Wisdom From More Than 90 Years Ago

President Franklin Roosevelt (November 1934):

“We must not allow this type of insurance to become a dole through the mingling of insurance and relief. It is not charity. It must be financed by contributions, not taxes.”

An Idea For “Saving” Social Security

      The Editorial Board of the Washington Post has come out with its plan to “save” Social Security. It’s fairly simple: means test benefits. They don’t even mention the possibility of raising taxes. They don’t engage with the fact that means testing Social Security doesn’t even “save” Social Security unless you apply it quite harshly to those now receiving Social Security or you use vast amounts of general revenues to make up the difference, something they dismiss off the top.

     You’d never guess that the Post is owned by Jeff Bezos who’s worth more than $280 billion.

     Right wing think tanks and editorial pages seem to be coalescing around means testing Social Security as their demand for “saving” Social Security. I think Republicans in Congress will stand behind this demand — way behind it, like on a different continent. 

     The Democratic plan is to lift the cap on FICA. That’s vastly more popular with the public than turning Social Security into a “welfare” program. As someone once said, a program for poor people is a poor program. Democrats aren’t agreeing to means testing. 

CATO To Social Security Recipients: Drop Dead

      Jeffrey Mirin of the right wing Cato Institute looks at the possibility of the Social Security trust funds running dry and benefits being cut by more than 20% and yawns. His view is any increase in taxes is quite out of the question so let's do nothing and let nature take its course. As he says, "the ideal Social Security system would have much lower benefits, if any."

Americans Have Ideas On “Saving" Social Security

      From a press release issued by Nationwide Insurance:

Despite widespread political divisions, Americans across political party lines largely agree that Social Security needs reform. According to the Nationwide Retirement Institute's 2026 Social Security Survey, 80% of U.S. adults who receive or expect to receive Social Security say the system needs to change, including 82% of Democrats and 78% of Republicans.

The agreement extends to potential solutions. The same three proposals were ranked as the most popular approaches to strengthening Social Security among both Democrats and Republicans:

1. Increase taxes on higher earners to increase funding: 51% overall, including 56% of Democrats and 43% of Republicans
2. Increase funding through taxes paid by employers: 42% overall, including 44% of Democrats and 42% of Republicans
3. Reduce or eliminate benefits for individuals with incomes above a certain threshold: 38% overall, including 38% of Democrats and 37% of Republicans. 

Yesterday’s Senate Hearing

      Yesterday, the Senate Finance Committee held a hearing on the looming depletion of Social Security’s Retirement and Survivors Trust Fund. Of course, you’d expect a serious nonpartisan discussion of the options. Right. The reality is that there were sharp divisions between Republicans and Democrats. Democrats favor a plan to remove the cap on wages subject to the FICA tax. Republicans thought that idea was terrible but had no plan of their own or at least not one they’ll release.

     Actually, it’s fairly easy to figure out the Republicans plan. They will demand a plan that includes both benefits cuts and tax increases. However, the overwhelming majority of Republican legislators will vote against the plan. They will only supply the bare minimum number of votes needed for passage. Then, they’ll campaign against Democrats for cutting benefits and raising taxes. Jujitsu! I don’t think Democrats will fall for this but maybe they’ll never have control of both houses of Congress and the White House as well as the will to get past the Senate filibuster so they can do what they think needs to be done.

Hearing On Solvency

      A press release:

U.S. Senate Finance Committee Chairman Mike Crapo (R-Idaho) announced the Committee will convene for a hearing entitled, “Exploring Process Approaches for Addressing Social Security Solvency” on Wednesday, August 5, at 10:00 AM.   

Title: Exploring Process Approaches for Addressing Social Security Solvency

Witnesses:

• Marc Goldwein, Senior Vice President and Senior Policy Director, Committee for a Responsible Federal Budget, Washington, D.C.
• The Honorable Charles Blahous, Ph.D., J. Fish and Lillian F. Smith Chair and Senior Research Strategist at the Mercatus Center at George Mason University, Fairfax, VA
• Nancy A. LeaMond, Executive Vice President and Chief Advocacy and Engagement Officer, AARP, Washington, D.C.
• Rebecca Vallas, Chief Executive Officer, National Academy of Social Insurance, Washington, D.C.

Can A Commission Save Social Security?

      From Howard Gleckman writing for Forbes about Congressional ideas for commissions to come up with plans to address Social Security’s long term funding problems:

… [T]he reality is, these sorts of bipartisan commissions only work when a president throws his full weight behind them and Congress really wants to fix a problem, rather than find an excuse to continue to do nothing. …

Nobody needs a panel of experts to develop ideas. We’ve known for decades how to fix the system. Congress instead needs to find the political will to act. …

The history of past commissions is clear, and depressing. My bookcase is filled with high-minded proposals made by expert panels, mostly to address budget deficits. Many included excellent suggestions. None went anywhere. …

     Who thinks there’s any will in Congress to actually do something about this now or any time soon?  Without that any commission plan is bound to fail.

Typical Politicians

      From CBS News:

 A bipartisan group of senators introduced a bill on Tuesday designed to shore up Social Security's finances in the coming decades and prevent future benefit cuts for the 70 million Americans who rely on the program. …

The legislation, called the Promise Act, would not itself raise taxes, reduce benefits or change eligibility. Instead, it would direct the bipartisan, seven-member Social Security Advisory Board to draft a bill, informed by public input, to keep the program's trust funds solvent for at least the next 50 years. …

Any proposal developed by the advisory board would be introduced in the House and Senate by congressional leaders before being considered by committees, which could hold hearings and revise the legislation. To become law, it would need a three-fifths vote in the Senate and a majority vote in the House.

The Promise Act's additional sponsors include Sen. Bill Cassidy, a Republican from Louisiana; Sen. Tim Kaine, a Democrat from Virginia; Sen. Thom Tillis, a Republican from North Carolina; and Sen. Angus King, an independent from Maine. …

     This is ridiculous. No panel of experts will come up with a bill that will draw widespread support. There’s no clever way of solving the problem that will hurt no one. You either raise taxes, which no Republican will support, cut benefits which no Democrat or Republican will support or you pay benefits out of general revenues, which no one will support as a long term solution but may have to accept. This bill is nothing more than pretending you’re doing something when you’re doing nothing. 

     A bill that combines tax increases and benefits cuts is a trap for Democrats. Republicans would probably provide a few votes to get such a bill passed and then campaign against Democrats for cutting benefits and raising taxes while laughing up their sleeves at the naïveté of the Democrats. Better for Democrats to wait until they control the White House and both houses of Congress so they can solve the problem with tax increases alone. Of course the filibuster stands in the way of doing this but that’s got to go at some point.

A Wealth Tax To Save Social Security?

      The Netherlands is having trouble financing its social security systems. Cuts in benefits are being discussed. According to the NL Times, one solution being discussed is a wealth tax. Wealthy people might be taxed not just on their income but on their wealth as well.

     A possible wealth tax is on the periphery of public discussion in the U.S. Only people like Senator Bernie Sanders talk much about the idea and then not in the context of Social Security. However, if the choice is between massive Social Security benefits cuts, removing the FICA cap or a wealth tax, what do the American people want? Remember, there’s no clever way of doing this. Your choices are limited to cutting benefits and/or raising taxes. Is getting more tax money out of the ultra wealthy, such as Elon Musk, such a bad idea?

Fertility Fears

      From an op ed by Lyman Stone in the New York Times:

… If America’s population does decline, it will strain our entitlements system, damage the economy, reduce innovation and entrepreneurship, and cause serious labor shortages. But the majority point of view — held by major institutions like the Census Bureau, the United Nations and the Social Security trustees — is that the United States probably won’t face population decline until the 2080s, or even beyond 2100.

That forecast is far too optimistic. The more accurate projection, which I outlined in a recent report for my organization, the Institute for Family Studies, sees the American population beginning to shrink in the 2050s. It is a forecast so grim it could upend American budgeting and, thus, American politics.

Start with the number that drives everything else. The American fertility rate has fallen below 1.6 children per woman, a record low. Replacement rate, the level that merely holds a population steady before immigration, is about 2.1. If the current trend in shrinking births continues, it’s likely that the U.S. population will largely stop growing in the 2030s, and begin to decline in the 2050s. Peak America may come before millennials meet their grandkids (if they have any. …

If birthrates continue to decline as they have been doing, then fertility will fall to 1.35 children per woman in 2050, and 1.15 by 2100. In that scenario, population growth will be anemic in the 2020s and 2030s, fall to essentially zero in the 2040s, and then, starting in the mid-2050s, experience a long, grinding decline. Each generation will be more than 30 percent smaller than the one before, the work force will shrink beneath the retirees it has to support, and the American century will give way to American contraction. …

Up until quite recently, the Social Security trustees’ main scenario assumed that fertility rates will rise from now until 2050, and stabilize at 1.9 children per woman. In 2023, the Census Bureau predicted that fertility rates will only gradually decline from 1.64 to 1.58 by 2075. Spoiler: Data from the Centers for Disease Control and Prevention has already shown a 1.57 fertility rate for 2025. The U.N. expects that the U.S. fertility rate will be flat at about 1.65 through the entire 21st century. To its credit, Social Security trustees released new numbers just last month that revised their expectations down to 1.75 in 2050, but that is overly optimistic. The Congressional Budget Office is more realistic, but even it predicts that fertility will decline to 1.53, then stabilize. …

     The writer is working for a pro-natalist project but that doesn’t mean he’s wrong.  In fact, even if his projections are a bit pessimistic, he’s still talking about a serious problem. Pro-natalism is nearly hopeless, I think. We have little way as a society of influencing these highly personal decisions. Of course, pro-natalism usually has racist undertones, if not overtones, as well, but that’s a separate issue.

     We need to accept that trying to hold down immigration to almost nothing is insane. We need more legal immigrants and we need to quit worrying so much about undocumented immigrants. Social Security needs these immigrants and so does the country. Those who oppose immigration invite long term catastrophe. At least we can attract all the immigrants we need, despite the hostility that most Republicans express towards black, brown, Asian and Muslim immigrants. Make use of our country’s attractiveness to immigrants. They and their children make great citizens

Got The Bases Covered From The Middle To The Far Right

      The Senate Finance Committee has scheduled a hearing for June 24 on The Future of Social Security. There are two scheduled witnesses, Shai Akabas, who has testified at a prior Congressional hearing recommending large benefit cuts as well as tax increases, and Elizabeth Milito, who is active in the right wing Federalist Society.

The GOP’s Position On Social Security In A Nutshell

      From People:

Rep. Rob Wittman, R-Va., ducked questions about the possibility of House Speaker Mike Johnson making cuts to Social Security by appearing to fake a minute-long phone call outside the U.S. Capitol on Tuesday, June 9.

After he was approached by a reporter for the liberal outlet MeidasTouchand asked about “Mike Johnson’s secret plan to cut Social Security,” Wittman, 67, put his phone to his head and appeared to have a one-sided conversation as the device remained lit up and cycled through apps while he pressed it against his face. During the encounter, the visible phone screen never showed sign that a call was in progress.

“Hey, how you doing? I'm good. I'm good with that. Yeah, I'll be there in just a few minutes,” Wittman said into his phone as soon as the question was asked. …

     This doesn’t sound like someone who would vote to cut Social Security benefits. The GOP can talk about the impending “bankruptcy” of Social Security as if they’re eager for cuts in benefits to happen but they’re not or, at least, they know the voters will not countenance this. Democrats need do nothing other than call the Republican bluff. Dems certainly shouldn’t vote for any cuts in benefits. The GOP will fold in the end. Of course, folding will probably mean funding Social Security out of general revenues rather than a tax increase on the wealthy but that’s way better than any cuts in benefits.

Congressional Hearing On Social Security Financing

       The Senate Budget Committee held a hearing yesterday on Social Security: A Discussion on the Facts and the Path Forward. It doesn’t look as if there is anything interesting coming out of this.

     It’s not this Committee or the witnesses at the hearing but I’m always surprised at the number of policymakers and commentators who think that Social Security’s long term, perhaps now medium term, funding problems are some riddle that can be solved by some brilliant person with no one feeling pain. The reality is that you can cut benefits significantly or you can raise taxes significantly or some combination of the two. Even then Treasury will probably need to lend money to the Social Security trust funds for at least a few years. At this point Republicans want benefit cuts but want to find a way to make Democrats politically responsible for the cuts while Democrats want higher taxes but are worried about the backlash. Few, if any, are interested in compromise. I predict no benefit cuts nor tax increases; just Treasury funding for well into the future.

A Plan To Help The Social Security Trust Funds

       From E&E News:

House Natural Resources subcommittee will take up several public lands bills during a hearing this week, including a contentious proposal to redirect revenues to shore up Social Security.

The “Land and Social Security Optimization (LASSO) Act,” H.R. 34, would redirect 10 percent of public land revenues into the Social Security Trust Fund.

The bill, from Rep. Paul Gosar (R-Ariz.) and more than a dozen GOP co-sponsors, would not allow public land access prices to be raised in connection with the initiative. …

     Apparently, it’s only about $2 billion a year, which is not enough to make a significant dent in the problem, but it may be a sign of what’s ahead — plans to divert current federal revenue streams to the Social Security trust funds. Right wing groups don’t like the sound of this since they think they finally have Social Security cornered. They’re rubbing their hands in glee at the prospect of forcing major Social Security cuts such as means testing. I guess everyone has to have a dream even if it’s crapping on other people’s retirement so billionaires can get ever greater tax cuts.

It’s An Idea

      From the Committee for a Responsible Federal Budget:

The Social Security retirement and Medicare Hospital Insurance (HI) trust funds are approaching insolvency, with both trust funds expected to be depleted in just seven years. Without action, retirees face an automatic 24 percent benefit cut in 2032, while Medicare hospital payments would be cut by 12 percent. Restoring solvency to these trust funds will require slowing benefit growth, lowering health care costs, increasing revenue, or some combination.

The Social Security and Medicare trust funds are financed primarily by a 15.3 percent payroll tax on wages, split evenly between worker and employer, with the 12.4 percent Social Security tax applied only to the first $176,100 of annual wages in 2025. Proposals to boost revenue often involve increasing the tax rate or the tax cap.

This Trust Fund Solutions Initiative white paper suggests a new alternative – replacing the employer side of the payroll tax with a flat Employer Compensation Tax (ECT) on all employer compensation costs.1 While workers would continue to pay payroll taxes, employers would instead pay an ECT on all wages (with no tax cap) and all fringe benefits such as employer-sponsored insurance and stock options.

Karen E. Smith at the Urban Institute modeled this proposal using the DYNASIM model.2 Using that analysis, replacing the employer payroll tax with an ECT would:

• Raise $2.5 trillion over a decade and 0.7 percent of GDP over 75 years.
• Close two-thirds of Social Security’s shortfall and half of Medicare’s gap.3
• Alternatively, close one-third of Social Security’s shortfall, one-eighth of Medicare’s shortfall, and fund a 1 percentage point cut in payroll taxes – improving solvency while reducing taxes for the bottom 60 percent of workers.
• Extend Social Security solvency by two decades to 2055 and modestly extend Medicare solvency – with further extension if combined with other reforms.
• Increase progressivity, generating revenue mainly from the highest earners.
• Support stronger economic growth than alternative revenue options.
• Improve horizontal equity, efficiency, and simplicity; slow health care cost growth; and avoid viability and revenue stability concerns of alternatives. …

Still Standing After All These Years

     From Tom Margenau, a retired Social Security employee with a syndicated column:

… I remember way back in 1973 when I was sent out as a relatively new Social Security Administration spokesperson to deliver my first speech on the topic. And hardly before I had a chance to introduce myself, some guy in the audience who appeared to be around 40 years old jumped up and said, “I don’t know why we should listen to anything you have to say. We all know Social Security will go belly up long before we ever have a chance to collect a dime out of the system!” …

Well, of course, if that guy is still alive, he’d be pushing 90 now and would have been collecting many millions of dimes in the form of Social Security checks, month in and month out, for about 30 years now.  …

That story always reminds me of something I learned from one of my mentors when I started working for the Social Security Administration. He was a fairly high-placed official within the agency who started working for the SSA shortly after it was created in 1936. And he told me that way back then, many members of the public were telling him that the Social Security program was doomed to failure. …

A Free Lunch That Only Costs A Few Trillion Dollars But It Will All Be Paid Back 75 Years From Now

      From an op ed piece in the Washington Post by Senators Bill Cassidy (R-LA) and Tim Kaine (D-VV):

… We propose creating an additional investment fund — in parallel to the trust fund, not replacing it — that would be invested in stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry.


We estimate that it would take a $1.5 trillion up-front investment into the fund to get it going, and we propose giving the fund 75 years to grow. The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund’s 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap.

The result? The consistent delivery of Social Security benefits for generations of Americans, and a reduction to the United States’ long-term indebtedness by up to 20 percent. …

Delusional?

      From The Hill:

The new head of the agency responsible for administering Social Security and Medicare said Sunday he plans to make sure the agency survives well into the 2100s.

In a Sunday interview, Social Security Administration Commissioner Frank Bisignano said the Trump administration and lawmakers plan to make major changes focused on cutting waste and fraud with the goal of keeping the trust funds behind Social Security and Medicare solvent. …

     There are at least three ways of looking at this. Maybe he really thinks he can “save” Social Security by cutting “waste, fraud and abuse.” That would  simply be delusional. There are no significant savings available. Any minor savings would require upfront funding which is out of the question and would be completely inadequate anyway. Still, I think the theory that he doesn’t know what he’s talking about is most likely.  A second possibility is that he plans to cut benefits in some way inconsistent with the law. That would have to be a huge illegal cut and extremely controversial, probably suicidally so. I’m not even entertaining the possibility that he thinks he’ll steer cuts in Social Security through Congress. The third possibility is that he’s simply spouting bull. Maybe, but Bisignano comes from the reality based world so I doubt that.

Americans Support Maintaining Social Security Even If It Means Increased Taxes And Oppose Cutting Benefits

     From a report on opinion polling performed by Greenwald Research for the National Academy of Social Insurance (NASI):

... This survey’s primary finding is that Americans overwhelmingly want to see Social Security’s financing gap closed by bringing in more revenues—and are willing to contribute more to strengthen the program’s finances. When asked which statement comes closest to their view, 85 percent of respondents selected either that we should ensure benefits are not reduced, or that we should increase benefits, even if it means raising taxes on some or all Americans. Only 15 percent of respondents selected the response that we shouldn’t raise taxes on any American even if it means benefits are reduced. This broad preference for raising revenues versus reducing benefits cuts across political, income, education, and generational lines; among Republicans, more than 3 in 4 prefer increasing revenues to benefit reductions, with more than 9 in 10 Democrats and more than 8 in 10 Independents sharing this preference.

Of all the policies tested, respondents most strongly preferred lifting the payroll tax cap. Respondents also strongly supported increasing the payroll tax rate from 6.2 percent to 7.2 percent for both employers and employees, to ensure solvency and maintain current benefits. Changes that would result in lower benefits, such as raising the retirement age or adopting cost-of-living adjustments, had little support. ...

One Man Thinks That The Third Rail No Longer Exists

     John Tammy has written a piece for Forbes arguing that Social Security is no longer the Third Rail of American politics because people will be working until they're 70 and then relying upon their private savings. Social Security hardly matter to anyone not already on benefits or about to be on them. He just wants taxes lowered for money coming out of retirement accounts.

    Talk about being elite and out of touch! Most people don't wait until full retirement age now to start their Social Security benefits. There's no sign that's changing. Blue collar workers can rarely go on working until they're 70. Their health won't permit it. I think that Mr. Tammy hasn't yet experienced any of the ill effects of the aging process. It's coming for you too, buddy, whether you believe it or not. The odds are high that even highly motivated white collar workers don't make it until 70. Private savings? Does Mr. Tammy know anyone with an annual income below $100,000? Apart from their homes, if they're lucky enough to have them, most Americans near retirement age have only modest savings at best.  

    Right wing "thinkers" keep telling us that the key to all retirement problems in the U.S. is lowering the tax bills paid by wealthy Americans. It's what they're paid to write.