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

https://www.cbsnews.com/news/social-security-says-costs-will-exceed-income-this-year/

by gscott • 8 years ago

72 112 8 years ago

mjevans2• 8 years 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?

ahoy2• 8 years ago

That'd be because a lot of US politicians are ideologically opposed to any welfare program.

magduf2• 8 years 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.

Avshalom5• 8 years 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• 8 years 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.

encoderer3• 8 years 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• 8 years 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.

maerF0x03• 8 years 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.

lev99• 8 years ago

- Eliminate "early" retirement ages and force the "full" age

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.

dgzl5• 8 years ago

As a millennial-ish, I think the government should stop stealing my money and make Social Security opt-in only.

eropple• 8 years ago

As a Millenial who tries to not hot-take, I do expect to receive Social Security benefits. I'm not planning on it being a requirement to survive, but I am expecting it to be there in a nontrivial form. As is widely noted the trust funds will, at current projected rates of usage, be tapped in 2034, but projected income (hence the "further looting" part) covers around 75% of all benefits at that point.

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.

hkmurakami• 8 years ago

I don’t know if caps are politically safe. After all even Obama wasn’t able to remove 529 college savings plans which purportedly benefit the upper middle class who don’t need that much help. Caps going up to say 500,000 sounds like it would meet a lot of resistance to me.

dopamean• 8 years ago

It's not a hot take to think that an unsustainable service that many members of government have campaigned on reducing or eliminating entirely wont exist in 30+ years.

kevinh• 8 years ago

This was also the longtime belief of my parents, who both recently began collecting Social Security benefits. Social Security will only die if we let it be killed.

malchow• 8 years ago

I'm pretty sure it can die from math, too.

mullingitover• 8 years ago

As a millenial, I'm eating a teaspoon of cat food each day to prepare my body for the day when it becomes my full-time diet.

kazinator• 8 years ago

Just learn to purr and chase balls of yarn; you can be coddled as some rich old spinster's pet.

megaman222• 8 years ago

There are cheaper sources of protein than catfood, sold for human consumption. This is a weird meme.

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...

DrScump• 8 years ago

Typical, lazy millennial. You should be getting out there and catching your own birds, lizards, and other prey.

cnorgate• 8 years ago

Social security will always be around in one form or another. Despite the fact that many Americans detest the idea of a welfare state, we're still collectively bright enough to realize that you can't simply leave no options for the sick, poor, and disabled.

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...

jeffreyrogers4• 8 years ago

The US is already a welfare state, we're just worse at it than other countries.

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.

rayiner8• 8 years ago

I'm not sure why millenials have to worry about it. Social Security is not an aquifer that will be tapped out by the time we get to it. It is a pay-as-you-go system. The current crunch is coming from having a large retiring generation (the baby boomers), supported by relatively smaller working generations. Millenials will not necessarily have the same problems (unless the elect to have even fewer kids than baby boomers did, which is a possibility).

jeffreyrogers4• 8 years ago

Total fertility rate has been pretty flat for several decades now in the US and I believe is declining if you don't include immigrants, so I expect the problems with social security to continue into the future.

lurquer• 8 years ago

It is a pay-as-you-go system.

Then who paid for the first generation of recipients?

jhayward2• 8 years ago

Social security is eminently and easily fixable. It's just been obstructed for decades by people of bad faith who want to burn it, and the country, to the ground.

lewis500• 8 years ago

You will have Social Security. You just might receive something closer to the current level of social security benefits rather than a more generous package. Social Security benefits are indexed to median wages, which rise over time. If they just don't increase benefits so quickly system will be fine. Likewise, a hike in taxes which would still leave us one of the lower-taxed industrialized countries would do the trick.

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.

s73v3r_3• 8 years ago

"If they just don't increase benefits so quickly system will be fine."

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?

api2• 8 years ago

You'll receive social security. Benefits will be in tomorrow's inflated dollars but at today's amounts.

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.

mythrwy• 8 years ago

I don't know why you are getting downvoted. I think this is what will happen as well. It also helps solve the pension crisis.

Not that it's a "fair" solution but it is a solution.

dragonwriter6• 8 years ago

as a Millennial, I don't expect to ever see a cent of Social Security benefits.

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.

krapp3• 8 years ago

As a Gen-X'er, I don't expect to see it either.

Also get off my damn lawn you filthy heathen.

maerF0x03• 8 years 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-get...

imbokodo• 8 years 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.

assblaster3• 8 years 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.

jeffreyrogers4• 8 years 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.

dlhavema• 8 years ago

and via the decreasing numbers of physicians who refuse to take Medicare or Medicaid.

do you mean "increasing number of physicians"?

vannevar3• 8 years 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.

rayiner8• 8 years 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-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.

mikeash2• 8 years 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?

TheLoneAdmin• 8 years ago

From your link "...and turning 65 in 2010 would have paid $722,000 into Social Security and Medicare and can be expected to take out $966,000 in benefits."

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.

vannevar3• 8 years ago

From your linked article:

"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.

dragonwriter6• 8 years ago

Our tax policy is among the most progressive in the developed world

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.

chiefalchemist4• 8 years ago

I said this above as well, but our latest DoD budget is $700,000,000,000.

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.

ams61103• 8 years ago

I would be the last person to say that there isn't a lot of waste in defense budgets. But you can't spend zero on defense. And the United States also defends all of NATO and a lot of Asia as well as certain other allied countries. Let's say you could somehow shave a few hundred billion out of the budget without materially impacting our defense capabilities and obligations. That's not enough to fix our bigger problems with entitlements.

mcthorogood• 8 years 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.

ams61103• 8 years ago

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

chiefalchemist4• 8 years 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.

eximius2• 8 years 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#Per... [2] - https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_... (it's 2010, but the proportions should be similar)

chiefalchemist4• 8 years 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."

jakelarkin• 8 years ago

that's not wrong but for the sake of argument perhaps its better to look at the DoD budget through the political lens ... its a corrupt jobs program in which the government funnels money to a broad swath of American states and counties, mostly via defense contractors.

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.

noobermin• 8 years ago

Instead you let a benefit the entire population depends on to keep the jobs of a fraction of the population. How is that a rational choice?

Apocryphon• 8 years ago

If only it's politically feasible to slowly redirect their activities to peacetime activities, like reassign a lot of that personnel to the Army Corps of Engineers, and have them fix America's crumbling infrastructure.

lamarpye• 8 years ago

It would be an interesting experiment to see what would happen if the cut the US military budget dramatically. I am of the opinion that it would decrease the world stability and millions of people would die. But YMMV.

Avshalom5• 8 years ago

The fundamental/fucked-up thing is that if you cut the military budget it's not that soldiers stop getting recruited it's that tank/jet/boot/GPS/mre companies start firing people. The Military Industrial complex is a huge welfare/workfare program that no one in power is willing to cut. So until we can convince essentially EVERY voter (any party: libertarian, green, D or R) that it's okay to have a real safety net then politicians who campaign against the military budget are basically lost causes.

fjsolwmv3• 8 years ago

A lot of military spending is building stuff to blow up. I rather pay people to build windfarms and trains.

ghouse• 8 years 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...

dragonwriter6• 8 years ago

“Retirement” and “insurance against becoming aged and/or disabled” are different framings for the same thing.

Avshalom5• 8 years 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• 8 years 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.

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

Related Stories