Hacker News Reader

Comment by watchandwait | Hacker News Reader

Social Security is supposed to be a pension program, not an income redistribution program. So you are making "contributions", not paying taxes, in the official lingo.

Of course the program is most regressive for younger workers, who pay the most and will get the least in return.

Social Security is in serious trouble, by the way, although it is not the driver of the current budget crisis. In just a couple of years the program goes into the red, and increasingly so as more boomers retire. The unfunded liability is around $8 trillion. That's serious money.

View on HN

There's no such thing as an unfunded liability for Social Security. By law, SS is funded solely by payroll taxes. If payroll taxes are insufficient, benefit payments are reduced to match.

Social Security can never go bankrupt, and it can never be in debt.

Why couldn't they just raise taxes?

Because the one thing almost every economist agrees on is raising taxes in a bad economy makes it worse.

> There's no such thing as an unfunded liability for Social Security.

This is wishful thinking. Social security benefits have been promised to a lot of people, and the money isn't there. It's all well and good to say they will just reduce benefits, but that's just a nice way of saying that they'll default on the liabilities.

In reality this is no different from Medicare or Medicaid, or the military budget, or anything else. Sure, we can in theory just reduce payout. The reality doesn't work out so neatly.

Social Security and Medicare are different from Medicaid and military budget, because they have different funding.

Social Security and Medicare are funded by payroll taxes. Medicaid and military budget funded from Federal income tax.

If you cut military budget 100%, you will save ~900 billions (or whatever the right number is) a year. If, on the other hand, you cut Social Security or Medicare, the savings are 0, because you will have to cut their funding as well. Surely, no one will pay Medicare taxes, if there is no Medicare exist, right?

This is a strange belief. Why in your mind would payroll tax be necessarily cut just because social security expenses drop? You do realize that social security is actually still running in the black, right? They are, right now, bringing in more money than they spend.

Guess what happens to the rest of the money: It gets spent elsewhere. Social security buys US Government debt with any excess, meaning it goes directly into the budget. In theory the SS trust has assets, but in reality the money is gone. It's one account holding a bunch of IOUs from a second account, and both accounts are owned by the federal government.

Reply on news.ycombinator.com