so far have been met with staunch and bipartisan political opposition. Attempting to alter the retirement age seems to be political toxic waste.
lotsofpulp 3y ago
Social Security in the US is very much a wealth redistribution scheme, and more and more so as time goes on. See adjustments to retirement age and bend points in the benefit formula.