Economics

Reach for the Low-Hanging Fruit

It's time to reform Social Security

|

The country is on an unsustainable fiscal path. According to the Congressional Budget Office's alternative scenario (the one that makes realistic assumptions about future policies), by 2050 the national debt will reach 344 percent of the economy with entitlements consuming two-thirds of non-interest spending. While Medicare and Medicaid require some intricate work to reform, there are a few easy changes that could be done to Social Security. Think of it as the low-hanging fruit of entitlement reform.

Besides, we don't have a choice. This October, the Congressional Budget Office (CBO) released its Long-Term Projections for Social Security. Like the two long-term projections before it, this projection finds social security in even worse shape than expected. The main conclusion is that by 2014 the Social Security Trust fund will be running perpetual cash flow deficits—three years ahead of what was predicted last year.

Using the CBO's three most recent long-term projections for Social Security, the above chart graphs the decline. It shows the year-end balance of the Social Security accounts as percentages of taxable payroll (an estimate of the earnings subject to payroll taxation each year). Concretely, when the balance of these accounts becomes negative, Social Security is paying out more in benefits than it collects in payroll taxes in a given year. For context, in 2010 taxable payroll is projected to be $5.4 trillion in real terms.

As we see, the 2009 and 2010 projections each estimated an earlier onset of cash-flow deficits than the preceding year's projections. In 2008, the CBO projected that in 2019 outlays would exceed revenues for the first time since 1983; in 2009 the CBO projected that this threshold would be crossed in 2017; in 2010 it projected that a permanent deficit would start in 2014.

While part of the acceleration in the onset of Social Security deficits is due to the impact of the recession on tax revenues, all projections show that these unsustainable deficits will continue into the future. For one thing, about 54 million people are receiving Social Security benefits today, nearly a sixth of the American population. But under current law this proportion will increase rapidly as baby-boomers retire and life expectancy increases.  

What about the assets in the Social Security Trust Fund? According to the Social Security Trustees Report, the extra payroll taxes collected from taxpayers since 1983 amount to $2.5 trillion and should last us until 2037.

While this may be true, the existence of the trust fund has no budgetary impact. First, as the 2011 federal budget  explains in Chapter 27 of the Analytical Perspectives, government trust funds are meaningfully different from private sector ones. In a private trust, the beneficiaries legally own the income from it. That is not the case with a government trust fund.

Second, by law, the Social Security trust fund has to purchase Treasury securities with its tax income. In other words, the trust fund contains a bunch of IOUs but no actual resources with which to pay Social Security benefits. Read about it on page 421 of the budget: "The existence of large trust fund balances, therefore, does not, by itself, increase the government's ability to pay benefits." These trust fund balances are assets of the program but also liabilities of the Treasury, netting to zero for the government as a whole.

The problem is that Treasury no longer has the money. It was spent as part of the general fund on education, wars, and loans to people who can't get loans in the private sector. To pay back Social Security, the federal government will have to either raise taxes or borrow even more from domestic and foreign investors.

The bottom line is that by 2014 Social Security will be broke. For this reason, Social Security reform is needed now—the people who will depend on Social Security need time to adjust to a systematically reformed system; they should not have to scramble in response to a crisis caused by political procrastination.

Thankfully, some fair and easy solutions are available. Congress should cut benefits today for people who are 55 and younger. Those individuals still have plenty of time to adjust their expectations about future benefits and plan for retirement.

Second, we should gradually raise the age of eligibility to at least 70 and progressively increase it to track with life expectancy. Life expectancy today is 78.8, but even with recent changes, the retirement age is far below that, averaging 66 for those born after 1943 and 67 for those born in 1960 and later. Third, we should allow these programs to be means tested so that only those who really need the help get it. These changes are low-hanging fruit because they are easy to implement and allow lawmakers to pass reforms that won't kick in until years down the road.

According to a recent CBO cost estimate measuring the potential budgetary impact of various Social Security reforms, the changes to the eligibility age suggested above would gradually decrease Social Security spending by 6 percent. An estimate of the budgetary effect of means testing the program found that it would decrease Social Security spending by an additional 6 percent. Taken together, these reforms would delay the trust fund exhaustion by 4 years.  

Since the assets in the Trust Fund are synonymous with money that needs to be borrowed or taxes that need to be raised, a means tested program would reduce the amount of money the government would need to acquire. To put that another way, the reduction in spending will reduce our future taxes and/or debt.

Still not convinced? Here is a final argument: Not only is there no account with taxpayers' names on it that will pay benefits past 2014, Congress can—at any time—reduce or cancel benefits even for people who paid into the system their entire lives. The Supreme Court made this perfectly clear in its 1960 decision in Flemming v. Nestor, where it described Social Security as a "noncontractual…social welfare program." By law, when the Social Security Administration has used up all of its federal IOUs, benefits will be cut to the level of payroll taxes the government collects for Social Security. At that point, benefits will shrink to three-fourths of their current level, and there is nothing retirees can do about it.

So what do you prefer: Should Congress extend retirement age and means test the program now to guarantee future payments to the people who need it most, or should all benefits be cut in a time of crisis? We know what we would choose.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a Reason columnist. Jakina Debnam is a research associate at the Mercatus Center.

NEXT: "Will Using the Prefix Cyber Make Me Look Like An Idiot?"

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “Veronique de Rugy wants to raise the retirement age, forcing the elderly to continue working well past their usefulness. And de Rugy wants to cut benefits for millions of Americans today! Is that really the kind of person you want representing you in Washington?

    “Say no to Veronique de Rugy and her cronies. Tell them to keep their hands off our Social Security!”

    Paid for by the Committee to Elect Fist of Etiquette

    1. Everyone thinks that anyone with a brain must agree with them–liberals, conservatives, libertarian–you name it.

      They are all equally convinced that anyone who disagrees with them is a worthless excuse for a human being.

      Any participation on my part won’t change the political system in any way or how others choose to participate.

      Why should I care about politics at all?

      1. You should care about your life and whether you’re allowed to live it.

    2. “, forcing the elderly to continue working well past their usefulness.”

      Wrong, we Feds are not forcing anyone to work, we’re just keeping your money for a little longer.

      We can always inflate our way out of this, we’ve been doing it for decades and it works great.

      http://youareproperty.blogspot…..ation.html

  2. But…Old.. People… Dieing in the STREETZZZZZZZZ!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!*&(^%(*&^(*^(*&^(*^DOIUYODJHGE(*^TIUGWHLKJG(W&TILUHGKFJHO;*YLIURHKJN;

  3. But…what about…old people…. Dieing in the STREEETZZZZZZZZZ!!!!!

    1. They can feed our soylent green factories.

      1. Ha! Soylent Green! So funny. So very very funny. And original!

        1. About as original as sarcasm.

          1. That is so true.

        2. Hey Orange, I’m peeing on your face.

          1. Your fantasies are your own. Go for it.

          2. So am I…at the same time as Agent Red.

            1. Er…same time as Agent Yellow.

              1. I love this place!

        3. Over the years I’ve been commenting here, references to the Hestonian Apocalyptic Trilogy have abounded.

          1. Yes, but someday you’ll have to come out of the light, Pro Lib. and then your reign of defending Heston will end…

            1. As far as Social Security, there was no cure, and there is no cure

              1. To be fair, I think Logan’s Run is more apropos in reference to Social Security options. With Michael York, who was in The Three Musketeers with Chuck Heston, so it’s tangentially related.

                1. Logan’s Run would be perfect fix for Social Security. It would also clean out our political houses.

                  I can see it now, one day on C-Span (for some reason all the members are present in the chamber) and the roof will open up, all these old farts will lift from their seats and start swirling around in ecstasy, to this giant electric bug-zapper…

                  Too bad life isn’t simple as the movies.

      2. Everyone thinks that anyone with a brain must agree with them–liberals, conservatives, libertarian–you name it.

        They are all equally convinced that anyone who disagrees with them is a worthless excuse for a human being.

        Any participation on my part won’t change the political system in any way or how others choose to participate.

        Why should I care about politics at all?

      3. It takes all kinds of critters to make Farmer Vincent’s fritters!

    2. Everyone thinks that anyone with a brain must agree with them–liberals, conservatives, libertarian–you name it.

      They are all equally convinced that anyone who disagrees with them is a worthless excuse for a human being.

      Any participation on my part won’t change the political system in any way or how others choose to participate.

      Why should I care about politics at all?

    3. Everyone thinks that anyone with a brain must agree with them–liberals, conservatives, libertarian–you name it.

      They are all equally convinced that anyone who disagrees with them is a worthless excuse for a human being.

      Any participation on my part won’t change the political system in any way or how others choose to participate.

      Why should I care about politics at all?

  4. It’s been time to reform Social Security for about 40 years.

    FTFY

    1. It has been reformed(deformed). It’s now called SOCIAL INSECURITY.

  5. The social security system will be “broke” by 2014? That sounds a lot more dire than the actual facts, which are that the dedicated payroll tax no longer will fund 100% of benefits, but rather only almost the full amount of benefits.

    Regarding the “trust fund,” I agree that it has no “budgetary consequences.” But isn’t it operating the way it was designed back when President Reagan increased the payroll tax to pre-emptively “fund” the Baby Boomers’ retirement?

    1. The SSTF was chicanery back in the ’80s, and it’s chicanery now.

    2. Actually Reagan and the Republicans wanted to means-test benefits back in the 80s.

      It was the Democratic congress that gave us the payroll tax increase instead.

      1. And Reagan’s tax reforms gave us the 1099, we’ve seen how that’s worked out. Lowered taxes my ass. Lowering rates and lowering taxes are different critters.

      2. “An estimate of the budgetary effect of means testing the program found that it would decrease Social Security spending by an additional 6 percent.”
        Keep rewarding the bums that didn’t save anything?

  6. Nothing new will be uttered here. Boomers, geezers and The Greatest Generation? will be vilified. Generations X, Y and Z will reassert their defeatist complaints in witty ways (“Doom!” “We’re fucked.”) Carry on anyway.

    1. Aww, baby got its feelings hurt? You wanna go get an ice cream? Maybe a Happy Meal? That sound good, little buddy?

      1. Not in San Fransisco.

    2. Please stop stealing my money and spending it in useless or economy destroying ways. In fact, just stop stealing my money.

      1. Jerk|11.12.10 @ 12:21PM|#
        Nothing new will be uttered here.

        I was right, of course. Not that it was particularly prescient. Every SS thread is exactly like every one that came before it.

        1. It’s because the solution is that simple.

          1. + XXX

  7. Great plan, of course politicans will probably wait and do it the hard way.

  8. Raising the retirement age to 73 and cutting everyone else off below that seems to be the quick fix. I see to many retirees who are still capable of working but choose to live off the backs of the young.

    1. Yes, we’re all living off your back. Now bring me more caviar. And champagne for everybody!

      1. Well, that’s pretty much what you’re doing when you voted in politicians that misappropriated YOUR investments for forty years. And now it’s time to pay the piper and you want the best of both worlds. Well, sorry but maybe you should have given a shit about fiscal restraint first. So now, the young taxpayers ARE bailing your geriatric asses out. You didn’t give a shit then, so don’t cry that people don’t give a shit about you now.

        /rant

        1. As an 18 year old who will be stolen from by a violent gang all my life to pay for old fucks who sit around all day beating their limp dicks to The Price is Right, I agree.

    2. The guys who spent the money that was supposed to go in a “lockbox” are the bad guys. The retirees honored their end of a contract they were forced into. They’re not doing anything on anybody’s backs.

      1. They weren’t forced into it. They reliably voted for the same Democrats and Republicans who promised pixie dust and magical unicorns, rather than listen to the naysayers who told them (for decades) social security is unsustainable.

        1. The people who voted for it are dead. The rest are people who were forced to pay into it and couldn’t have voted it out if they tried for the same reason we can’t today. If it was run the way it was presented, it could have been abolished at any time and the “lockbox” money distributed.

          1. Only registered Libertarians have clean hands on this issue.

            1. And all the other people who are and were philosophically opposed to it but were taxed anyway.

        2. Yeah, tell Granpa his retirement money was ‘invested’ in a jungle-covered crater in Grenada somewhere. And Karzai’s limo. We all remember liberating Grenada? Right?

      2. What “contract”? According to the SCOTUS, SS is a “non-contractual…social welfare program”. Having my money taken away without my consent is not a “contract”, it’s a “tax”.

        1. Bingo–let’s stop with this nonsense that SS is an “insurance fund” or a “contract” that entitles people to payments. Flemming vs. Nestor already established that you have no right to collect on the money you paid into the program.

          SS is a tax, nothing more, nothing less. And the amount being taken out for the program is now exceeding that being taken in.

          You want to find out how popular Social Security really is? Change it from a mandatory tax to an optional retirement program and watch how fast the program really dies.

          1. Yes but it was a Ponzi scheme. It was sold as an investment and turned out to be just a tax (which is gubmint for fraud/theft)

      3. The guys who spent the money that was supposed to go in a “lockbox” are the bad guys.

        Who voted those guys into power?

        1. The generation who voted for the people who initially broke the piggy bank and set the Ponzi scheme in motion are dead. There’s more to it than “OLD PEOPLE DUN IT TO US!!!!”.

  9. If you save your money and plan for the future you wont recieve a dime of your own SS money.
    If you spend your entire life pissing it away you can expect taxpayers to fully support your retirement.
    take from those who have and give to those who Need …. gotta love it…

    1. I would base it on total income earned over a lifetime rather than money on hand at the moment. Those who’ve never earned much have an excuse if they haven’t been able to save much for retirement. Those who’ve earned a lot should have been planning and saving rather than buying a new BMW 5-series.

      Plus, it makes it much harder to ‘game’ the system by trying to appear asset-poor.

      1. Fair enough, but is that how the government would do it?

      2. You still base it on taking from those who earn to give to those who need. It is not my responsibility to take care of those who could not take responsibility for their own lives.
        Who should have the power to say how much any one person “needs” to be able to say how much of their own money they can have back?

    2. United Scoialiststates of America

  10. Is there where I sign up for my Golden Shower… Curtain?

  11. Total Income for Households Age 65 and Older in the U.S.

    * Under $5,000 (2.4 percent)
    * $5,000 to $9,999 (7.7 percent)
    * $10,000 to $14,999 (13.3 percent)
    * $15,000 to $19,999 (11.4 percent)
    * $20,000 to $24,999 (9.3 percent)
    * $25,000 to $34,999 (15 percent)
    * $35,000 to $49,999 (13.7 percent)
    * $50,000 to $74,999 (11.9 percent)
    * $75,000 to $99,999 (6 percent)
    * $100,000 and over (9.3 percent)

    Source: Census Bureau, 2007.

    1. That kind of scratch buys alot of catfood.

    2. This doesn’t include total wealth though. If I were a retiree with 100% ownership of my house, I could comfortably live on much less than I do now.

      1. So if someone said that you and your family could live comfortably eating only ramen (the cheep 10 for a dollar stuff) 3 meals a day 7 days a week you would be OK with it?

        1. I would be OK with them saying that. I would also be OK with them rambling on about unicorns farting rainbows, since that would be an equally true statement.

          I’ve eaten cheaply when I was younger. I could do it again, but I’ve set money aside because I’ve never trusted that the government would take care of my retirement. I’m not some idiot who can’t see through one of the most blatant Ponzi schemes imaginable.

          1. “but I’ve set money aside”

            Proves you are under-taxed.

          2. I’m a grad student. That stuff is like my crack. Well, free pizza events are my crack. But ramen is my… weed?

        2. So if someone told you that as a retiree you get to rob your children and grandchildren of 15% of every thing they earn (up to the first $106k) to pay for your retirement and healthcare you would be okay with it?

          1. Personally, I’m living far more simply than I could now so I can live without relying on Social Security if and when I retire. I still plan on drawing and cashing my SS checks, but I plan on giving the money to my kids as restitution for the money that is being stolen from them to pay for my retirement.

            I see it as the only moral thing to do.

            1. I plan on giving the money to my kids as restitution for the money that is being stolen from them

              “Restitution?” That implies guilt. Were you around in 1935 when the SS Act was signed? If not, and if you’re still feeling guilty, why cash the checks if they are so evil? Wouldn’t you be passing the guilt along to your kids? It’s OK for them to accept blood money but not you? Your logic is comically flawed, not to mention your sense of ethics.

        3. ramen (the cheep 10 for a dollar stuff)

          Damn you, Nong Shim, and your high $1/pack pricing!

          *shaken fist*

      2. If you give yourself the power to tell others what they need or do not need you also give others the power to tell YOU what you need or do not need.

        1. You seem to be forgetting, to be charitable about it, that confiscating SS payments under the threat of being hauled away to jail IS giving others the power to tell you what you need or do not need.

          1. Actually i agree with you. I would like to get my money back but i would be just as happy if they stopped taking my money away. Whats the first step in emergency care? STOP the bleeding!

            1. actually it is start the breathing then stop the bleeding

              1. It depends on the bleeding, if you have a real pumper going, it is first.

    3. Income is not equity. Retired people tend to have very little income because they aren’t working, but lots of equity to spend, and lots of potential income if they decided to work instead of living off money stolen from younger people.

      1. Is it income “stolen from younger people” or is it income ” taken from them by the government with a promisied return at retirement”?
        Do retirees have the right to get their investment money back?

        1. Investment money? That’s cute.

        2. Is it okay if I break into your house and steal your television as long as I leave a note promising another one in a few decades? Even if there is nothing that truly backs up my promise?

        3. Do retirees have the right to get their investment money back?

          Of course. Call it a refund on money that was stolen from them, often against their will. Some of the intellectually impaired here think that all retirees support the concept of Social Security. There are plenty who don’t, but they shouldn’t be penalized twice: the first time having their money stolen by the government, and the second time being threatened by that same government to default on its financial obligations. If they can default on SS, they can default on anything.

          1. The problem is that the money is simply no longer there. It’s gone, spent many years ago. Such is the nature of Ponzi schemes–when they collapse, when they can no longer sustain themselves, everyone gets hosed.

            It’s not fair, but unfortunately that’s the way it ALWAYS is and always has been.

            It’s not about mean people or letting grandma starve–it’s about mathematics. And the math is unequivocal in showing that the exponential growth required to keep the system solvent, at the levels expected by the populace and promised to them by politicians, could not be sustained in perpetuity.

            Rome couldn’t provide bread and circuses forever, and neither can we. The only option, in the end, is going to be to let the program collapse, take our medicine, and figure out a way to care for the elderly that doesn’t involve unsustainble mathematical assumptions.

            1. Well now, if “the money is simply no longer there,” will you be foregoing your tax refund next year? Show of hands: How many of you will donate next year’s tax refund back to the federal government, because all the money is gone and you don’t want to be a parasite in their ponzi scheme?

              I’ll wait.

              1. Nice strawman–now try arguing, using mathematics, how this program can be sustained, given that the “surplus” is a bunch of IOUs that require additional funding by the Treasury to pay for them.

                Or does actually arguing the subject at hand too much for you to handle?

                1. Readers will note that RRR did not answer my question, so I’ll ask him again. Will you be cashing your tax refund next year, RRR, that illusory dough drawn from “a bunch of IOUs”? Furthermore, do you think you have a right to cash it? Don’t retirees have that same right to cash their checks after waiting 40-50 years for their refund?

                  You keep repeating, “The money is simply no longer there. It’s gone.” Have you ever used a credit card or had a mortgage on your home? Did you have all the cash on hand to pay it back immediately, or were you planning on repaying it over months and years and decades? The federal government is in the same situation now, but on a gigantic scale, and its obligations are currently exceeding its revenues. We citizens can address the challenge in an intelligent and morally equitable way, or we can default on our obligations and devolve into chaos and class warfare.

                  Regarding SS’s longterm viability, the program must be restructured and gradually phased out. It took 75 years to get to this point and it will take decades to reverse the momentum. The federal budget must be trimmed to the bone without the United States defaulting on its financial obligations. It can be done, the prevailing “libertarian” defeatism notwithstanding.

                  1. Will you be cashing your tax refund next year, RRR, that illusory dough drawn from “a bunch of IOUs”? Furthermore, do you think you have a right to cash it?

                    Readers will note that Retiree’s question is irrelevant to the actual issue at hand, and is a weak attempt to distract from the core problem.

                    Don’t retirees have that same right to cash their checks after waiting 40-50 years for their refund?

                    Not according to the ruling passed on Flemming vs. Nestor, they don’t. You can rail about the unfairness of it all you want, but the legal precedent is established. Social Security is a tax, not a retirement program. You were lied to.

                    You keep repeating, “The money is simply no longer there. It’s gone.” Have you ever used a credit card or had a mortgage on your home? Did you have all the cash on hand to pay it back immediately, or were you planning on repaying it over months and years and decades?

                    What a mistaken analogy. Over the last decade, we saw case after case after case of people using expanded credit availability to supposedly pay down debt that was already in place, while adding to their personal debt the whole time. perhaps the charts here will illuminate just how faulty your equivocation is:

                    Fed Z1

                    And your solution to this mathematical reality is this “brilliant” piece of analysis:

                    The federal government is in the same situation now, but on a gigantic scale, and its obligations are currently exceeding its revenues. We citizens can address the challenge in an intelligent and morally equitable way, or we can default on our obligations and devolve into chaos and class warfare.

                    A vague solution followed by a threat of Thunderdome. Not making your case at all.

                    Regarding SS’s longterm viability, the program must be restructured and gradually phased out.

                    Restructured how, exactly?

                    It took 75 years to get to this point and it will take decades to reverse the momentum. The federal budget must be trimmed to the bone without the United States defaulting on its financial obligations.

                    Just how far do you propose those cuts should go? 50%? 75%? 95%? You’ve already postulated that major alterations to the current SS structure that aren’t done in an “intelligent and morally equitable way,” (a laughingly vague solution that shouldn’t even be taken seriously) are going to lead to chaos.

                    Take a look at the charts at the link. Now try to explain how the budget can be “trimmed to the bone” without default occurring. Need I mention that the government hasn’t paid down its Public Debt Outstanding since 1957? And you really think default isn’t going to happen here, with all the QE and debt monetization tha Bernanke’s implemented? With all the toxic debt that is STILL on the books of the TBTFs after all this time? With trillion-dollar deficits on the horizon for the foreseeable future? What sort of miracle scenario do you envision this massive budget trimming ocurring without default of some sort? I’d really love to hear your wishcasting here.

                  2. There are two “tax refunds” the first is when a taxpayer pays more than he is obligated to pay during the years and reclaims that overpayment when he files a tax return. The second is when a “refundable tax credit” results in the government sending a welfare check out.

              2. Well Retirees, I will not be getting a tax refund next year. I’ve designed my tax withholding so that I pay my statutory tax burden & nothing more. I wish I could do something similar with SS.

                so… what was your point?

  12. Why not reduce or eliminate benefits for high-income retirees? If you are making (say) $80,000 or more you don’t really need it. I have no idea how much that would save, and Democrats traditionally oppose the idea, because it implies SS is a form of welfare.

    1. I thought D’s were all about means testing benefits. It’s just an added layer of theft from the “Rich” who paid in their 15% same as the poor.

      1. D’s are about getting re-elected, heh.

    2. Well, okay. But then why should I have to pay into it at all if I don’t benefit from it? I mean, you want me to pay for your retirement AND mine?

      1. Because it’s a welfare program? I mean, the justifications are no better or worse than any other welfare program.

        1. *** Sigh ***

          point taken

          1. Acceptance is the first step…

      2. “Well, okay. But then why should I have to pay into it at all if I don’t benefit from it?”

        That’s just it, SS is a welfare program pretending to be a retirement plan for all classes. Even without means testing the richer earners are getting royally hosed by the system. If we truly accepted SS for what it is, welfare for old people, we could make substantial spending cuts, and hopefully, we could start to roll back the payroll taxes for people who earn more and won’t benefit from the program. We could probably find other ways to fund SS. The first step, though, is to start reducing the liability of SS, and then finding methods of funding that are fair should be much, much easier.

      3. “I mean, you want me to pay for your retirement AND mine?”

        That is the reason why we will never do away with SS and rely entirely on private accounts. For that to happen, some segment of the population will have to pay to support current retirees while having sole responsibility for their own retirement. Ain’t gonna happen.

        I would certainly agree to give up any future benefits if I could opt out entirely and quit being taxed for SS. But someone’s gotta pay for the current retirees.

        1. How about we cut the hell out of all of the programs that the government should not have a hand in like sending money to africa to fight aids, sending money to pakistan so they can buy weapons, welfare, FCC, FDA, ATF, FBI, TSA, and the EPA (these are just a few). Then we can eliminate the ss tax and just use the money saved from those other programs to fund those who are already relying on ss. Would that work? (that is a serious question)

          1. I suspect that if you added up all that money, it would be dwarfed by what we spend on Social Security.

            1. I can just about guarantee that all of those combined don’t even amount to just an annual increase in SS outlays.

      4. IMO, the goal should be to turn it into an insurance system. You pay a premium and if you end up with insufficient money to retire you get a minimal stipend.

  13. As happy as I am to see anyone talk about reforming SS, the reality is that old people vote WAY WAY WAYYYYY more than young people, period.

    A 60 year old voter will never vote for someone who says that they will have to wait an extra five years to get any of the money they’ve been giving to the government for the last 40 years, and frankly I don’t blame them.

    The only way to get reform to work is to start with the youngest generations and work upwards from there.

    1. I’m closing in on the age where I could draw SS, and if I could push a button that ended SS in its entirety, just shut the fucker down, I’d sprain a finger rushing to push that button.

      I don’t give a fuck about the money the government allegedly owes me. The money stolen to pay for someone else’s entitlement program is gone.

      I don’t want to continue the theft.

      I don’t want my kids and future grandkids and everyone else’s kids to be stuck paying for this socialist monstrosity.

      1. I wish there were more of you.

      2. Word. I’m over 50, and I’d do the exact same thing.

      3. let’s compromise – only those over 18 (who are eligible to have voted for the crooks in D.C.) have to stay in the system and pay us older folks back for some of our stolen money. Those under 18 are innocent so I don’t want anything from them.

        1. I’m 18, don’t vote, and am therefore not responsible for this violent ponzi scheme in any way, shape, or form.

          So please let me opt out and quit stealing my money, you greedy old fucker.

      4. As an 18 year old, I thank you very much.

        Now if only 51% of people thought the way you did…

    2. The only way “reform” is going to happen is by way of inflation that destroys the value of the benefit faster than the benefit increases.

      Of course, this will destroy the savings of those who have put their own money aside for retirement as well, but inflation is what will ‘resolve’ this mess.

      1. I wish I thought you were wrong. Unfortunately, I think you’re right.

        1. He’s probably right, but he’s Canadian and I don’t trust him.

          He just wants access to our Maple trees, and a fiscal depression will give him that opening.

          They are verrrrrrry sneaky.

          1. Curses! My cunning plan unmasked!

            – Snidely Whiplash Aresen

      2. Exactly. It is the path of least political resistance.

        1. And those T-bills the SS trust fund bought? Hellicopter Ben is more than willing to print money to “buy” them.

          Social Security will *never* run out of money, because our “money” is debt created out of thin air. And if there’s one thing our Government can do, it’s create debt.

  14. I really, truly had my hopes up when I read this graf:

    Second, by law, the Social Security trust fund has to purchase Treasury securities with its tax income. In other words, the trust fund contains a bunch of IOUs but no actual resources with which to pay Social Security benefits. Read about it on page 421 of the budget: “The existence of large trust fund balances, therefore, does not, by itself, increase the government’s ability to pay benefits.” These trust fund balances are assets of the program but also liabilities of the Treasury, netting to zero for the government as a whole.

    At last! Chapter and verse to throw back at the willfully blind Democratic partisans who think that just because it was W who brought up the subject of those worthless IOUs, that makes the whole line of argument invalid. Sadly, the first sentence in the cited paragraph on page 421 of the budget reads,

    From the perspective of the trust fund, these balances are available for future benefit payments and other fund expenditures.

    What this tells lefties is that “teh moneyz still dere”. I seriously have never had so many unreal discussions with anyone as I have had over Social Security, or the meaning of those alleged Treasury bonds.

    1. How is the Government’s obligation to repay its debt obligation to the SS Trust Fund any different from its obligation to repay its debt obligation to other creditors?

      1. For that matter, how is the ‘trust fund’ any different than French War Bonds?

      2. The federal government is all one entity. The SS “trust fund” is not some independent party.

        1. This is true, but as Hazel Meade points out below, defaulting on paying back the trust fund would send a disconcerting message to the international financial community.

          1. You’re confusing the moral obligation to pay back the SS fund with the ability to do so.

            To pay off those t-bills, the government will have to borrow/print money just as if those t-bills didn’t exist.

            1. Or cut other spending, and pay it back from tax revenue.

      3. It isn’t. The problem is that they don’t consider it a debt.

        They’ve been counting SS income against the deficit for decades. Even though the money is borrowed by the Treasury and spent every year. They count it as income, but they don’t count it as a debt.

        Ultimately, when SS stops running a surplus and goes into deficit, the general treasury has to come up with the money to pay it back. EXACTLY as if no money had been saved at all.

        Think about it this way: If you have to raise taxes from the general fund to pay back the bonds when SS starts running a deficit, how is that effectively different from SS always being run from the general fund in the first place?

        The whole point of the “trust fund” was so that the government would have something saved to pay for the boomers retirement. But if the money comes out of the general fund when the time comes ANYWAYS, it’s exactly the same thing as not having saved a dime.

  15. Just need to raise the age at which you’re qualified to receive social security to that of expected life expectancy. You can retire anytime before that it’s just that you’re responsible for yourself until then. Heck if you win the lottery you can retire at 30. You’re just not going to get any social security until you’re likely to die. If you make it past then, good for you, we’ll help you out.

    1. Isn’t this what FDR did when setting up this Ponzi scheme?
      Make the payout age 62 while life expectancy was 59 or so?

      1. Essentially yes, Bismarck in Germany as well when he set up a similar system. I’m just proposing to go back to the way the system was originally set up.

      2. That is how Obamacare will save SS with deathpanels. Lowers life expectancy and SS will catch up. Win win

    2. Agreed. The problem with retirement planning is the big question, “When will I die?” It’s difficult to plan a yearly amount to live on when you don’t know the total time you’re going to live.

      I can see Social Security being around purely to mitigate the risk of living an extra long life. If it were viewed as such and the eligibility age were set to 73 (for example), people would know if they want to retire at age 63, they’d have to have enough saved for 10 years. That’s much easier to plan for.

      Of course, you couldn’t make that change for anyone older than about 50, but it would be a start.

      Medicare is the much tougher problem because one bout of cancer can wipe out a life savings in a few months.

      1. A good friend described his retirement plan to me. He says he will live carefully but comfortably on his savings until it runs out, then kill himself if he is still alive.

  16. My understanding was that the real threat of all entitlements relates back to the servicing America’s $13 trillion dollar debt. If the money paying the interest on those bonds the trustees purchased is the same money the trustees use to purchase the bonds, it’s an absolute ponzi scheme. Regardless of how many securities Reagan caused the trustees to purchase in the 1980s, without more money coming from workers, money will have to come from general revenue to service the bonds issued to the social security trust in the 1980s. It is this reason that the Social Security “Trust Fund” is a major liability waiting to explode.

    1. It is, and has been almost since the inception of the program, an entitlement program paid from current receipts and the general fund.

      Talking about a nonexistent Trust Fund just plays along with the lie.

      1. I’m not sure where this Reagan creating the “Trust Fund” comes from either. The main thing that happened with the Reagan reform was that the FICA devoted to SS was increased and a portion to pay for Medicare was added – in effect they just raised FICA. There was always a fiction trust fund in the form of bonds purchased with a “surplus” that had been used as general revenue.

        The Social Security System was a scam from the beginning. It’s purpose was to impose a regressive income tax on young workers (who are least able to shelter income from the tax man and hence the best targets for taxation) with a future pension benefit attached to disguise it an insurance scheme. The goal was always to raise revenue for the general fund.

        The problem was that the demographics got away from them. And long before the boomers arrived. Who’d’ave thought all those Greatest Generation geezers were going to live so fucking long?

        1. The other myth that was pushed was that SS was supposed to be an income supplement for the retired – a little extra to bolster their own income from savings in such a way as to keep the elderly out of poverty.

          Suddenly in the 1970s a spate of stories started appearing telling how many of the eldery, mostly women, having saved nothing for retirement, found themselves entirely dependent on this meagre income complete with the whole “living on cat food” meme.

          At that point Congress voted generous raises in benefits together with cost of living adjustments to the point where SS retirement income was almost a living “wage”.

          Then “suddenly” in the eighties, the administrators realized that at current tax levels the system was unsustainable, especially when the boomers would hit the system.

  17. Just need to raise the age at which you’re qualified to receive social security to that of expected life expectancy.

    It’s already set at the life expectancy for poor people and black guys.

    Coincidentally!

    1. The life expectancy of people back in the 1930s is more like it. Most people live a lot longer now.

  18. Libertarianpress.blogspot.com

  19. The official name of the social security program is Federal Old-Age (Retirement), Survivors, and Disability INSURANCE.

    The key word in bold is supposed to mean payments are only made to any person who experienced extreme hardships that left them unable to secure a decent standard of living in their older years. If they lower the payroll tax rate, I could live with treating the payments as insurance claims against poverty in old age.

    1. ^this. Philosophically, not my cup of tea, but if this was practically in effect, SS would not even make the top twenty list of things in need of serious reform.

  20. fair and easy solutions are available. Congress should cut benefits today for people who are 55 and younger.

    And cut their taxes to make up for reduced benefits. Fair and easy.

    1. And cut their taxes to make up for reduced benefits.

      Whoa whoa, let’s not be hasty here. We need that cash to pay for Obamacare…

  21. there are a few easy changes that could be done to Social Security

    The easiest would be to make participation voluntary — if you don’t like it, you permanently opt out, and receive no payments, ever — with higher premiums to reflect the higher cost of NOT coercing young people to join a Ponzi scheme.

    Then sit back and watch the implosion as the consequences of no longer being able to coerce people into a raw deal — bring a bag of popcorn!

    1. That wouldn’t work because there would always be irresponsible (or simply very unlucky) people who saved nothing and you’d still have to support them (or be willing to let people starve… that’s too much even for most libertarians).

      1. It wouldn’t work because you couldn’t pay current beneficiaries if you let younger workers drop out of the system.

        1. Sure you can: sell the T-bills in the trust fun.

          1. Ahhh. The special non-transferrable T-bills?

            Maybe. But then the government really would have to pay them back to whoever buys them. We couldn’t just keep raising payroll taxes to avoid having to actually cash them in.

  22. There are lots of people on SS who have already received far more than they ever paid into it – and some paid little or nothing.

    Here’s a cost cutting idea:

    For every SS beneficiary in the system, calculate the ratio of total benefits received to total FICA taxes paid into SS when they were working.

    Create a list of all beneficiaries sorted on that ratio in descending order.

    The start cutting benefits of those people from the top down.

    1. that would tend to cut the benefits of the poorest retirees first.

      IMO, it should be turned into retirement insurance.

      Try this formula. If you already have received more than you paid in AND you also have a secure other source of income, then we cut your benefits to zero, starting now.

      1. I like it.

  23. Here’s a caveat.
    Isnt’ the government absolutely morally fucking obligated to pay back the trust fund?

    they tool those payroll taxes on the promise of paying out benefits eventually. To cut those benefits so as to avoid paying back social security recipients is not only to renege on basic promises, but to default on a shitload of debt.

    I would think that if we defaulted on the SS debt, that might freak out a lot of internatioanl investors. You just don’t decide not to pay off treasury bonds without consequences.

    Secondly, the fact that it puts pressure on other government functions is a positive thing. We have to pay back the trust fund, so the rest of the government MUST shrink.

    Personally, I’d think Medicare might be a bit easier to slash since they don’t have as much of a “trust fund”, and the benefits are much more out of proportion to the amount people have paid into the system.

    And then there’s the defense budget, the department of energy, the department of education.

    Besides, it’s going to be really hard to get the kinds of cuts in SS we need as is. We might end up having to do it all.

    But then, once the trust fund is exhausted, then the real reform comes down.

    1. “government” and “morally” in the same sentence?

      Is that one of the rules in the drinking game?

      1. For retards, yes.

        1. Boy, i feel retarded now. Thanks for putting me in my place with some choice girlsplaining.

          1. Its womynsplaining

            1. So gullible. I laugh and laugh.

  24. there is nothing wrong with social security.
    The problem is our politicians are thieves and have stolen all of our money and that of our children.
    No amount of money put into a bank account will solve your money problems when your accountants are kleptomaniacs.

  25. Set SS retirement age = age expectancy at birth – 8 years, effective immediately. Problem solved.

    1. I, for one would have no problem if the SS retirement age were done away with altogether. What is it about reaching a certain age that let’s you get to sponge off you fellow citizens.

      If we need a welfare system to sustain those who are too infirm to work and too impoverished to support themselves, then so be it, but let’s stop pretending that reaching some magical age creates this entitlement.

      1. Whatever happened to mooching off of one’s kids?

  26. Dems won’t be happy unless the retirement age is somwhere below the life expectancy of white men, and above the life expectancy of black men.

    It’s not a successful government program unless it transfers money from poor blacks to rich whites.

    1. Its already pretty effective at transferring the money from black men to white women.

  27. Few topics bring out the stupid like Social Security. The anger, class envy, spite, despair…it’s like a 12-step meeting.

  28. How about eliminating welfare?

  29. Means testing is just another redistributionist gimmick.

    1. Well, it’s one of the few politically possible ways to deal with the problem without raising taxes.

      1. Any time you reduce one groups benefits, you are raising their taxes.

        1. Well, without raising S.S. taxes in general, for everybody.

  30. Sorry! The means testing just creates anothher welfare program, which will indeed eliminate welfare as anyone hhas ever known it.
    Reform it. but do not make it welfare. Cut across the board. Equual protection? or are you just progressives.

  31. Hey, Joey, c’mover here. Lookit these stupid Republifuck wannabes, thinkin’ it’s THEIR money in Social Security!

    What a bunch of selfish bastards.

  32. Fair & Easy Solutions? Veronique and Jakina need to start writing for CNN, Huffington Post or DailyKos. When Social Security was first implemented it was supposed to represent 1/3 of personal saving, with another 1/3 from pension, and the remaining 1/3 from personal savings. It was also introduced as a benefit you’d get at 65 when average life expectancy was 59 1/2. Means testing is a simple penalty to pass along to those who worked harder and earned more so that you can give to those who didn’t work as hard, earned less, or simply didn’t save. This is patently offensive. How is it, if I work and save, that some government agency gets to penalize me for prudent planning? This is an incentive to consume instead of save, lest the government think you’re too well off. Privatizing Social Security is the only fair objective, unless they’d like to enlist the help of the insurance industry that has been doing this for years which would be infinitely better than what we have now.

  33. Social Security is already heavily means tested. For example, a sole proprietor making over $110,000 – with total adjusted gross family income of about $200,000 – and drawing about $30,000 per year in SS, pays $13,243.20 into SS on their income, and income taxes on 85% of $30,000 SS income, or about $8,925, leaving a net SS balance after taxes of $7,831.80. However, the SS recipient also paid income taxes of $4,635.12 on the non-deductible $13,243.20 paid into SS, leaving a net after taxes of only $3,196.68 of the $30,000. I don’t know, but I doubt that researchers projecting big savings in SS from means testing consider all the money the government collects back already. After paying at or near the maximum into SS for most of a working lifetime, the current system of keeping only 11 cents of each SS dollar collected, and having nothing to show for your contributions when you die, sounds like a system for fools.

  34. Testing just creates another welfare program

  35. The easiest would be to make participation voluntary — if you don’t like it, you permanently opt out, and receive no payments, ever — with higher premiums to reflect the higher cost of NOT coercing young people to join a Ponzi scheme.

    Then sit back and watch the implosion as the consequences of no longer being able to coerce people into a raw deal — bring a bag of popcorn!

  36. Let anybody decide they want out at any point in time. Let me keep my ~$100-ish per paycheck and invest it as I see fit. I will sign the following statement:

    “I, Steve, being of sound mind and body, do hereby withdraw myself entirely from the Social Security program of the United States of America. I will collect $0 in benefits and from this date forward will pay $0 in OASDI taxes. This decision may not be reversed.”

  37. I like how the young, working generation is fucked no matter what. Sucks to be the last one out of a mandatory, state-sponsored ponzi scheme.

    1. True, but it’s not THAT bad. Here are some scenarios:

      Default Scenario – Congress does nothing; SS benefits slowly diminish to about 70% of current in real money by the time I retire & then level off.

      Welfare Scenario – essentially means testing of SS. Productive members of society get maybe 50% of current benefits & poor folks get 100%.

      Tax scenario – Taxes get raised & benefits stay at 100% of current.

      Privatization – folks 55+ get 100% of promised benefits; Folks under 55 get some cash value in a retirement account that they can invest however they want. Income taxes go up in interim to pay for the 55+.

      There are probably lots of other scenarios, but nothing that you might call cataclysmic. Sucky yes, but not world ending.

  38. Medicare admin should put out “low bid” contracts for durable medical goods, such as power wheel chairs, oxygen, etc., instead of paying a max of $X.XX dollars to providers. Many providers always charge the max, which may be 3-4x the wholesale costs.

  39. I wish the authors of the article would tell their news about worthless Treasury bills to their stockbrokers or accountants. I say this because the accountants and stock brokers I know and have heard consistently over the years say that Treasury bills are the most conservative as in cautious investment one can make.

    Yet, whenever the ideologues want to trash Social Security, they tell us T-bills are worthless IOUs. Funny that.

    And let’s take a look at this issue from another perspective: How about letting the tax cuts for those making more than $250,000 expire? If we did, the money saved over the same long haul that gets us to the late 2030s when Soc Sec pays 75% to 80% of its benefits is negated. See the Center for Budget Priorities and Public Policy led by Robert Greenstein, who even Republicans say is a straight shooting guy for a so-called ‘liberal’.

    And let’s further consider: Let’s all download the Soc Sec Trustees’ annual report and read it. We’ll find the Trustees’ assumption about Soc Sec that is so dire is based upon projected incoming revenues that are based upon GDP annual growth. The Trustees think the annual growth for the next 35 years is 1.8% per year. If we accept that, the US in deeper trouble than merely Soc Sec. A more realistic number is 2.3% annual growth on average. So what happens when you plug that in? Shhh…Don’t tell the authors of the article, but most if not all of the so-called deficits of payments disappear.

    The problem with long term funding for our federal government are fighting too many wars, tax cuts for people who least need them, and reimbursement of medical and medication costs. The problem is not with the sometimes meager pension fund known as Social Security.

    Now the true believers in Ayn Rand can tell me how stupid I am, or what a “statist” I am. But perhaps this time, they will have arguments that deal with the points raised.

  40. What about raising the ceiling?

  41. New post on how personalization fights poverty at: http://www.libertarianinternat…..-so-there-

  42. Submitted for your approval.

    Let’s see if you can guess which article (or, what the article might have been about) the following post was a response to. Submitted respectfully by one of our more ‘enlightened’ Reason readers.

    Veronique de Rugy – who is this clown, must be French with a name like that. Crawl back into your institutional echo chamber with your theory’s and numbers. Talk about Hit and Run, come back to me when the US has been attacked again but this time by Iranian made dirty bombs after the Democratic Surrender Monkeys have left Iraq. Sadly these events will probably take place in big cities like LA,Philli, NYC, DC, Boston, filled with unexpecting people and mostly of liberals. Us gun toting, bitter church goers with pray for you. I certainly don’t need numbers and charts to identify who the enemy is and what they want to our country.

  43. I am 18 years old and a small business owner. I am stolen from by a violent gang of thieves writ large to pay for old fuckers through a wealth transfer ponzi scheme.

    I will never see any of the money.

    Just abolish this disgusting system and leave me the fuck alone.

  44. Fileserve, Filesonic Free Porn Downloads | Fresh Porn
    http://www.freshporn.org

Please to post comments

Comments are closed.