“ He also points out that payroll tax revenue should be excluded from the revenue denominator, as these taxes are immediately spent on Social Security (and thus not available to pay for interest). Under this accounting, the interest-to-revenue ratio will hit 27.9 percent in 2025”
Well, you can’t have it both ways. If SS is just another program, and nothing at all like an earned benefit (and yes I know it is not legally an owned benefit), then “should be excluded” is a meaningless/false thing right?
Do not misunderstand, the amount of revenue spent on debt is indeed a very bad indicator and I am 10,000% in the camp that we need to rein in all federal spending.
But you can’t put SS aside on the one hand, but then claim on the other “it’s just another tax and spend program”…
Social Security is running cash-flow deficits for the foreseeable future. The point is that payroll taxes are going out immediately to pay for promised benefits (and then some…that being $4+ trillion in added borrowing between now and 2033) so they can’t also be used to service the interest on the debt.
But the same point is true of every dollar of taxes coming in! They are going out to pay for spending Congress has authorized.
You yourself are the champion of the idea that “promised benefits” are not a guarantee, they are just whatever Congress is willing to pay out.
I fully accept that one can make this argument either way. I just don’t accept it when people try to have it *both* ways.
I actually agree that the way you published in *this* piece is the better way to look at things.
But you can’t publish as “real” the higher percentage here from excluding Social Security revenue from the calculation *AND* also claim that “promised benefits” are a complete fiction, and therefore SS should be radically changed to just a welfare program to avoid poverty for the poorest as in the U.K., as you have repeatedly done this year.
Those are unrelated points and I didn’t make them either. Payroll taxes can be a dedicated revenue source and they are also falling short and the trust fund is also an accounting fiction. All of these are true at the same time.
And nobody doubts that people feel entitled to their ‘promised’ benefits and that is the whole point of the Social Security propaganda of calling it an ‘earned’ or ‘promised’ benefit and other rhetorical tools such as calling a tax a ‘federal insurance contribution.’ But rhetoric doesn’t change fiscal and legal reality.
“But rhetoric doesn’t change fiscal and legal reality.”
Quite true.
But neither does your rhetoric blurring the enormous distinction between “earned” and “promised”.
Especially in the context of your suggestion that SS not merely be made fiscally sane and solvent (e.g. by replacing the increase based on average earnings with one based solely on inflation, and slowly raising the retirement age as was done 40 years ago) - with which any reasonable person who understands the basics of our fiscal reality should surely agree - but instead be radically altered to be a fixed benefit for all.
Which given the earnings cap which has been raised repeatedly, would be a massive bait and switch which would completely undercut the popular support SS has had all these years in a way the sensible changes noted above - changes you have covered very well in this Substack - would not.
“the US Social Security benefit for the highest-income earners looks more like a golden parachute than what President Roosevelt referred to as ‘some measure of protection to the average citizen and to his family…against poverty-ridden old age.’”
“The key to understanding this discrepancy is that the US Social Security benefit is an earnings-related benefit while the UK state pension now offers a largely universal flat benefit.”
“Under a universal benefit regime, everyone who qualifies for a full retirement benefit receives the same amount.”
“A better option would return Social Security to its stated goals of old age poverty protection by shifting from an earnings-related benefit to a flat benefit that is predictable, transparent, and more effective at providing insurance for struggling seniors. The UK used to feature an earnings-related benefit in the past but connected the dots that this was an ineffective and excessively costly way to provide seniors with poverty protection in old age.”
P.S. AFAIK, the U.K., unlike the U.S., never had a dedicated funding source for its prior earnings-based benefit - which dated only to 1978, not to the 1930s - that was based on taxing higher earners far more than lower earners. So they had nothing remotely like the same “promise”.
“ He also points out that payroll tax revenue should be excluded from the revenue denominator, as these taxes are immediately spent on Social Security (and thus not available to pay for interest). Under this accounting, the interest-to-revenue ratio will hit 27.9 percent in 2025”
Well, you can’t have it both ways. If SS is just another program, and nothing at all like an earned benefit (and yes I know it is not legally an owned benefit), then “should be excluded” is a meaningless/false thing right?
Do not misunderstand, the amount of revenue spent on debt is indeed a very bad indicator and I am 10,000% in the camp that we need to rein in all federal spending.
But you can’t put SS aside on the one hand, but then claim on the other “it’s just another tax and spend program”…
Social Security is running cash-flow deficits for the foreseeable future. The point is that payroll taxes are going out immediately to pay for promised benefits (and then some…that being $4+ trillion in added borrowing between now and 2033) so they can’t also be used to service the interest on the debt.
But the same point is true of every dollar of taxes coming in! They are going out to pay for spending Congress has authorized.
You yourself are the champion of the idea that “promised benefits” are not a guarantee, they are just whatever Congress is willing to pay out.
I fully accept that one can make this argument either way. I just don’t accept it when people try to have it *both* ways.
I actually agree that the way you published in *this* piece is the better way to look at things.
But you can’t publish as “real” the higher percentage here from excluding Social Security revenue from the calculation *AND* also claim that “promised benefits” are a complete fiction, and therefore SS should be radically changed to just a welfare program to avoid poverty for the poorest as in the U.K., as you have repeatedly done this year.
Those are unrelated points and I didn’t make them either. Payroll taxes can be a dedicated revenue source and they are also falling short and the trust fund is also an accounting fiction. All of these are true at the same time.
And nobody doubts that people feel entitled to their ‘promised’ benefits and that is the whole point of the Social Security propaganda of calling it an ‘earned’ or ‘promised’ benefit and other rhetorical tools such as calling a tax a ‘federal insurance contribution.’ But rhetoric doesn’t change fiscal and legal reality.
“But rhetoric doesn’t change fiscal and legal reality.”
Quite true.
But neither does your rhetoric blurring the enormous distinction between “earned” and “promised”.
Especially in the context of your suggestion that SS not merely be made fiscally sane and solvent (e.g. by replacing the increase based on average earnings with one based solely on inflation, and slowly raising the retirement age as was done 40 years ago) - with which any reasonable person who understands the basics of our fiscal reality should surely agree - but instead be radically altered to be a fixed benefit for all.
Which given the earnings cap which has been raised repeatedly, would be a massive bait and switch which would completely undercut the popular support SS has had all these years in a way the sensible changes noted above - changes you have covered very well in this Substack - would not.
Well, most of your responses are fair enough.
But here you indeed argued for radically changing SS:
https://substack.com/@debtdispatch/p-141677018
“the US Social Security benefit for the highest-income earners looks more like a golden parachute than what President Roosevelt referred to as ‘some measure of protection to the average citizen and to his family…against poverty-ridden old age.’”
“The key to understanding this discrepancy is that the US Social Security benefit is an earnings-related benefit while the UK state pension now offers a largely universal flat benefit.”
“Under a universal benefit regime, everyone who qualifies for a full retirement benefit receives the same amount.”
“A better option would return Social Security to its stated goals of old age poverty protection by shifting from an earnings-related benefit to a flat benefit that is predictable, transparent, and more effective at providing insurance for struggling seniors. The UK used to feature an earnings-related benefit in the past but connected the dots that this was an ineffective and excessively costly way to provide seniors with poverty protection in old age.”
P.S. AFAIK, the U.K., unlike the U.S., never had a dedicated funding source for its prior earnings-based benefit - which dated only to 1978, not to the 1930s - that was based on taxing higher earners far more than lower earners. So they had nothing remotely like the same “promise”.