This is an excellent and concise (if somewhat chilling!) assessment of the Social Security situation. I see the greatest challenge as the lack of awareness of the general public. Politicians struggle to enact painful, long term reforms even on issues that have substantial media attention and that are widely understood by the public to be urgent problems. If the citizens are barely aware of the magnitude of this issue, then I have no hope that elected officials will risk unpopular legislation to fix it.
With the above in mind, I actually wrote up an idea in January for one way to address Social Security: using an unusual, can’t fail referendum that would split raising revenue vs. cutting benefits in proportion to the vote (https://wickedhard.substack.com/p/punt-to-the-people-on-social-security). A bit wacky, admittedly, but this approach would force a solution (perhaps not the optimal one that experts would advocate). And the value in getting citizens to confront the Social Security math head-on in the voting booth and be forced to own a trade-off is tremendous. It provides cover for politicians to act. Ideally, Congress would negotiate reforms themselves, such as many of the ones you have proposed. But, to the extent a gap in funding still remains after those best efforts, I say put it to the public to trade-off benefits and taxes.
I have also wondered whether one approach to moving away from the current Ponzi design would be to transition to cohort accounts rather than (or in addition to) individual accounts. Basically, instead of funneling withholdings into individually managed retirement accounts, you funnel all the withholdings of people born in a given year (e.g., everyone born in 1990) into a common “account” managed by the SSA. As this birth year cohort retires, the benefits are distributed between them according to a formula around years and amount of contribution (similar to today) but the absolute level of benefits is calibrated to the amount that is on hand for the cohort. Essentially, generation 1990 saves for itself and gets out no more or less than they put in. This cohort component could provide the baseline security against poverty and avoid concerns about individuals making poor investment choices.
Excellent summary of the history and true nature of the program. Combined with the fiscal deficits both parties seem to be intent on continuing and the growing budgetary burden of our interest payments, the brick wall toward which out fiscal situation is accelerating is indeed worrisome. Unfortunately , there appears no substantial political will to confront the problem until bond buyers revolt . At least the facile solution espoused under the guise of MMT has been exposed for the charlatan political hoax that it is. Will the US indeed succumb to the way this problem has been addressed in other countries historically ? By debasing our currency and reducing our nominal debt through inflation ? Anxiously awaiting your success in awakening both our citizenry and our political class to this onrushing fiscal train and agreeing on actions sufficient to confront the upcoming crisis .
“ discontinuing cost-of-living adjustments for wealthier Americans to reduce their benefits slowly over time. ”
Completely discontinuing cost-of-living adjustments for wealthier Americans would give the government a massive incentive to inflate, and make it harder for folks to plan for their retirements. And it will cause support for the program to erode.
You make a true but disingenuous statement when you point out that workers newly entering the workforce today would be better off without there being a SS. This is of course true given the rest of your point that early recipients were net big winners. Ending SS now would make all the folks who paid SS taxes over the last 20-40 years the biggest chumps and losers of all.
It is also disingenuous because the biggest winners in ending SS now would be the highest income workers! The system is already redistributive, both in the benefits calculations and in the tax rates paid by “wealthier Americans”.
This portion of your proposal is yet another way to punish success, disincentivize work and likely disincentivize marriage. These are not good things for our economy or our culture.
This portion of your proposal is also not necessary to solve the SS shortfall, as the combination of your other two would be completely sufficient. As your own pieces have shown, eliminating the wage indexing of initial benefits alone solves almost 80% of the problem.
That said, if you wanted to slightly discount the COLA adjustment (say, 0.5 percentage points less than CPI inflation) for so-called “wealthier Americans”, then that would be a lot less worse and at least somewhat defensible.
This is an excellent and concise (if somewhat chilling!) assessment of the Social Security situation. I see the greatest challenge as the lack of awareness of the general public. Politicians struggle to enact painful, long term reforms even on issues that have substantial media attention and that are widely understood by the public to be urgent problems. If the citizens are barely aware of the magnitude of this issue, then I have no hope that elected officials will risk unpopular legislation to fix it.
With the above in mind, I actually wrote up an idea in January for one way to address Social Security: using an unusual, can’t fail referendum that would split raising revenue vs. cutting benefits in proportion to the vote (https://wickedhard.substack.com/p/punt-to-the-people-on-social-security). A bit wacky, admittedly, but this approach would force a solution (perhaps not the optimal one that experts would advocate). And the value in getting citizens to confront the Social Security math head-on in the voting booth and be forced to own a trade-off is tremendous. It provides cover for politicians to act. Ideally, Congress would negotiate reforms themselves, such as many of the ones you have proposed. But, to the extent a gap in funding still remains after those best efforts, I say put it to the public to trade-off benefits and taxes.
I have also wondered whether one approach to moving away from the current Ponzi design would be to transition to cohort accounts rather than (or in addition to) individual accounts. Basically, instead of funneling withholdings into individually managed retirement accounts, you funnel all the withholdings of people born in a given year (e.g., everyone born in 1990) into a common “account” managed by the SSA. As this birth year cohort retires, the benefits are distributed between them according to a formula around years and amount of contribution (similar to today) but the absolute level of benefits is calibrated to the amount that is on hand for the cohort. Essentially, generation 1990 saves for itself and gets out no more or less than they put in. This cohort component could provide the baseline security against poverty and avoid concerns about individuals making poor investment choices.
Excellent summary of the history and true nature of the program. Combined with the fiscal deficits both parties seem to be intent on continuing and the growing budgetary burden of our interest payments, the brick wall toward which out fiscal situation is accelerating is indeed worrisome. Unfortunately , there appears no substantial political will to confront the problem until bond buyers revolt . At least the facile solution espoused under the guise of MMT has been exposed for the charlatan political hoax that it is. Will the US indeed succumb to the way this problem has been addressed in other countries historically ? By debasing our currency and reducing our nominal debt through inflation ? Anxiously awaiting your success in awakening both our citizenry and our political class to this onrushing fiscal train and agreeing on actions sufficient to confront the upcoming crisis .
“ discontinuing cost-of-living adjustments for wealthier Americans to reduce their benefits slowly over time. ”
Completely discontinuing cost-of-living adjustments for wealthier Americans would give the government a massive incentive to inflate, and make it harder for folks to plan for their retirements. And it will cause support for the program to erode.
You make a true but disingenuous statement when you point out that workers newly entering the workforce today would be better off without there being a SS. This is of course true given the rest of your point that early recipients were net big winners. Ending SS now would make all the folks who paid SS taxes over the last 20-40 years the biggest chumps and losers of all.
It is also disingenuous because the biggest winners in ending SS now would be the highest income workers! The system is already redistributive, both in the benefits calculations and in the tax rates paid by “wealthier Americans”.
This portion of your proposal is yet another way to punish success, disincentivize work and likely disincentivize marriage. These are not good things for our economy or our culture.
This portion of your proposal is also not necessary to solve the SS shortfall, as the combination of your other two would be completely sufficient. As your own pieces have shown, eliminating the wage indexing of initial benefits alone solves almost 80% of the problem.
That said, if you wanted to slightly discount the COLA adjustment (say, 0.5 percentage points less than CPI inflation) for so-called “wealthier Americans”, then that would be a lot less worse and at least somewhat defensible.
Learn about the legal deception history in my podcast here:
https://soberchristiangentlemanpodcast.substack.com/p/s2-ep-6-legal-deception-the-magic