Dishonesty about Social Security

After winning the Iowa caucuses Monday, Mr. Trump replayed a golden oldie of a campaign pledge: “We’re also going to pay off the national debt. It’s about time.” He said the same thing in 2016, before he added about $8 trillion to the tab. Roughly half of that was Covid relief, so perhaps voters grade him on a curve. Less forgivable is that he’s now playing for the Democrats on entitlements.

“Americans were promised a secure retirement. Nikki Haley’s plan ends that,” says the grim narrator of a Trump advertisement playing in New Hampshire. A new radio spot adds: “Year after year, you paid into Social Security. Now Nikki Haley wants to keep you from collecting what’s yours.” The Trump campaign alleges Ms. Haley would cut benefits “for 82 percent of Americans.”

This is dishonest. Social Security is running out of money, and doing nothing will result in a 23% cut to benefits within a decade. The retirement trust fund, according to the latest report, will be depleted in 2033, at which point the incoming cash “will be sufficient to pay 77 percent of scheduled benefits.” Does Mr. Trump have any plan to prevent this outcome in only nine years? Nope.

Ms. Haley hasn’t issued a detailed proposal, but what she says doesn’t fit Mr. Trump’s narrative. “I will protect those receiving Social Security and Medicare—that’s a promise,” she said last fall. “We’ll keep these programs the same for anyone who’s in their 40s, 50s, 60s, or older, period.”

Then she added that she would “limit benefits on the wealthy” and “raise the retirement age only for younger people who are just entering the system. Americans are living 15 years longer than they were in the ’30s. If we don’t get out of this 20th-century mindset, Social Security and Medicare won’t survive.”

Whatever Mr. Trump might say about getting the debt under control, it won’t happen without changes to these programs. Social Security was 19% of total federal outlays in 2022. Medicare was 12% and Medicaid 9%. The category of “other means tested entitlements” was another 10%. Add those up, and they’re half of federal spending. As social programs keep growing, they crowd out everything that’s counted as “discretionary,” including national defense, which was 12%.

Excerpts from Wall Street Journal Editorial Board 1-19-24

There is a lot dishonest going on here‼️

There is no reason, none, to cut Social Security benefits.

Limiting benefits for the wealthy sounds good, what benefits? Benefits are already limited for the wealthy and the benefit formula works in favor of lower earning Americans. Social Security is not supposed to be a welfare program. It is designed to be self sustaining and thus not a deficit concern. Keep it that way.

Let’s be clear…

The Social Security trust is an accounting tool, there are no actual isolated funds in a lock box or anywhere else. That does not mean it isn’t secure.

Revenue into the trust comes from three basic sources, payroll taxes, income taxes on a portion of the Social Security benefit which is taxable income and interest paid by the federal government on the treasury bonds held by the trust.

General revenue is not used to fund Social Security benefits.

Some people say that because the government pays interest to the trust those payments are part of the deficit. That is very misleading.

When there was a surplus of revenue into the trust, the excess was invested in special interest paying treasury bonds [since the very beginning of Social Security]. The funds the government received by selling those bonds was used for general government expenses just as is the case if you buy a bond or another country buys US debt.

There is no longer a surplus going into the trust. Instead the treasury bonds must be redeemed to pay full benefits.

When all those bonds are redeemed around 2033, incoming revenue from other sources will be insufficient to pay 100% of earned benefits.

One thing should be obvious, the way to replenish the trust and sustain full benefits is to increase revenue, not reduce benefits, but politicians rather not tell you that. Instead they propose cuts that appear to not affect anyone in the here and now.

That is dishonest.

Social Security will only add to the deficit if general revenue is used to pay the trust shortfall. There is no reason – and it’s dangerous – to let this happen.

The cost of redeeming those bonds may add to the deficit, but that has nothing to do with Social Security. That would be the case if another entity redeemed its U.S. bonds. And if the bonds had not been sold to the SS Trust, similar bonds would have had to be sold to investors – to other countries – China and Japan – in order to obtain the funds to run the government. Last year the federal government paid $659 billion in interest on its debt. And is currently spending $1.8 trillion more a year than its revenue. The Treasury bonds earned the SS Trust $66 billion.

If the full retirement age is raised to 69, the solvency of the trust is only extended two years.

On the other hand if the combined – worker/employer – payroll tax were raised from 12.4% to 14.4%, the trust is good until 2072. That’s about ten dollars a week for the average worker to have a more secure retirement and other benefits.

Don’t like that, put most of the increase on employers-1.5% vs .5% on workers for example.

Minor and gradual changes along the way would easily keep things going beyond 2072.