Social Security says system's costs will exceed income this year
cbsnews.com
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- 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
Medicare, however, is another story.
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.
Means testing is consistent with this outcome.
Too bad we already do, and the number seems to be increasing rapidly: https://www.nytimes.com/2016/05/31/us/americas-aging-homeles...
So if Social Security isn't helping with that, what other excuses are there?
Presumably, if we did away with SS, there would be more on the streets.
Resources are no longer growing as quickly relative to population as they were in the 70s and 80s. We need normal people to make uncomfortable decisions _not_ to consume. Otherwise there are not enough resources when they grow old.
Incentivising spending in the present is not a clever idea, even if it isn't intended.
Also as an aside, there are wealthy elderly people already not cashing their social security checks, you just don't know it because it makes nearly no difference in the scheme of things.
I'm a proponent of BI but I have to point out that means-testing doesn't imply perverse incentives.
Such a person wouldn't be able to live a "lavish lifestyle" with the benefits alone - that's not what they're for. And if they saved up throughout their entire life then they wouldn't depend on those benefits in the first place, and could likely live far more lavishly than the average recipient, anyway.
Itd be no different than a bank keeping the contents of my savings account and giving me the excuse "we changed the rules"
One could argue that designing your financial expectations around that program remaining exactly as is for the forseeable future given that history wouldn't be reasonable - any number of events could lead to that $1000 hole in your budget. Who's "keeping your savings" when stocks fall or inflation rises?
But, if the feasibility of the Social Security program as a whole depends on restructuring the program, as it has in the past, then I believe it's better for society that those cuts be distributed to those who can best afford them.
I'd really be interested in seeing the math on this. If a person retires 2 years early (receive 86% of benefits) that person's total social security withdraw should be equal to someone that retired at normal age 13 years after retirement. With a retirement age of 67 and considering a life expectancy of 80, retiring early looks like favors the goverment on average.
There are additional factors to consider:
* How much more a person will pay into social security while continuing to work longer.
* If the last two years are the highest earning then it can increase the base payout.
* Does retirement age have an impact of life expectancy?
* Does a person's current health have an impact of if they decide to draw early?
* I don't really know how inflation changes social security, but it seems relevant to consider.
It's funny, I see this meme sometimes around tax day: "Well, I just paid my taxes. Those roads should be fixed anytime now". It's funny because the excuses people use (my roads!) to justify reckless and out-of-control taxation ($21T debt, that's T for Trillion) are almost never at the head of where the tax revenue is actually spent.
As a US government contractor, governments are great at overspending and under-delivering.
There were far, far more inputs to that than just "taxes are bad".
"As a US government contractor, governments are great at overspending and under-delivering."
And as a contractor, you're part of that problem.
Very true, and excessive taxation was one of the major factors.
> And as a contractor, you're part of that problem.
Not myself, but it's a reasonable accusation about the company I work for. Even if that were true, we offer a product that the government could never engineer. The product is good, the government needs it, so they take money from their citizens to buy it. My points still stand unfortunately.
Baby Boomers will be dying off at that point, which should reduce the stress on the system, and there are a number of fairly politically safe ways to improve the financial position of Social Security like removing the caps on income. Don't get me wrong, Social Security is not a great system in a lot of ways, but it's not gonna just disappear and there is a recovery point in there if we should choose to take it.
Though, if I was a retired person, I'd move back home in the mountains and eat trout and squirrel and deer meat everyday. Buy a lot and a trailer for a pittance. Get a library card.
God, that'd be a life...
The better question to ask is whether you will be happy living out the twilight of your life on a government controlled amount of money. This amount will likely always gravitate toward the prevailing poverty line. Unlikely to lead to a truly comfortable existence. Definitely not enough to live in any high COL location. Average monthly benefit in 2017 was ~$1,300, and MAX was $2,687 [1]. ~$15-$30K will cover the basics in most lower COL parts of the country, but not much more.
[1] http://time.com/money/4644332/maximum-social-security-benefi...
In any case, if you are young and aren't happy living out your life on whatever social security pays there is a simple solution: pretend like it doesn't exist and plan accordingly.
Then who paid for the first generation of recipients?
A funny thing is that we have both fear of automation and fear of insolvent social security. If the economy gets more automated it will grow quickly, and it will be easy to tax the additional income to pay for social security---although we may have to use a value-added tax or a higher corporate tax rather than payroll taxes.
Problem is that the current level of benefit is completely inadequate.
"A funny thing is that we have both fear of automation and fear of insolvent social security. If the economy gets more automated it will grow quickly, and it will be easy to tax the additional income to pay for social security"
But will that be countered by the larger numbers of unemployed who no longer have an income due to automation?
I've been predicting huge inflation for a long time for the simple reason that housing has inflated so much. Housing is so unreasonable and house prices are so sticky (people hate to take a loss and most are on loans) that the only reasonable way out of the housing affordability crisis is for the rest of the economy to inflate until house prices are reasonable again. This will also neatly "solve" the social security funding problem.
Not that it's a "fair" solution but it is a solution.
Maybe people didn't get my rationale around housing. Put more simply I see housing inflation as the leading edge of a giant wave of inflation. Housing has inflated first because QE money first went to banks and coupled with historically low interest rates this allowed banks to pump massive amounts of money into the housing market via cheap mortgages. So the housing market is where the big wave of post-crash re-inflation money went. But houses do have a turnover rate, so the money is not going to stay there forever. All those people who made 200-600% profit on their homes will sell those homes and use the money for old age care and other personal expenses or pass it on to their children who will likely spend it. Housing may fall a bit but it's more likely that the rest of the economy will just inflate to meet it.
Even if the Trust Fund is fully exhausted, beneficiaries will see a sizable fraction of full benefits from current payroll taxes.
The only way this doesn't happen is if the program is modified to affirmatively deny people already-earned benefits, which is probably less politically viable than fixes that would protect full benefits even with pessimistic projections.
Also get off my damn lawn you filthy heathen.
Our tax policy is among the most progressive in the developed world: 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/.... 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.
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%.
So basically, employees are giving the government a 45 year loan at zero interest. Even at just a 1.5% rate, the typical employee pays their own way.
> (Remember, the couple didn’t literally pay out $600,000; that’s the current value of what they paid out over the years, plus an additional 2 percent they may have gotten had it been invested.)
Even accounting for inflation and investment, the average worker still is paid out more from Social Security than they paid in.
The source cited combines “Social Security and Medicare”, it doesn't (at least in the quoted excerpt) address SS separately. These are different programs supported by different Trust Funds funded by different taxes applicable to different income and with different dynamics driving costs.
"Why, according to the OECD, is the US system so progressive? Not because the rich face unusually high average tax rates, but because middle-income US households face unusually low tax rates--an important point which de Rugy mentions and Chait ignores.
How does the picture change if you take indirect taxation into account? That would make the US system look even more progressive, because the US doesn't rely on a flat consumption tax like most other governments.
What does the tax-rate schedule tell you about progressivity? Very little, until you factor in deductions, thresholds and opportunities for avoidance. High top rates are meaningless if nobody is paying them.
What happens to tax progressivity at the very top of the US income distribution--inside the top one percent, or 0.1 or 0.01 percent? Good question. When it comes to international comparisons, I don't know of any good answers..."
The real point of the article is that progresssivity is hard to measure. But when so much of the income growth in the country is captured by a class that doesn't pay into the SS system, the result speaks for itself.
The U.S. tax system is progressive well into the top 1% of income earners (by contrast, Germany, Sweden, and Denmark have a relatively flat tax structure after about 1.5x the median income). There is a lot of focus on tax breaks for the top 0.1%, but 90% of U.S. income is earned by people outside that group, and 80% is earned by folks outside the top 1%.
In Germany by contrast, health care is paid for with a regressive mandatory insurance premium of 15.5% on income up to about $60,000.
"Should the US system be even more progressive than it already is, bearing in mind the skewness of the pre-tax distribution, especially at the very top? Maybe it should--but a steeper tax-band schedule is a dumb way to improve fairness and raise more revenue."
A progressive tax system is progressive in effect, not just in form. The author is saying that people who focus on the tax rate bands are barking up the wrong tree, because the US system already looks like one of the most progressive, even though it may actually not be.
The part about tax-band schedules is not an assertion that the system is not progressive "in effect." (That theory cannot be reconciled with the data presented in the article, which looks at taxes paid, not tax bands.) Instead the author is saying that if we want to make the system "even more progressive than it already is"--which he does not concede we should, he leaves that as a "maybe"--then we should be looking deeper than tax bands. (And he points out that the possibility of loopholes and preferential treatment does not indicate that the U.S. system is not progressive, because other countries do that too.)
Not as applies to Social Security, which has a dedicated funding stream independent of general revenue, consisting entirely of a flat tax on labor income below a certain level and no tax above that level which constitutes a two-timer regressive tax on labor income made even more regressive on total income because the high end of the total income distribution consists largely of people whose income comes largely from capital rather than labor income.
Yes, and the US funding system is similar to that norm, not unusually progressive as claimed upthread.
I agree with the crux of your analysis. But I also think we literally can't afford to ignore how $700 billion contributes to a multitude of our problems.
And if we can’t solve it completely in one shot, why bother at all? (false dichotomy/nirvana)
0 for 2 on your arguments there.
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.
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#Per... [2] - https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_... (it's 2010, but the proportions should be similar)
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."
Put another way, inefficient allocation is an orthogonal problem to giving too much to the allocator.
Yes its incredible dumb and inefficient but many millions of people earn their livelihood, healthcare and pensions by building useless bombs, so its hard (politically) to say we'll take that away to shore-up Social Security or whatever.
You might be right. But the USA's DoD budget is more than the NEXT 10 countries COMBINED. So we're VERY afraid? And we're alone with that having that fear?
Maybe we find what we're looking for?
I'm on my phone otherwise I could list umpteen better uses of the money. But they all involve firing people then hiring people. MRE quality assurance however is not co-located or skill- transferable to installing solar panels in the llano estacado. And people losing their jobs are always going to be more motivated voters than people who might get a job.
One reason GBI/universal healthcare would be beneficial is because then we can have a reason to end useless jobs that we don't really need to have, and eventually (hopefully) we have post-scarcity, low-employment, and high-enjoyment because AI/Robots do the work, and we all live in varying degrees of middle-to-upper class life. Maybe we spend 18 hours per week working (the same as during the middle ages), and the rest of our lives we actually live.
The rich can still be uber rich and live in mansions and fly on their jets, but lets fill the millions of vacant homes, and make sure everyone has a home, basic comforts, and food.
Life is precious, we don't get much time. We spend 10 full years out of 90 working -- that's if you add up all the hours and divide by days/years.
Then you sleep 8 hours per day. That's 1/3rd of the day. 30 years of life gone to sleep. Now we're at 40 years gone -- 40 years that we do not get to keep at all for ourselves.. This is a middle-ages life-time. They only got 40 years total, and we waste all of that.
There's tons of other stuff we waste time on with school, eating, restroom, commuting to work, etc... That might add up to 10 more years. This means you may get 40% of your life --to claim for yourselves, this is ONLY if you don't have to ever work more than one job, and ONLY if you never ever work overtime or more than 40 hours per week.
If you work on side projects or moonlight projects, it's more fun and rewarding but you're also losing time spent with family and loved ones, or enjoying life.
This keeps me up at night, knowing I could die at any time, and never really have lived because of all the things I have to do just to make sure I make it through next month - financially.
I'm a freelance developer, but have months where I do really well, and others where I'm on the verge of losing everything, because my pipeline dries up. I'm hoping I can even it out, and make it work, because when it works the stress is so much less than commuting to a corporation.
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-get...
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.
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.
It's really upsetting.
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.
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".
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.
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.
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.
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.
I don't think we're actually that far apart on what we think the problems are. I wasn't trying to say that requiring large amounts of school in order to test for strep and antibiotics are the only cause of our high costs of healthcare, but they obviously contribute.
I agree (and I think any thinking person would agree) that you should have training to perform more specialized procedures.
Expensive end of life care is partly the fault of clinicians who get paid to authorize expensive procedures and who don't want to tell their patients and their families that there is very little they can do to prolong their life, so they should just surround themselves with loved ones and prepare to die.
And we can both agree that there is wasteful spending without arguing that people should kill themselves sooner. Just looking at our healthcare expenses relative to other countries shows we pay somewhere between 1.5-2x more for roughly the same level of care. That's obviously a market failure.
do you mean "increasing number of physicians"?