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.

Immigrants Help Social Security Trust Funds

     From The Hill writing about Tuesday's hearing before the House Social Security Subcommittee on future funding of Social Security benefits:

“The immigration surge, we project from 2021 to 2026, will result in about $1 trillion in additional revenue” over a ten year period, Dr. Phillip Swagel, director of the Congressional Budget Office (CBO) told lawmakers during a Tuesday hearing. ...

Republicans — including former president and presidential candidate Donald Trump — have increasingly pointed to immigration as a drain on social safety nets for the elderly in recent months, including Social Security and Medicare. 

Top budgetary experts bucked those claims during Tuesday’s panel as they argued immigrants could have a positive impact on Social Security.  ...

Rep. Ron Estes (R-Kan.) pressed [Stephen] Goss [Social Security's Chief Actuary] on whether the SSA accounted for the “impact of illegal immigrants” in their yearly report.

“Absolutely, we always have,” Goss responded. “The bottom line really is that immigration of any form is actually a positive in the realm we are now where the birth rates in the country are as low as they are.” ...

    Isn't it obvious that illegal immigrants help the Social Security trust funds? They contribute but can't get anything in return. Of course, this won't be obvious if you believe that illegal immigrants are just "given" Social Security benefits as soon as they arrive but, of course, that's a myth believed only by the credulous.

The Only Real Fix For Social Security Is More Babies?

What about more people like these taking the citizenship oath?

     Megan McArdle writes for the Washington Post that "The only real fix to Social Security’s [long term funding] problems? More babies."

    More babies would certainly help but only in the long run. It may be literally impossible for the government to get women to have more babies, anyway. Fertility is a deep cultural thing which may be beyond any incentives the government can provide. Even if you can figure out a way to increase fertility it would be at least a couple of decades before it would help.

    In any case, more babies isn't the only solution. The other solution is increased immigration. That gives an immediate increase in the working age population. Also, for literally centuries, the U.S. economy has been invigorated by the contributions of immigrants. They're good for the U.S. The problem with increased immigration is that those who most want to immigrate to the U.S. tend to be black or brown which enrages a significant portion of the existing population.

The Right Will Spin The Trustees Report As Showing That The Doomsday That They Have Always Predicted For Social Security Is Right Around The Corner But Actually The Report Is Good News This Year

     From a press release:

The Social Security Board of Trustees today released its annual report on the financial status of the health of the Social Security Trust Funds. The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to have enough dedicated revenue to pay all scheduled benefits and associated administrative costs until 2035, one year later than projected last year, with 83 percent of benefits payable at that time.

In the 2024 Annual Report to Congress, the Trustees announced:

• The asset reserves of the combined OASI and DI Trust Funds declined by $41 billion in 2023 to a total of $2.788 trillion.
• The total annual cost of the program is projected to exceed total annual income in 2024 and remain higher throughout the 75-year projection period. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.
• The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2035. At that time, there would be sufficient income coming in to pay 83 percent of scheduled benefits. ...

It's An Idea

    From The Case For Using Subsidies For Retirement Plans To Fix Social Security by Andrew Biggs and Alicia Munnell:

The U.S. Treasury estimates that the tax preference for employer-sponsored retirement plans and IRAs reduced federal income taxes by about $185-$189 billion in 2020, equal to about 0.9 percent of gross domestic product.1 However, the best evidence suggests that the federal tax preferences do little to increase retirement saving.  ...

The [report] concludes that it makes little sense to throw more and more taxpayer money at employer plans and IRAs. In fact, the case is strong for eliminating the current tax expenditures on retirement plans, and using the increase in tax revenues to address Social Security’s long-term financing shortfall. ...

    This doesn't appeal to me. It's very unlikely to pass. There aren't specific tax revenues involved, just a reduction in tax preferences. I'd be more in favor of dedicating revenues from the estate tax, excise taxes and tariffs to Social Security but I doubt that would be enough to matter much. It's becoming more and more obvious to me that the only solution to the long term funding shortfall is an infusion of general tax revenues. The things that people discuss, raising full retirement age and lifting the cap on wages covered by the FICA tax, even together, aren't nearly enough to solve the long term funding problem.

Rising Income Inequality And Social Security

       From Marketwatch:

When Alan Greenspan and his committee supposedly “fixed” Social Security’s funding crisis in the early 1980s, the program was supposed to remain solvent well into the 2050s.

Instead, the trust fund is scheduled to run out of money in 2034 — decades ahead of schedule. What went wrong?

Stephen Goss, who has been the Social Security Administration’s chief actuary for more than 20 years, posed this question recently during a retirement conference hosted by the Harkin Institute. And his answer may surprise some people.

Sure, birthrates have collapsed from the heady days of the baby boom, he said, and that trend hasn’t helped. But it’s nothing new: The big fall started in 1965, nearly 20 years before the Greenspan Commission.

And yes, people are living longer than they used to. But that isn’t a surprise, he added —actually, the decline in mortality is pretty much in line with expectations. The forecasts have proven “remarkably accurate,” he said.

So what changed? In a word: inequality.

Goss argued that rising income inequality — with fast growth at the top and slow growth everywhere else — is the mystery ingredient that has thrown Social Security’s finances into turmoil earlier than planned. And the big change took place in the 17 years after the Greenspan Commission made its projection, from 1983 to 2000, he said.

During that time, incomes for the best-paid 6% of earners rose by 62% in real, inflation-adjusted terms, he said. For the other 94%, incomes rose by just 17%.

The net result was that the lion’s share of U.S. income growth was above the Social Security cap, and wasn’t subject to the program’s payroll taxes. The percentage of incomes subject to the program’s tax collapsed from around 90% in the early 1980s to barely 82% by the turn of the millennium. …

Martin O'Malley's Positions On Social Security

     Back in 2015 Martin O'Malley was running for President. He didn't get very far but he did take these positions on Social Security:

• Increase Social Security benefits. O'Malley proposed increasing minimum Social Security benefits to 125% above the poverty line and raising benefits for low- and minimum-wage workers, who the governor claims currently don't receive enough benefits and often don't have any retirement savings at all.
• Raise the cap on the payroll tax for workers making more than $250,000 a year. O'Malley claimed that raising the payroll tax — along with raising the minimum wage and enacting immigration reform — will pay for many of his proposed reforms.  ...
  

    Please remember that as Commissioner, O'Malley would have no ability to adopt such plans. Congress has to do that. As Commissioner, he probably couldn't even lobby for such plans. That seems to be an unwritten rule these days. It's not always been that way, though. I've read the autobiography of Arthur Altmeyer, the first Commissioner of Social Security and an extremely important figure in the history of Social Security in this country. As Commissioner, Altmeyer was engaged in lobbying Congress almost full time. Other people were actually running the agency. By the way, I do not recommend reading the Altmeyer autobiography. It's really dry and tedious.

     Also by the way, the White House has lined up quite a number of endorsements for O’Malley’s nomination but none from Republicans.

Congressional Hearing Today

     A press release:

There will be a Hearing of the Committee on the Budget 

On: Wednesday, July 12, 2023, 10:00 AM 

In: Room SD-608. 

To consider: "Protecting Social Security for All: Making the Wealthy Pay Their Fair Share"

Witnesses

---

1. The Honorable Phillip Swagel, Ph.D.
   Director
   Congressional Budget Office
    
2. Mr. Stephen C. Goss
   Chief Actuary
   Social Security Administration
    
3. Ms. Kathleen Romig
   Director of Social Security and Disability Policy
   Center on Budget and Policy Priorities
    
4. Ms. Amy Hanauer
   Executive Director
   Institute on Taxation and Economic Policy
    
5. Dr. Andrew G. Biggs, Ph.D.
   Senior Fellow
   American Enterprise Institute