Social Security

Social Security Will Be Insolvent in 16 Years

So we're probably only 15 years away from Congress deciding that's a big enough crisis to do something about it.

|

Social Security will be insolvent and unable to pay the full value of promised benefits by 2035—that's one full year later than previously expected—and Social Security's costs will exceed its income by 2020, according to a new report published Monday by the program's trustees.

At the end of 2018, Social Security was providing income to about 67 million Americans. About 47 million of them were over age 65, and the majority of the rest were disabled. If nothing changes, the Social Security Trust Fund will be fully depleted by 2035 and the program would impose across-the-board cuts of 20 percent to all beneficiaries. That may sound like it's a long way off, but 51-year-old workers today will be just hitting retirement age when the cuts kick in. Some current retirees will still be younger than 80.

By that point, some parts of Medicare will already be unable to cover the full cost of benefits.

The trustees' report released Monday shows that the trust fund for Medicare Part A, which covers hospital and nursing home costs, will be gone by 2026. Medicare Part B, which covers routine medical care like visits to the doctor, and Medicare Part D, which covers prescription drugs, are on more solid footing and will remain solvent "indefinitely."

It is important to remember that insolvency is not the same as bankruptcy. By 2026 and 2034, respectively, Medicare and Social Security will not have enough money to pay the full cost of their obligations, but that's not the same as saying they'll have no money at all.

It's also important to keep in mind that these projections are constantly shifting based on economic data, demographic trends, and actuarial projections. Last year, Social Security was supposed to hit insolvency in 2034. The year before, the trustees said insolvency wouldn't hit until 2037. It's a moving target, but time keeps on slipping and ignoring the looming crisis won't make it go away.

Still, Congress could be spurred to action by the threat that Social Security will post losses in just two years. The last time that happened, in 1982, it provided an impetus for federal policymakers to make several changes, including an increase to the payroll tax, that kept the federal old-age pension program solvent. Without policy changes, the new report shows that Social Security would start losing money in 2020 and would continue to operate in the red for decades to come—long past the point when the program would be able to fund its promises to retired Americans.

Right now, there's not much evidence that federal policymakers are ready for that challenge. President Donald Trump has repeatedly promised not to touch Social Security while he's in office, while Democrats in Congress are eyeing Medicare for All proposals that would likely pile massive new obligations onto a federal entitlement program that's already struggling under its own weight.

"That fact that we now can't guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policymaker to rally around solutions to restore solvency to those programs," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for balanced budgets, in a statement. "Certainly we should be focused on saving Social Security and Medicare before we start promising to expand these programs."

What's really needed is a complete reconsidering of the relationship between older Americans and those entitlement programs. Both Social Security and Medicare were designed more than half a century ago for an entirely different workforce and population. When Social Security launched in 1935, the average life expectancy for Americans was 61—that means the average person died four years before qualifying for benefits.

Meanwhile, demographics are blowing up the basic premise of how Social Security is funded. There were 2.8 workers for every Social Security recipient in 2017. That's down from 3.3 in 2007, and that's way down from the 5.1 workers per beneficiary that existed in 1960.

Today, the two programs function mostly as a giant conveyor belt to transfer wealth from the young and relatively poor to the old and relatively rich, allowing the average person (who now lives to be 78) more than a decade of taxpayer-funded retirement.

When and if Congress gets around to doing anything, both programs should be restructured to ensure they take care of the truly needy, rather than being benefits for anyone who has reached an arbitrary age. As Reason's Nick Gillespie and Veronique de Rugy wrote in a still-very-relevant 2012 feature on the future of America's entitlements, "Focusing on those truly in need instead of automatically shoveling out larger and larger amounts to well-off senior citizens is the best way to avert looming fiscal catastrophe and restore some morality to an indefensible system."

Those entitlement programs are also the primary drivers of our national debt, which just hit $22 trillion and is on pace to reach levels not seen since World War II by the end of the next decade.

"Every day that passes, the problem gets bigger and the solutions become more difficult to implement," said MacGuineas.

About the only way Congress will get off the hook is if climate change kills everyone in the next 12 years.

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.

194 responses to “Social Security Will Be Insolvent in 16 Years

  1. Never underestimate the government’s ability to kick a can down a road.

    1. Or voters interest in making sure that gets done too

    2. Dammit trying to load the comments and I accidentally flagged one of the comments. Sorry about that.
      Wish they would make the flags a little less intrusive.

      1. Just get rid of them. Flagging comments is for pussies.

          1. Don’t feel bad I just flagged my own comment for review! I was trying to edit it and guessed the little icon in the top right might do the trick. *sigh*

    3. The author is optimistic, it will be 15 years and 364 days before it is addressed. And the first thing will be to blame the other party for a system that was not financially sound from the day it was signed into law.

      1. “”it will be 15 years and 364 days before it is addressed.””

        Three or four years after we all perish from climate change. I was worried for a moment.

    4. “Social Security Will Be Insolvent in 16 Years”

      I heard this 16 years ago. And 32 years ago. This was said during the Bush 43 years when he tried to reform. And time goes by and the goalposts keep getting pushed out further.

  2. The solution is, of course, to vote Democrat so they can strengthen our economy and implement the Koch / Reason immigration agenda.

    1. We could declare that Americans have to live in Mexico to collect Social Security retirement benefits.

  3. “”Medicare Part B, which covers routine medical care like visits to the doctor,”‘

    Close. It only covers 80% of those visits and it does not cover preventive visits.

    “”Those entitlement programs are also the primary drivers of our national debt, which just hit $22 trillion””

    When Obama took office it was around 10T and 20T when he left. That’s a little more than 1T a year. I would not be surprised if that level of growth continues or expands. I don’t see any attempt by Congress to control spending in a meaningful way.

    1. Close. It only covers 80% of those visits and it does not cover preventive visits.

      Can’t wait until it’s “for all.”

    2. How often do poor Medicare recipients pay that 20%. Theres a reason cost shifting is so prevalent and medicare only pays 92 cents on the dollar.

      1. Not sure if it’s all states, but you may be eligible for Medicaid as a secondary coverage to pick up the rest.

        We call them dual eligible.

      2. The average Medicare recipient pays $5500 per year out-of-pocket (including premiums/deductibles and for stuff that isn’t covered dental/preventive). That varies mostly by age not income. The average non-disabled Medicaid recipient pays about $800/year out-of-pocket (equals roughly 25% of total costs). The average disabled Medicaid recipient pays about $1200/year (equals maybe 8% of costs).

  4. I have a great idea. Just cut me a check for all I have put in at 7% compounded.

    1. Then invest the sum in an annuity that probably returns more than you now get in your s.s. check.

      But “insolvency” has little meaning to guys who have printing presses and the proper plates and paper.

      1. I am low risk and can do way better than the government.

        I max out every year on FICA.

        Anyone doing better on Social Security is eating my lunch.

    2. I love it when people make the argument that most people get more from social security than they put in. First, that might not actually be true. Second, if they do, it’s not much more. Third, if it’s supposed to be some kind of pension program, then it damned well better pay out way more than was put in over the years, adjusted for inflation.

      1. I’ve seen mostly studies showing people could get more from their own simple investments that what SS pays. Can’t recall any showing SS is better.

      2. SS is now pretty progressive. Yes those who paid more get more back out, but far less than they would have gotten even with a 4% mutual fund return. The payouts for ss require only a few years of work, not 40. Then there is the disability SS which skyrocketed under Obama for reducing requirements and paying lawyers for every victim they got through the system.

        1. SS is most utterly, awesomely progressive when it rips off (taxes) the brown-skinned illegal sub-humans, and denies them the chance of EVER getting back paid-for bennies!! And pays bennies to the moochers instead, with the moochers being the native-born. But no one wants to talk about THAT!!!

          See “The Truth About Undocumented Immigrants and Taxes” (in quotes) in your Google search window will take you straight there, hit number one… AKA http://www.theatlantic.com/business/archive/2016/09/undocumented-immigrants-and-taxes/499604/ For details about us natives mooching off of the taxes of the illegal sub-humans…

        2. Then there is the disability SS which skyrocketed under Obama for reducing requirements and paying lawyers for every victim they got through the system.

          The growth in SSDI was entirely about the health of the economy.
          As the economy went into the shitter, the SSDI claims went up. But as the economy improved, the SSDI claims went down.
          The number of SSDI recipients was the same at the end of Obama’s term, as it was at the beginning.
          https://www.ssa.gov/oact/STATS/dibStat.html

          1. 7.4 million to 9 million isnt the same…

            Plus read about his first term where the growth was worst.

            https://www.investors.com/news/ssdi-disability-rolls-skyrocket-under-obama/

            1. SSDI is a huge problem. I know someone who has been on SSDI for over 20 years and is perfectly able-bodied. The problem is, his mother is a social worker, so she knows hoe to game the system very well. A big part of the problem is the administrative judges, who rarely deny an appeal for benefits. Get a lawyer and appeal a denial of SSDI, and you are almost assuredly set for life. Only the most obviously fraudulent cases are ever denied, and if they are, there is no penalty to the individual in question. Also problematic is that one can receive SSDI for something as nebulous and difficult-to-disprove as “Stress.” Almost 1/3 of SS beneficiaries are on SSDI, and unlike ordinary retirees, these people did not pay into the system for 40-45 years like typical retirees did.

              1. I used to do income verification for a nonprofit, all the time I would see people coming in, saying they just need a little help until their baby’s disability gets approved. It always got approved, and they’d be cut a check for anywhere from 20k to 65k (SSDI payments backdated to the date of the birth of the disabled kid) and they’d stop coming in to our org for benefits

                Sometimes it was 3 or 4 months, sometimes it was the very next month, but they were always back, just as broke as before their windfall. Some of these parents had 2 or 3 kids receiving SSDI

      3. “Third, if it’s supposed to be some kind of pension program”

        It’s not and never has been.

        It’s more closely defined as insurance against poverty in old age, with the government (taxpayers) being the insurer. Actuarially, the way it was designed was that most people were SUPPOSED to die before reaching SS age. Only a few were expected to live long enough to collect SS, and fewer of those would collect it for very long.

        Those that did live long enough were covered by the taxes being paid by their younger neighbors who were still working. Those younger workers were NEVER “paying into” SS, they were paying FOR SS for their older neighbors in the anticipation that if they themselves reached that point, then even younger folks would pay for them, and so on in.

        1. Mpercy is correct. That’s why programs such as these are called “social insurance” programs. It later morphed into a government run defined benefits pension program. This state of affairs was politically buttressed by the fact that the earliest retirees (pre-1980) received spectacular returns on their “investment,” and as we all know, the elderly vote.

      4. The people who retired in the earliest years of the program received spectacular returns relative to what they paid in, while the later one turned 65, the worse one’s “return” was. Basically, if you graph SS “returns on a Y-axis, and date one turns 65 on the X-axis, you have a downward sloping curve.

        1. It’s also a downward sloping curve if you plot FICA taxes paid on the Y-axis and SS benefits received on the X-axis.

      5. It only takes the average earner about five years to “get back” all they have contributed.
        If you don’t live that long after you retire – the initial plan was that you wouldn’t – then you don’t get as much, but most people live longer.
        You aren’t foolish enough to think they invest that money, and get some kind of return, are you?

    3. That is a great idea. That is along the lines for my idea for how to privatize Social Security:
      1. Keep the current system for everyone 55 and over.
      2. For everyone else, return all promised benefits, in the form of an annuity, in reverse age order, until the “trust fund” money runs out. This can be done at the time the person reaches retirement age, so as to lessen the effects of the transition costs.
      3. In the place of the SS taxes, establish a mandatory private savings program, funded by the same taxes that everyone was paying previously.

      It’s not libertopia, but it’s a step in that direction at least.

      1. All it takes is one sob story about some poor sucker who invested in Nigerian Spam® stocks, and you would not believe all the wailing about there must be some government safety net.

        1. Should’ve invested in GoldLine instead!

      2. I tend to agree with you here, but the big problem comes in the “Mandatory Savings Program”. As alphabet soup notes, people will want to protect savers from themselves, and politicians will demand that people invest in treasuries. Which, ya know, essentially re-nationalizes the savings market.

        1. Even if the mandatory savings part is invested in only treasuries, that account would nonetheless be the property of the investor, not the state, and that alone would be a huge step in the right direction. All of the wailing about “wealth inequality” would dissipate after just a few generations once people could actually keep their retirement savings and bequeath them to their heirs upon death.

          1. It wouldn’t last. Statists just couldn’t stand all those people owning their own retirement funds, or bequeathing them to underserving people who didn’t earn them. That’s treasury funds, you idiot, the *people’s* money, not yours!

            1. My cynical self says that you’re probably right. But my more sober self says that most people can understand the difference between owning a treasury bond, and owning nothing and getting a handout from the state. Even if both piles of cash are generated via debt, who *owns* the debt is important.

            2. But of course liberty minded people should push for maximal liberty and demand full ownership rights of the money that is rightly ours, to invest as we please. But I’d be willing to settle for a modified system, like Chile’s or Singapore’s, which is private accounts but forced contributions and investments only in “approved” accounts. It is still too much statism, but it is less than now.

          2. “Even if the mandatory savings part is invested in only treasuries, that account would nonetheless be the property of the investor, not the state, and that alone would be a huge step in the right direction. ”

            I give you a lot of shit, mostly because you earn it.

            But when you are right, you deserve to hear that too. We are not getting out of this mess in one fell swoop, and a step in the right direction is a step still a step in the right direction.

            Private ownership breeds personal responsibility.

        2. Well, that is exactly what the current program is. By law the excess, which we did have, had to be invested in US Treasuries. It was. And here we are.

          1. That is what we have now, *except* ownership of the asset itself. With private accounts, the assets are owned by the individual, and when you die, the excess balance in your account is bequeathed to your heirs. With the current system, the assets are owned by the state, and when you die, the “excess balance” is kept by the state. That alone is a huge difference.

            I agree that it would be better for the funds in the investment accounts to be able to be invested anywhere. But I at least would be willing to settle for investments in treasuries as a reasonable compromise, because the ownership of the asset itself is a huge deal.

            1. O give it up. This pretense that there is an account is hogwash and you know it. It is closer to actual insurance in that they bet enough people die to pay off the rest. Your scheme would mean everyone gets full pay, thus requiring probably double the premiums to cover everyone, including those who die and pass it on.

              1. This pretense that there is an account is hogwash

                I agree! But the common perception is that there *is* an account. Both Team Red and Team Blue are in agreement on this point.

                Your scheme would mean everyone gets full pay, thus requiring probably double the premiums to cover everyone, including those who die and pass it on.

                If the money were only invested in treasuries, you may be right. That is why we should push for that NOT being the case. But EVEN IF IT WERE only invested in treasuries, it would still be a step in the right direction. Based on the ownership of the asset itself, and the ability for people to pass on wealth to their descendants. Not as big of a step as I would like, but still a step. That’s my point.

                1. GW Bush proposed private accounts, and had to back down if he wanted to win Florida. Instead he made Medicare worse by adding Part D.

                2. “I agree! But the common perception is that there *is* an account.”

                  This was by design. Officials from the FDR administration have admitted that they designed the system in this manner to make it politically very difficult or impossible to ever modify the SS system.

          2. US treasuries are not an asset. they are a liability of the government, since it has to pay them. If the “trust fund” had been put in cash, or gold, or real estate, or stocks, or corporate bonds, there would be real value there. As it is, it’s just more money the taxpayers have to pay, now or after more debt is racked up.

            1. Good luck trying to explain that to a Democrat. I’ve tried, and they just cannot or refuse to understand this very simple point.

            2. Private bonds are no different – they are a promise to pay as well. It’s just that those bondholders tend to take an interest in their asset, and that changes the game entirely.

          3. No, that’s nothing at all like what we have now. We do not now have accounts with YOUR money laying their earning interest for YOU. We never have. That’s simply not how it works, even if millions of people believe that’s how it works…they’re just flat out plain wrong.

            Current SS taxes pay for current SS benefits. Because the SS taxes were in excess of the benefits for some year, the excess was used to buy treasuries (i.e., the excess was loaned to the government). But that money is not sitting in accounts with anyone’s name on them.

            You’re not even OWED SS benefits. Congress can change the SS laws anytime, even revoke them completely and not one person will be OWED anything., legally speaking.

            In Flemming v Nestor, SCOTUS ruled that there is no contractual right to receive Social Security payments. Payments due under Social Security are not “property” rights and are not protected by the Takings Clause of the Fifth Amendment.

            1. Specifically, in Fleming v Nestor, the Court held that SS benefits are an entitlement, just like TANF or the like, and are revocable at any time by act of Congress. Leftists who insist that SS is not an entitlement are wrong, and need to take it up with the Court, as it were.

            2. This.

              You cannot borrow against SS bennies, and you cannot liquidate them and take the value elsewhere.

          4. It’s not exactly “invested” in Treasuries as it is the general treasury that receives the proceeds from the treasuries. Most of us know that this is just an accounting gimmick that allows the excess of social security proceeds to be spent as if they were general revenues, albeit with an essentially meaningless interest provision.

            1. Not even “as if,” SCOTUS was very clear back in the 1930s that FICA was general revenue.

      3. Remember, Ryan proposed something similar and we got throwing Grandma from the cliff commercials.

        1. This is why I don’t think Republicans should do a damned thing to fix the system. Any proposals to do so are met with rabid demagoguery. It’s the Democrats’ system, designed exclusively by them. When the Day of Reckoning comes, it should be repeated loudly and frequently that they designed a flawed system for which they have never proposed a practical fix.

    4. Shit, I’d take the half a percent you can get out of a saving’s account.

      1. Personally, I would too, just to be free of them.
        But I understand most people probably wouldn’t make that choice.

        1. Heck, I’d abandon all claims if they let me finish my career (I’m 53) without having to paying another cent into the system.

          1. Same here. I’m 52, and I’ve been paying for over 30 years, and at max or near max for the last 20. At the same time been saving/investing for myself. But even so, due to various life events I’m still looking at another 20 years before I can think about retiring. That extra 7% (or 14% if my employer plays fair) would sure go a long way towards me meeting my goals.

            But the reality is that you, me, and all the others like us are the horse pulling the whole damned cart. And they are not going to release us from the yoke without a fight.

  5. The problem is that government laws have put people on a collision course with government dependence. If you are paying FICA taxes and maxing out your 401k contributions, you are going to freak out in retirement when they start talking about payment reductions. Mind you, you should be maxing out your 401k, but the caps on pre-tax contributions are WAY too low to fund a decent retirement. This means when the government has to cut SS, it will be a significant hit to many Americans who were just doing what the government told them to do.

    If you don’t have some other major savings- whether it is Whole Life, a major brokerage account, passive investments (like rental properties) or something else, you are just asking the government to ruin your retirement.

    1. There should be no cap. The cap is crap.

      1. That’s madness

      2. Lift the cap on income taxed? Then lift the cap on benefits.

      3. There’s a cap on benefits. Why should someone keep paying into a system if their benefits are capped? As it stands, the cap on income taxed is related to the cap on benefits. Remove the one without removing the other just further exposes the plain fact that SS is welfare cash transfer paid for by others.

        1. I think the cap Juice is talking about is the cap on 401k contributions, not the cap on FICA taxes beyond a fixed level of salary.

        2. “Remove the one without removing the other just further exposes the plain fact that SS is welfare cash transfer paid for by others.”

          This is why you only see this proposed by “amateurs.” The Democrat Congresscritters and political class are perfectly aware of this conundrum for them.

    2. If you can afford it you should be using post tax 401ks.

      1. income limits on Roths

        1. Search on “Backdoor Roth IRA”. You legally can get around the income limits on Roth IRAs.

    3. wait til the socialists start eyeing those fat 401k balances…. (they already have, “no one needs over 3 million dollars”, at least not until inflation kicks in from the runaway debt….)

    4. “but the caps on pre-tax contributions are WAY too low to fund a decent retirement. ”

      Yep, I’m living proof of that. Hell, for multiple years I couldn’t even hit the stated max because I was deemed a ‘highly compensated employee’ of my company and the overall plan participation rate was too low. Literally prevented from saving because others weren’t saving enough.

  6. Is this the real “collapse” this time? I can’t tell how many times I have heard this same thing.
    I am not saying what we have going on is good, but how can we expect anyone to be concerned when this sounds just like more of the boy who cried wolf?

    1. Well the WORLD will END in

        TWELVE YEARS

      so it doesn’t matter anyway.

    2. Social Security WILL run out of money someday within the next 20-30 years. The exact date, however, is dependent on all sorts of factors that may or may not come to pass, so unlike the standard 10-12 years before we all die from the Environmental Apocalypse it’s not a nice, round number.

      The program is an elaborate Ponzi scheme. The con man can juggle his payments enough to keep it going for a while, but the end result is inevitable.

      1. There is only one ‘factor’ controlling Social Security funding – Congress.

        It’s a political promise, nothing more, nothing less. If it gets too politically expensive to keep it then they will not keep it.

  7. Math error in the heading – it should say 17 years, not 15. 17 years before it becomes a big enough crisis for Congress to do something about it. Which just means that the global warmists “12 years until we’re all dead” isn’t so much a threat as a hope.

    1. Good point. If the world is going to end in 12 years, who cares if social security will be bankrupt in 16 years. If I, a math dud, can figure out that I’ll be dead before we’re bankrupt. I say, spend what you have get more credit and party.

  8. Mr. Boehm, you are sadly mistake.
    The most important issues facing the United States are transgendered soldiers in the military and secret hotel meetings with the Russians.

    1. Boehm, I am disappoint.

      1. Yeah yeah that’s what happens when you type too fas.

    2. If you can’t trust a TV star who got elected president to handle the Russians for you … but enough about Ukraine.

    3. Is this where Jeff pretends he never pushed the Russia conspiracy?

      1. Is this where Jesse proves how much of a liar he is?

      2. Funny how Jesse chooses only to respond to this one comment of mine, and not to engage in any of the substantive comments that I have presented in this discussion.
        Why it is almost as if Jesse is not interested in a discussion at all.

  9. I often read on the internet that increasing the FICA by 2% or so should be enough to fill in the gap (that’s with the government already raiding other programs to sustain entitlement spending).

    Will that be enough?

    1. The caps work on both sides of the equation, so no.

    2. I think that is roughly correct. That’s what is so fucking stupid about the whole thing… At this point just the slightest tweaks could kick the can decades further down the road. It’s insane that NOTHING gets done.

  10. What are we worried about? Andrew Yang says we just need to tax the ‘tech corporations’ – he’s run the numbers, right?

    1. He looked at them, he didnt run them.

  11. 16 years? That should work out just about right for me. Thank you, young taxpayers.

  12. When Social Security launched in 1935, the average life expectancy for Americans was 61—that means the average person died four years before qualifying for benefits.

    *facepalm*.

    No, Boehm, that’s not what ‘average life expectancy means’.

    ALE includes people who die at birth and very young. At the time when the ALE was 61 years that was a lot of people and includes men and women – and there are and have long been, significant differences between when men and women die of old age. That drug the ALE down and the *average person who survives until adulthood* wasn’t popping off until their late-60’s to early 70’s.

    You need an ALE at a specific age – like ALE at 5 years of age or ALE at 15, with those early births cut out – to figure out the real average age that old people are dying at.

    1. I know, it’s like the myth that everyone died in their 40s during the middle ages. No, life expectancy was in the 40s because of the high child mortality rate at the time.

      1. Yup. I was watching a documentary the other day that was about the colonization of north America. They said that the ALE for somebody who made it past childhood in New England was about 70, whereas in the southern colonies it was only about 45 due to disease and such.

        People died as babies or pre teens. If you made it past then you tended to live to a reasonably old age. People of course died from infections and such too as adults which dragged things down… But for people who never had a serious issue they lived just as long as anybody does today.

  13. Total government liabilities according to the government is 75 trillion.

  14. So do I count on the 12 year end of the world, or should I start smoking and drinking like it was 1953?

    Snark aside, wouldn’t removing the salary cap buy another couple of years? Only the rich would pay it, so the democrats should be on board. And it would save Social Security, so the republicans should be on board. Neither of the libertarians would object.

    1. Removing the cap effects payouts too. Youd gove the older rich an extra boost paid for by the future rich. So no fucking thanks.

      1. And if you remove the cap but keep the payout the same, you shatter the illusion that these are some form of individual retirement accounts rather than just another entitlement with an unusual funding mechanism.*

        * The funding mechanism is also an illusion.

    2. I’ll object, since I would be paying the higher max and getting no additional benefit.

    3. “wouldn’t removing the salary cap buy another couple of years? Only the rich would pay it,”

      Rich?

      Anyone earning above about $125k a year is rich????

      1. Maybe – one day – they could be. but only if they get to keep their fucking money.

        1. Is this making any sense, longtobeaslaver?

      2. From the U. S. Census Bureau website:

        United States | Median Household Income
        $ 57,652
        Source: 2013-2017 American Community Survey 5-Year Estimates

        1. And what are the income levels at one and two SD?

  15. “When Social Security launched in 1935, the average life expectancy for Americans was 61—that means the average person died four years before qualifying for benefits.”

    Only proves that it was plan as a tax, Not to really help anyone.

    1. And the author doesn’t understand how statistics work. No, the average person didn’t die 4 years before they collected benefits. Life expectancy was lower because of greater child mortality and other factors. Not because people died earlier. Actual life span has not changed much.

      1. Are you seriously saying lifespans have not increased since 1935?

        1. I think he’s saying people who made it to 18 and started working lived a lot longer than 61 on average.

        2. Does. Not. Matter.

          What matters is the ratio of people paying in to people getting paid. Stratified by decade our population demographics have shifted from a pyramid to a column.

          And it wasn’t so much the increased survival as it was the decreased fecundity.

  16. They can and will “kick the can down the road”. Because there is no “trust fund” or “account” with SS dollars in it, they will do what they’re doing now, paying benefits out of the general fund. The fact that SS will be “in the red” is only technically correct if you hold that particular program in a vacuum. There’s nothing stopping us from going 900 Trillion in debt.

    I’ve come to conclude that the only thing stopping your debt economy is total and catastrophic economic collapse.

    1. It’s amazing how many supposedly informed people, such as Reason writers, continue to believe there’s an actual trust fund, and they think that it has cash in it that can be depleted. Up to now the excess of FICA taxes collected over Social Security benefit payments has gone to the Treasury and the “trust fund” has received IOU’s from the Treasury. [ For those who believe this constitutes a real trust fund remember that the Treasury and Social Security are part of the same organization. Can you lend yourself money? ] The “surplus” in the trust fund is simply an accounting of cumulative cash flows. When Social Security becomes insolvent that means cumulative FICA taxes received are less than benefits paid. At that point the trust fund will take money from the Treasury and the accounting will be reversed: the trust fund will issue IOU’s to the Treasury.

      1. ” [ For those who believe this constitutes a real trust fund remember that the Treasury and Social Security are part of the same organization. Can you lend yourself money? ] ”

        This was literally a plot device in Dumb and Dumber.

        1. “This one is for $750 thou! Better hold on to that one!”

      2. That has already happened, Mr Tibbs. Payouts are already more than taxes collected and the SS Trust Fund is already dipping into reserves, which have been invested in Treasury bonds. The SS system will become insolvent when the reserves run out (in 15 years) and there will be no “makeup” fund to draw from to keep all promised benefits paying out every month.

  17. “If nothing changes, the Social Security Trust Fund will be fully depleted by 2035 and the program would impose across-the-board cuts of 20 percent to all beneficiaries.”

    there was never anything in the trust fund anyway. just a promise to pay from the treasury. wtf are you talking about.

    1. The insolvency date does matter even though the “trust fund” is somewhat a subterfuge. After that date, in order to maintain benefits at promised levels, Congress will have to appropriate the money every year in the annual appropriations bill. Up until that point, the shortfall will be funded automatically when the “trust fund” cashes in the Treasuries it holds.

  18. This is truly one of those issues that, now that both Team Red and Team Blue are firmly on the pro-entitlement side of things, Team Liberty has the opportunity to actually distinguish themselves as the sober responsible ones demanding fiscal responsibility.

    It is not that hard to conceive of something reasonably feasible, at least conceptually, that can wind down the entitlement state:

    1. Privatize SS according to my prescription above
    2. Make Medicare/Medicaid *both* as state-level entitlements *at most*. If California wants generous entitlements, let them create it on their own. If Mississippi doesn’t, let them choose that as their choice.
    And the Medicare/Medicaid stuff can be handled like welfare is currently handled – yes, federal mandates, but funded via block grants. It is not ideal, but it is better than currently.
    This is common sense, not particularly ideological, but nonetheless advances the cause of liberty.

    1. No. Every “benefit” that is funded by taxpayer money, is stolen. No SS. No medicaid or medicare. No entitlements. If people want, then they work.

    2. Returning this issue to the states would never work because it would require the citizenry to not get perpetually outraged over public policy in other states. Do you honestly expect CA residents to not flip out about Mississippi policy? CA’s biggest exports are fake outrage and attempts to control other people.

  19. Disclaimer, I am not as knowledgeable on this subject as many. Having said that, when the publish these types of declarations, are they accounting for recipients who die (hence their monies still in the fund), or recipients who do not file for benefits (hence their monies still in the funds).

    1. There’s no “fund”.

    2. There’s no fund. The government spends all the payroll taxes they take in and uses a portion to pay retirees/disabled.

      It’s literally a ponzi scheme

      That’s the point. It used to be, the government brought in a lot more than they spent on oldsters. But as people lived longer and had fewer children, it’s running out of steam, as all ponzi schemes do.

  20. Yeah it would be nice if Reason writers would quit promoting this mythological Trust Fund as having any relevance to SS. All federal taxes: income, payroll, fuel, tariffs, and all of the others are paid directly into the US Treasury. All federal expenditures are paid directly out of the same US Treasury. Benefits are not paid from a trust fund and they never have been because the trust fund is now, always has been, and always will be worth exactly zero. Raising the FICA tax will not make the SS trust fund solvent. It will still be worth exactly zero. The reality is that congress can spend unlimited amounts on whatever they want as long as people are willing loan money to the treasury.

    1. This writer is worse than most. He thinks the “trust fund” has cash in it.

      1. This is high school level work.

        But it’s entirely typical – they hire children and give them agenda driven assignments then those children base their output upon provided press releases and political operative produced ‘fact sheets.’

  21. The trustees’ report released Monday shows that the trust fund for Medicare Part A, which covers hospital and nursing home costs, will be gone by 2026.

    Exxxxxcellent!

  22. If only there were betting markets on this I”d bet everything I own on the following outcomes. Social Security will change in the following ways:

    reduced benefits
    increased FICA taxes
    raised retirement age
    increase payroll tax wage ceiling (currently $132k)
    retirees with too much wealth or income will be ineligible entirely

    Count on it

    1. I’d take that bet on your points 1, 3, and 5. Remember, the elderly vote, and the AARP is the most powerful lobbying organization there is.

  23. Come on Reason, post on something less urgent than this, so I can go off-topic without feeling all guilty.

  24. Means testing should be the first step. I realize it’s meant to be a savings program (in theory), but a lot of old people don’t need it, and it’s just taking money from the poor and giving it to the rich.

    We all know it was never seriously meant to be a retirement plan, but a way to get more money for the government now. Let’s just end the farce.

    1. How the hell is it “taking money from the poor and giving it to the rich”? The “rich” already heavily subsidize the generous benefits that the poor get, relative to how much they paid in. Stop your leftist bullshit.

  25. Cmon
    Compounded interest at 8% at max FICA for thirty years rounding out to 8k per year current charge is about 1 million dollars.

    Social security pays a maximum of around 33k per year. The return at 8% on one million is 80 k without drawing from principle.

    If you can get that, let us be more conservative at 5% ROI. Still you are losing and have lost your million.

    Social security is pure income redistribution ripoff.

    I am not retired. This is just what I am looking at.

    1. Not really income distribution, at least in the traditional sense. It was designed as, but not sold as, an annuity policy that all workers were forced to buy – kind of a reverse life insurance policy. Workers paid premiums, and if you died young you got nothing. If you lived a long time you made out. But then people started living longer and the benefits were increased, but the premiums weren’t adjusted accordingly. So the insurance company is bleeding out.

  26. Sigh. Social Security was never solvent, so can’t go insolvent. If you want to “save” it, simply make all taxes FICA taxes. Imagine how big the trust fund would be then!

    1. How about we just stop accounting for Social Security (and Medicare) differently than other government programs? We don’t pay Defense Department taxes and keep track of its trust fund. Then people would stop getting tripped up over solvency, trust fund balances, etc. Just report what we spend and what we expect to spend. And call the FICA tax something else.

  27. Social Security’s costs will exceed its income by 2020

    They’ve exceeded its income every year since 2010

    1. The trustees are talking here about cumulative costs and income, not periodic. But since Eric doesn’t understand Social Security at all (he thinks there’s a trust fund and he thinks it has a cash balance) I’m guessing he had no idea what he was saying when he reported this.

  28. SS is already insolvent — it’s a Ponzi scheme, paying current beneficiaries by taking the contributions from new victims. The “trust fund” is in US Treasury notes, which are paid out of the general fund. SS taxes go into the general fund. Any surplus (which they don’t have any more) is spent immediately, on general government stuff.

  29. Today, the two programs function mostly as a giant conveyor belt to transfer wealth from the young and relatively poor to the old and relatively rich, allowing the average person (who now lives to be 78) more than a decade of taxpayer-funded retirement.

    No. Social Security does not provide enough to the vast majority of recipients to make that comment accurate. It helps—and increasingly, it helps recipients unable to earn living wages continue to work forever for pittances, without retirement. Practically nowhere in the nation is the typical social security recipient able to enjoy a “taxpayer-funded retirement” on the public dime.

    1. I think you’re mixing up income and wealth.

      My understanding is, when you look at the wealth (not income) of the populations paying in and taking out of the SS system, the majority of people paying into the system are comparatively LESS wealthy than the people receiving benefits. A lot of that has to do with accumulated assets (young people can’t afford houses, are paying student loans and SS taxes… while old SS retirees have houses full of equity, a better-funded 401(k) and even a pension in many cases)

  30. This issue always pisses me off so much, because it’s so easy to fix. First, we could just phase the whole damn thing out, which would be awesome. But if we want to keep the general idea in place it only needs small tweaks to go on for decades longer, or forever.

    Raise retirement age a year or two, reduce benefits a couple percent, jack FICA taxes like .5% and you’re done. Not enough to really hurt anybody too much, but gets it going for probably decades longer. How fuckin’ hard is it???

    Alternatively they could just take even 50% of funds coming in and transition them to REAL investments that make decent returns instead of treasuries. Obviously you don’t want the Guvmint “picking” investments and distorting the market too much… So perhaps mandate that it buys into a fund that owns every single stock on the NYSE proportionally.

    State bonds tend to pay better than Feds, some similar thing could be done for that kind of crap. Real Estate Investment Trust investments of some sort where it’s not picking winners/losers itself? Basically ANYTHING but FedGov treasuries would increase the returns so much that it would instantly be solvent with no other changes, even if they still put most of the money into treasuries.

    This shit is so easy to fix it just boggles the mind how they can’t get it done. Fucking idiot/spineless politicians.

    1. “First, we could just phase the whole damn thing out, which would be awesome.”

      Maybe do nothing and let it phase itself out via insolvency and then bankruptcy.

      1. Well, that’s likely where it’s going, so you may get your wish!

        What I find amusing about a lot of these “big” problems is almost every single one of them has been fixed somewhere on earth in the recent past.

        I forget some of the details, but in Australia in the 80s they basically switched to forcing everybody to have a 401K type account where I believe the funds were collected by the government, privately managed, and somehow administered by them, but where the assets are individually owned. Something along those lines.

        Anyway, Australians net worths have soared, mainly because of gains among the working class and lower middle class.

        The truth is that forcing dumb people to save IS in their long term best interests… Absolute freedom is best for the top 80% of people perhaps, but libertarians forget that there are the lower reaches of humanity that don’t have the intelligence to run their own lives properly. Everybody knows this in their heart of hearts, and the leftists use this to control everyone’s lives, including those that don’t need any “help” because they’re not morons.

        Our system is especially fucked mainly because the “investment” is not individually owned, and is invested strictly in a poor performing asset (government bonds), and there is no opt out for the intelligent/wealthy. If bleeding hearts/lefties really wanted the best results they should offer opt ins/opt outs based on whether or not your a blow in case. But they just want control sooooo that ain’t gonna happen.

  31. Social Security is already a semi-welfare program, taking from high earners to subsidize low earner’s retirement benefits. So, Reason’s answer is to make it a full-blown welfare program? Boy, that will sure strengthen widespread support for it.

    1. Does anyone over the federal retirement age not qualify to receive benefits? My understanding is that even high earning, wealthy individuals still get their SS payout just like everyone else.

      When you look at the wealth (not income) of the populations paying in and taking out of the SS system, my understanding is that the majority of people paying into the system are comparatively LESS wealthy than the people receiving benefits. A lot of that has to do with accumulated assets (young people can’t afford houses, are paying student loans and SS taxes… while old SS retirees have houses full of equity, a better-funded 401(k) and even a pension in many cases)

      1. Everybody gets money… BUT people who paid in the max amount over all their working life, AKA rich people, actually get out relatively less than poor people who didn’t max out.

        Basically there’s a fair amount of skimming via paying out less than should be to higher earners, and directing that skimmed cash towards low earners. If it were proportionally exactly based on what one paid in high income earners would receive bigger checks than they do, and poorer people smaller ones.

  32. They will first remove the income caps for those paying in, raise the tax rate a half per cent and phase in a higher retirement age, from 67 to 69. This should kick the can down the road a couple of decades, while keeping widespread support for it. I might also add including investment income as taxable for SS purposes – that way, Warren Buffet could help pay those higher taxes he’s been pushing for so long.

    1. the way i understand it is that the payroll tax is the tax that funds SS, Medicare and Medicaid? so Warren B does not really chime in with lots of money for SS, Medicare and Medicaid. As most of his money is coming in from other ways. Interest, Cap gains , etc. they are called passive income and not subject to payroll taxes. am i right or wrong?

      1. Buffet could change that tomorrow by drawing a salary from Berkshire Hathaway. He, and he alone, chooses not to do that.

        1. Yes. but why would he want to do that?

          1. I thought he was supposed to a a SUPER moral dude, who thinks he should pay more in taxes???

            I hate rich commies who say that shit. You can give as much as you want over and above the minimum to the IRS if you want. Put your money where your mouth is commies, and keep you hands out of my wallet!

      2. The employee SS portion of the payroll tax is 6.2%, while the Medicare tax is 1.45%. Each are matched by the employer. Medicaid is funded out of “general revenues”, which means mostly borrowed money these days. And yes, you are correct – capital gains are not subject to payroll taxes.

  33. Worst case scenario, voluntary opt out for social security should work. Can’t imagine anyone staying in it if they had a choice.

    1. Until some of the opt-outs end up destitute and living on the streets. When that happens, we’ll have the usual calls to “do something.”

      1. “Do something because I decided to fuck around and not do anything!”

      2. Honestly, why not just have means tested welfare for fuck ups?

        Even if you’re a bleeding heart, why wouldn’t you be okay with that? Let the non idiots run their own lives, and just pay for morons out of general tax funds.

        Even the Australian system which forces investments into actual money making assets would be better than this shit we have.

        Or, God forbid, we could just do away with it all and let private charities do their thing. But I seriously don’t get why commies would be opposed to general welfare for the old and indigent, which would still be a vast improvement.

    2. Jesus, I could have built another million or so bucks in net worth already if I wasn’t “investing” in that garbage SS system… Fucking dicks.

  34. Every refugee who comes here is eligible to collect SSI for up to seven years. Remember that the next time your Congressperson says you have to accept cuts in benefits to keep SS solvent.

  35. […] [ April 23, 2019 ] Social Security Will Be Insolvent in 16 Years Blog Right […]

  36. The most obvious and common sense solution (which pribabbly wont happen) is to just get rid of social security altogether. Both the payroll tax as well as the payouts.

    For any old people who are actually in poverty and can’t work because of their age; the government could always increase taxes (the increase would still be less than the SS tax) for welfare / disability like they do for any other citizen.

    1. like they do for any other citizen.

      Actually, few citizens are eligible for public assistance—generally, only unemployed unmarried mothers with dependent minor children. If you have no dependents, have not been ruled disabled, and your unemployment benefits have run out, you get a big “sorry about your luck” from the government.

    2. Yup. Most people get screwed by SS, basically to help the stupidest 10-20% of the population. If we just let everybody do their thing, and created a new old age welfare program only for the indigent everybody would be faaaaaar better off.

  37. Dear Eric,

    Social Security is insolvent. There is no pile of money or any other real assets secreted away to cover expenses.

    Social Security is entirely dependent on Congress’ continued funding of it. It is a political promise, nothing more.

    I sure wish Reason would stop hiring children.

  38. Social Security Will Be Insolvent in 16 Years
    So we’re probably only 15 17 years away from Congress deciding that’s a big enough crisis to do something about it.

    FTFY.

  39. SS has never been solvent. Every penny paid in SS taxes was looted from day one, and all that was ever in the “trust fund” was a pile of IOUs from the biggest debtor in history.

    If any private pension scheme tried this shit, people would be behind bars.

    -jcr

  40. We have to wait 15 years before Congress pull their heads out of their asses?
    Gee, isn’t Big Government wonderful?

  41. I don’t understand why people think they’re entitled to retire just because they’re old. My opinion is that, if you saved for it, you get to retire whenever the hell you want. If you didn’t save for it, I hope you have a good relationship with your family, because they need to take care of you while you’ve voluntarily decided to stop working.

    I do understand why we have public benefits for disabled people. That shit makes sense. Simply being old shouldn’t automatically qualify you for government assistance. Once you’re so old that you can’t work, we should classify you as “disabled” and you should receive benefits.

    Personally, I’ve been saving like crazy since 25 because I don’t expect the government to pay my way just because I get old like every single other human on the planet.

    1. A system like that would make far more sense than the one we have.

  42. Like four years after the world dies…..what’s the problem then?

  43. Boy I wonder what would happen if we lift the salary cap on FICA taxes? Probably rich people would move en masse to Texas or something.

  44. […] Social Security Will Be Insolvent in 16 Years by pgnewser on April 23, 2019 at 12:03 pm […]

  45. […] Social Security Will Be Insolvent in 16 Yearsby pgnewser on April 23, 2019 at 12:03 pm […]

  46. If you’re not going to approve comments in a timely fashion, don’t use a moderating system. I have had a comment that has been waiting for approval for two days.

  47. Military funding is insolvent NOW.
    Why are we worried about Social Security?

    Wait, military expenditures don’t get a dedicated tax? Maybe it should.
    We might be more hesitant to defend oil corporations dominance over third world countries on our dime.
    Perhaps fees charged to foreign nations we occupy would be more politically palatable?

    Liberal causes like mass transit and social security are explicitly brought to our attention with add on taxes and fares then the bitchin’ begins when the funds fall short.

    When not a dime is squirreled away for nuclear arsenal maintenance, no one talks about how the military fails to pay for itself. But it’s an expense, they say. It’s not expected to break even. Why is it only conservatives get “free stuff”?

  48. […] That fear is likely not so misplaced as Reason noted: […]

  49. […] That fear is likely not so misplaced as Reason noted: […]

  50. […] That fear is likely not so misplaced as Reason noted: […]

  51. […] That fear is likely not so misplaced as Reason noted: […]

  52. […] That fear is likely not so misplaced as Reason noted: […]

  53. […] That fear is likely not so misplaced as Reason noted: […]

  54. […] That fear is likely not so misplaced as Reason noted: […]

  55. […] That fear is likely not so misplaced as Reason noted: […]

  56. […] That fear is likely not so misplaced as Reason noted: […]

  57. […] That fear is likely not so misplaced as Reason noted: […]

  58. […] the mixed metaphor makes even less sense in the podcast), while also getting into Social Security insolvency, long-term fiscal unsustainability, conversations about conversations, and—yes!—the […]

  59. […] That fear is likely not so misplaced as Reason noted: […]

  60. […] even with money coming in from new younger workers Social Security is going broke. […]

Please to post comments

Comments are closed.