Pseudo-clever wonkery is not going to solve Social Security's unfunded-liabilities problem

 This is a subject LITD focuses on with some frequency. That's because unless what's really going on is fixed sooner rather than later, a whole lot of folks are going to be unpleasantly surprised a few short years from now.

An article appearing today in The Motley Fool explains it with requisite starkness:

Every year since the first retired worker payment was made in 1940, the Social Security Board of Trustees has released a report that examines the current financial status, as well as short-term (10-year) and long-term (75-year) outlook, of the program. Since 1985, the Trustees have cautioned that incoming revenue wouldn't be sufficient to cover outlays (i.e., benefits and administrative expenses) over the 75 years following the release of a report.

As of the 2023 report, Social Security's long-term funding obligation shortfall reached $22.4 trillion, which is $2 trillion more than the long-term shortfall forecast in the 2022 Trustees Report. What decades of Trustees Reports have shown is that the longer Congress waits to act, the larger the Social Security's funding black hole will grow.

The Trustees Report also estimates that if lawmakers fail to address the program's shortcomings, its more than $2.8 trillion in asset reserves -- excess cash built up since inception that's invested, by law, in special-issue bonds -- could be depleted in as little as 10 years for the Old-Age and Survivors Insurance Trust (OASI). If that were to happen, sweeping cuts of up to 23% may be needed for retired workers and survivors to sustain payouts without the need for any further cuts until 2097.

The reason Social Security is such a financial mess has to do with a long list of demographic changes, some of which you may be familiar with. While I've previously discussed these demographic shifts in far greater detail, the key shifts include a 57% decline in legal immigration into the U.S. over the past 25 years, a record-low for U.S. birth rates, rising income inequality, increased longevity, and baby boomers steadily retiring from the labor force.

As part of the agenda Joe Biden ran for president ran for president on in the last election cycle, he put forth a four-point plan for shoring the program up. 

I'll let you peruse the deets beyond the acronyms and esoteric terminology at the article itself, but the points are: 

• reinstate the payroll tax on high earners
• ditch the CPI-W in favor of the CPI-E
• bolster the special minimum benefit
• lift payout for aged beneficiaries

But here's the thing: this package of clever ideas doesn't appreciably move the needle:

Like most proposals, it all sounds great on paper. Social Security would bring in additional revenue, and that revenue would help fuel higher annual COLAs for all 66 million-plus beneficiaries, an increase in the special minimum benefit for lifetime low earners, and higher payouts for retirees as they age. But there's a grim reality to Biden's proposal that needs to be addressed.

While doing something about Social Security's long-term funding shortfall is better than doing nothing, an analysis of Biden's proposal by Urban Institute shows that his four-point plan does very little to extend the solvency of the program's asset reserves. Remember, once the asset reserves are depleted, sweeping benefit cuts are needed to sustain payouts.

According to Urban Institute, Biden's four-point plan would "extend the life of the trust funds by about five years." 

If Biden were to simply propose an increase on taxation to high earners and made no other changes to the program, the solvency issues of the trust funds would have been kicked much further down the road. In fact, an analysis from the Social Security Administration's Office of the Chief Actuary (OCACT) estimates that exposing all earned income to the payroll tax would extend the solvency of the trust funds by "about 35 years."  Biden's additional proposals to beef up COLA payouts, lift the special minimum benefit, and increase the PIA for aged beneficiaries, negates the bulk of the revenue boost from reinstating the payroll tax on the rich.

I know this is going to sound terribly simplistic, but the core of the problem is the contrast in the visions of James Madison and Frances Perkins regarding the proper scope and function of government. 

When you take the macro approach to addressing the big two givens of the human condition - sickness and aging - you're forever frantically trying to come up with ways to fit individual human beings' destinies into a one-size-fits-all model.

In the process, those individual human beings' sense of personal agency begins to erode. At the first sight of any kind of threat to the plan that they've entrusted government to carry out, they adopt a somebody-has-to-do-something-about-this mentality.

That, and not some kind of balance sheet tinkering, is the crux of the matter. 

 

Donald Trump is not, and never has been, a conservative

 Consider what he had to say about a couple of particular topics in Iowa:

Former President Donald Trump drew contrasts between himself and Florida Gov. Ron DeSantis on Monday in Davenport, Trump’s first visit to Iowa since announcing a run for president. 

Speaking to a full Adler Theatre, Trump called his potential rival “very, very bad on ethanol,” compared him to 2012 GOP candidate Mitt Romney, and accused DeSantis of supporting raising the minimum age for Social Security benefits.

During his 2012 campaign for Congress, DeSantis expressed support for restructuring Social Security and Medicare, which aid millions of seniors in the United States, to make them more financially sustainable.

While in Congress, DeSantis voted on nonbinding budget resolutions that called for raising the retirement age and slowing the growth of future spending.

This bit of ethanol pandering is classic Trump transactionalism. He knows that the subsidies are federal gravy for Iowa corn producers and framing it as sacrosanct just may buy their loyalty, the only thing the Very Stable Genius gives a flying diddly about in this universe. 

It also makes clear that Trumpism is not about the free market, or, if you want to put it in macro terms, an allocation of resources that is in any way efficient:

One of the key reasons for the growth in ethanol production has been government subsidies for ethanol — $45 billion in tax credits giving 45 cents to ethanol producers for every gallon they produced between 1980 and 2011. This was a strange subsidy considering ethanol's inefficiency as a fuel, and given the fact that unlike other renewables, burning ethanol continues to pump carbon dioxide into the atmosphere.

It's not like the farmers growing subsidized corn for ethanol production didn't already have a market for their produce. Kevin Drum of Mother Jones calls it "shoveling... ag welfare to a group of people who were already pretty rich."

In January 2012, the legislation that authorized the ethanol tax credits expired. But this didn't end the subsidies for ethanol. Why did the powerful corn ethanol lobby let the tax credits expire? According to Aaron Smith of the American Enterprise Institute:

The answer lies in legislation known as the Renewable Fuel Standard (RFS), which creates government-guaranteed demand that keeps corn prices high and generates massive farm profits. Removing the tax credit but keeping the RFS is like scraping a little frosting from the ethanol-boondoggle cake.

The RFS mandates that at least 37 percent of the 2011-12 corn crop be converted to ethanol and blended with the gasoline that powers our cars. The ethanol mandate is causing corn demand to outstrip supply by more and more each year, creating a vulnerable market in which even the slightest production disturbance will have devastating consequences for the world's poor.[AEI]

So the ethanol subsidies are still alive through government-guaranteed demand from the Renewable Fuel Standard mandate.

There are so many curbs on human freedom involved here: a mandate, government playing favorites, wealth redistribution.

The other topic on which he pulled the I'll-never-change-one-thing-about-this-government-goodie was Social Security. We covered this last month at LITD, excerpting generously from a piece by Tiana Lowe. We'll just re-up the relevant portion of that:

 I want to discuss a Washington Examiner piece by Tiana Lowe that deserves wide readership. It's short, and it's some bracing straight talk about that perennial third rail: Social Security.

She starts by recounting what President Biden had to say about it last night:

"So tonight, let’s all agree to stand up for seniors," Biden said. "Stand up and show them we will not cut Social Security. We will not cut Medicare. Those benefits belong to the American people. They earned them. If anyone tries to cut Social Security, I will stop them. And if anyone tries to cut Medicare, I will stop them."

Lowe point out that this is a lot of sound and fury over something that ain't even happening:

But not only is Biden arguing against a straw man here — sadly, no sitting Republicans actually are pledging to cut entitlements — but he is also forgetting that doing nothing is tantamount to a massive cut of Social Security benefits!

Why is that the case?

Absent a major reform from Social Security, the program will become insolvent in a little more than a decade. Upon insolvency, benefits will be slashed by 20% to 25% across the board.

Okay, nobody is talking about cutting benefits or structurally reforming the program. Well, where do we look next to face our country's debt-and-deficit precipice?

If Republicans wish to balance the budget within the decade without touching entitlements or defense spending, the Committee for a Responsible Federal Budget projects Congress would need to slash 85% of the rest of the budget.

Could tax hikes fill in the void of the Social Security Trust Fund once insolvency hits? Maybe — if Democrats and Republicans were comfortable with jacking up the payroll tax by 25%.

And then there's what the VSG had to say on Truth Social about one of America's thorniest foreign-policy problems:

“Kim Jung Un of North Korea, who I got to know and got along with very well during my years as President, is not happy with the U.S. and South Korea doing big training and air exercises together,” Mr Trump said. “He feels threatened. Even I would constantly complain that South Korea pays us very little to do these extremely expensive and provocative drills. It’s really ridiculous. We have 35,000 in jeopardy soldiers there, I had a deal for full payment to us, $Billions, and Biden gave it away. Such a shame!!!”

Folks to the right of center finding appeasement of totalitarian belligerents loathsome has Cold War roots, but it's still found fairly recent expression. Barack Obama deservedly came in for outrage for his apology tour, accepting a Loan Chomsky book from Hugo Chavez in front of the world's cameras, and pursuing a worthless agreement with Iran about its nuclear program.

But the VSG speaks in terms about Kim suggesting maybe they ought to get a room, and the drool-besotted cult is fine with it. 

And there's the transactional element again. These allies, they need to pony up! We're putting a lot of young US asses on the line over there!

No, his culture-war nods, delivered in the most boneheaded manner possible, do not make up for stuff like this.

Still, most Republicans want him to be the 2024 presidential candidate. 

That's sick. 

 

A subject about which no one will speak plainly

 First, some thoughts on the State of the Union address more broadly.

I didn't watch it, and all reportage I've come across about it today confirms my decision.

It also confirms the likelihood that I'll once again sit out the election next year. The essence of each of the major US political parties in their present forms was brought into sharp relief: The Democrats remain the party of wealth redistribution, climate alarmism, and identity politics militancy. The Republicans are a collection of cowards, sycophants, nuts and out-and-out zoo animals. 

But I want to discuss a Washington Examiner piece by Tiana Lowe that deserves wide readership. It's short, and it's some bracing straight talk about that perennial third rail: Social Security.

She starts by recounting what President Biden had to say about it last night:

"So tonight, let’s all agree to stand up for seniors," Biden said. "Stand up and show them we will not cut Social Security. We will not cut Medicare. Those benefits belong to the American people. They earned them. If anyone tries to cut Social Security, I will stop them. And if anyone tries to cut Medicare, I will stop them."

Lowe point out that this is a lot of sound and fury over something that ain't even happening:

But not only is Biden arguing against a straw man here — sadly, no sitting Republicans actually are pledging to cut entitlements — but he is also forgetting that doing nothing is tantamount to a massive cut of Social Security benefits!

Why is that the case?

Absent a major reform from Social Security, the program will become insolvent in a little more than a decade. Upon insolvency, benefits will be slashed by 20% to 25% across the board.

Okay, nobody is talking about cutting benefits or structurally reforming the program. Well, where do we look next to face our country's debt-and-deficit precipice?

If Republicans wish to balance the budget within the decade without touching entitlements or defense spending, the Committee for a Responsible Federal Budget projects Congress would need to slash 85% of the rest of the budget.

Could tax hikes fill in the void of the Social Security Trust Fund once insolvency hits? Maybe — if Democrats and Republicans were comfortable with jacking up the payroll tax by 25%.

This is what happens when enough people adopt the mindset that government ought to be about the task of ensuring that people can age gracefully.  

 

 

 

The current debt-ceiling standoff and the two irreconcilable views of government's proper scope

 We're back at a juncture we've found ourselves at several times. It works a little differently from the way such a juncture does in a household. (And here, we're assuming a responsible couple heading that household, a couple with a common goal of ensuring financial soundness in the present and for the future.) In a household, the people involved come to an agreement along the lines of, "Okay, given our present income, present savings plan, and reasonable confidence that both can be maintained, if we ever have to go in yet, here's how much we can handle, but we must never that."

Government has options for skirting the firmness of such an agreement. It can tax citizens more, issue bonds and print money. Congress never worries about whether those measures will actually be taken when spending bumps up against the agreed-upon limit. Treasury bond holders still seem to have enough confidence in the full-faith-and-credit premise of the arrangement to keep things shored up, at least on a band-aid basis.

How did all this get started, anyway?

It’s a legal limit dating back to 1917 that caps the level of debt that the federal government can assume. Once the U.S. hits the limit and exhausts ways to pay its bills, Congress must lift the ceiling in order for the government to continue to borrow to meet its obligations. If it doesn’t, the country could be forced to default, which experts warn would be economically catastrophic.

Republicans have waged heated battles over the debt ceiling, most notably in 2011, but they have always been resolved in time.

Now, it's true that the rush to resolve a debt-ceiling crisis is not about new spending. Government is on the hook for the debt in question. But the fact that government keeps coming to a moment like this means that no one ever thinks of operating government at a debt level far enough below the ceiling to avoid trouble.

In light of that, is it grandstanding for McCarthy to insist on spending cuts in his negotiations with Biden? That case could be made; McCarthy has something of a track record as a grandstander. But his stance is predicated on a question worth asking: At what point do we have the difficult discussions about the reason we're always up to our eyeballs in debt?

And what might that reason be? Well, that's why the discussions would be difficult:

Politicians promised you benefits, but never funded them.

That’s according to truthinaccounting.org, which noted that there’s $96.3 trillion owed in promised but unfunded Medicare and Social Security benefits — $55.1 trillion for Medicare and $41.2 trillion for Social Security.

While Uncle Sam has $5.9 trillion in assets, the $129 trillion owed in bills — including military and civilian retirement benefits — means the U.S. is in the hole for $123 trillion. Just the unfunded liabilities in Medicare and Social Security add up to $96 trillion.

It is a stunning amount coming due over the next 75 years. The Treasury Department sticks its proverbial head in the sand and does not even list the liabilities on the balance sheet of the federal government.

But not to worry, taxpayers will not actually be paying for this. How could they?

Instead, older people who have been promised these benefits likely will not be paid in full.

If by some magic we do manage to pay for these promised benefits, it is young people who would be saddled with trillions in extra taxes with nothing in return.

Unelected policy makers in the twentieth century decided for the nation that government should address two major givens of human life - old age and sickness - that had, to that point, been outside its purview. Frances Perkins, the fourth labor secretary of labor, was the architect of social security in the 1930s (as she was of the minimum wage and unemployment insurance, two more unprecedented intrusions into the life of the citizenry).  Medicare was the brainchild of a Democratic congressional majority in the 1960s who found it unacceptable that only 60 percent of older Americans had health insurance.

These programs and the thinking behind them didn't appear spontaneously. They have their roots in the progressive movement of the early twentieth century. Thinkers such as John Dewey, Thorstein Veblen, Richard T. Ely, Herbert Croly and Woodrow Wilson looked at the rapid industrialization and urbanization of the country and concluded that the Madisonian framework for American government was no longer sufficient to address the issues of the day. Furthermore, legislators elected from the populace around the country lacked the knowledge to deal with those issues by crafting bills to target each one. In their view, what government needed to do was hire a cadre of experts in areas such as transportation, infrastructure, labor, health care, education and agriculture that would flesh out with details broad mandates enacted by Congress.

This fundamentally changed the average citizen's view of his or her relationship to government.  Government, with its monopoly on the legitimate use of force, was now assuming a seemingly benevolent role as well, and private citizens would be henceforth dependent on it for basic necessities. No longer was the state just tasked with keeping bad guys foreign and domestic from knocking us over the head. Now it would assume responsibility for the planning of an individual's life course. 

Over the course of the last 90 years, people have come comfortable with the trading off of having choices as to how to plan for their basic well-being - liberty, if you will - for being unburdened with having to think about such daunting matters.

There are think tanks and lobbying organizations dedicated to the quixotic task of rolling this all back, but without an understanding on the part of the country's inhabitants of the preciousness of their freedom to steer their own destinies. That, in turn, requires an understanding that individual sovereignty is the image and likeness of the Creator's sovereignty. 

But it's pretty late in the day for a conversation like that, isn't it?

 

The third rail re-enters the national conversation

 It hasn't taken much time for the question "What moves might a GOP-majority House make on entitlements" to emerge:

Republicans don’t plan to alter benefits for current Social Security and Medicare recipients, according to Rep. Chip Roy (R-Texas).

“What we have been very clear about is, we’re not going to touch the benefits that are going to people relying on the benefits under Social Security and Medicare,” Roy said Sunday on CNN’s “State of the Union.” “But we all have to be honest about sitting at the table and figuring out how we’re going to make those work, how we’re going to deal with defense spending and how we’re going to deal with nondefense discretionary spending.”

The Republican Study Committee proposed a budget for fiscal 2023 that would gradually increase the eligibility ages for Social Security and Medicare, and change the Social Security benefit formula for people 54 and younger, while not changing it for people closer to receiving benefits.

Democrats are likely to oppose those changes, as well as any cuts to Social Security and Medicare, and an ensuing standoff could result in another government shutdown. The 2018-2019 lapse in federal funding lasted 35 days after a fight over former President Donald Trump’s border policies and immigration.

What other course of action is there? Platitudinous insistences that Frances Perkins promised that money to Americans in perpetuity do not make for workable policy.

This is not a new conversation by any means. In the 1990s, much bristling ensued when the idea of freezing benefits was floated:

Back in 2001, I served on the staff of President George W. Bush’s Commission to Strengthen Social Security. While the commission did not agree on a single reform plan, two members — economists John Cogan of Stanford University and Olivia S. Mitchell of the Wharton School — argued for freezing the value of Social Security benefits in inflation-adjusted terms. Benefits wouldn’t be cut, but Americans retiring in the future wouldn’t receive higher benefits than today’s retirees, as the current benefit formula requires. That single change would have restored Social Security to long-term solvency.

The argument was not universally well received:

But freezing Social Security benefits came with the risk that seniors would have little else to rely upon in old age. In 1995, for instance, the New York Times warned of a “great retirement crisis . . . widely anticipated for the Baby Boomers who begin to reach retirement age in 2010.” Even wealthy seniors would not escape this crisis of inadequate incomes, the Times feared. Reducing Social Security would only worsen the problem of poverty in old age. The same fears, and the same arguments, are heard today.

But its veracity has been borne out:

Yet new data from the Congressional Budget Office show that, had Social Security benefits been frozen in 2001, retirees’ average household incomes in 2019 would have been reduced by just 3.9 percent. Seniors still would have been better off than ever before, while knowing that their Social Security benefits were secure, rather than facing a 20 percent potential cut when Social Security’s trust funds run out in the mid-2030s.

In late October, the Congressional Budget Office (CBO) released new household-income figures compiled from Internal Revenue Service data. The CBO figures, running from 1979 through 2019, include salaries, investment income, welfare payments, Social Security, and even Medicare benefits, while subtracting the various federal taxes that Americans pay.

The CBO data show that in 1979, the average American over age 65 had a household income after taxes and transfers of $43,000 (all dollar figures are inflation-adjusted to 2019). Seniors’ incomes averaged 23 percent below those of working-age Americans. Retiree households were more than twice as likely to live in the poorest fifth of the overall population as to live in the richest fifth. The 1970s stereotype of retirees eating cat food, if not accurate, at least reflected some semblance of seniors’ reality.

Four decades later, the picture is radically different. By 2019, average incomes for over-65 households had grown to $97,300, a 126 percent increase. For non-elderly households, average incomes rose from $58,795 to $104,297, just 77 percent higher than 1979. The income gap between seniors and working-age Americans in 2019 shrank from 23 percent to just 7 percent. Today, seniors are nearly twice as likely to live in the richest income quintile as to live in the poorest quintile.

This boils down to a significant degree to being a case of the diminishment of human agency. The great industrial leap of the 20th century gave us an advancement in comfort, convenience, safety and longevity unlike any our species had previously see. But for many, it cultivated a mindset that vocation was the core of human existence, and that, in some form, to some degree, one would be working for some organization that would, in addition to compensating one for performing some act of value, set one up with health insurance and retirement benefits. It was an easy addition for many people to make to incorporate Social Security, and later, Medicare, into this picture of what life should look like. 

The entitlements' unfunded liability problems are a modern situation. Three hundred years ago, we didn't have air conditioning, plane travel or transplant surgery, but the state's control over our destiny was not among our concerns. 

 

 

 

A very bad and wrong way to address Social Security's shortfall

This is one of those areas in which the Very Stable Genius's lack of a core set of principles causes trouble.

His position since his 2015 entry into the presidential sweepstakes has been hands off regarding Social Security.

It's untenable, as anyone with a lick of common sense can see.

Also, it gives opportunistic collectivists a justification to cook up even more untenable schemes, such as the Social Security 2100 Act:

“There is no realistic chance that Social Security will ‘fix itself’ via higher economic growth or other changes to the underlying factors that affect the program’s finances,” American Enterprise Institute’s Andrew G. Biggs told Congress earlier this month while blaming the federal government for poor stewardship. “The question…is whether America needs Social Security benefit increases. While targeted benefit increases may be warranted, the evidence supporting across-the-board benefit increases is far weaker.” (emphasis mine)

The Democrats’ bill would be an across-the-board benefit increase for Social Security earners – on the backs of the rich and, more importantly, workers and small business owners.

The Social Security 2100 Act would increase payroll taxes on workers from the current 6.2% to 7.4% by 2043. Businesses would also see their payroll tax go up from 6.2% to 7.4%. This means the payroll tax would jump over two-percentage points to a total of 14.8% by 2043. The hike slightly cuts into gains taxpayers and businesses made through the 2017 tax cuts.

Economics 101 says businesses will do all they can to keep making a profit. This means layoffs, not even bothering hiring new workers, and keeping wages low. Social Security 2100 Act would actually destabilize the economy and probably put even more people on welfare.

Small business owners – which include independent contractors i.e. freelance workers – would be hurt even more. Larson wants to increase taxes from the already-too-high current 12.4% to 14.8%. They are already taxed at 34.94% under current federal law – thanks to a 17.4% deduction in the 2017 tax cuts. This payroll tax increase would actually encourage more freelancers to take up a full-time job with a larger business, so they won’t be hit by the extra taxes. Of course, if businesses aren’t hiring workers because of the extra payroll tax, then there won’t be any other jobs to be had.

Way to encourage entrepreneurship, government! Note sarcasm.

House Democrats are mostly trying to gloss over this tax increase by focusing on soaking the rich. The proposal – which should hit the full House at some point this year – would start taxing people who make over $400K each year. 

The problem with Larson’s idea? Inflation.

“Since that $400,000 threshold is not indexed for inflation while the Social Security payroll tax ceiling (currently $132,900) rises each year along with nominal wage growth, eventually the payroll tax would apply to all earnings,” Biggs told Congress. “This means a nearly 15 percentage point effective marginal tax increase not merely on millionaires and billionaires, but on upper-middle-class households looking to pay off their mortgage, fund college for their kids or save for retirement.” 

The Social Security Act adjusts taxes automatically each year based on the average wage index. It’s gone up each year since 1950 – meaning it will eventually hit $400K, although it probably won’t be in our lifetime. This means every American will have to pay the $400K threshold rate if it isn’t adjusted for inflation – and Americans would probably head for the tar and feathers in anger.

Notice the point that I put in boldface. I am a freelancer. I write magazine articles and do radio news on a freelance basis. I have chosen to arrange my worklife that way of my own volition.

The tax code should not be used for behavior modification purposes. It should not be deliberately designed to influence my choices about how to work.

Big thumbs down on Larson's shiny object.

Some absolutely essential plain speaking about entitlements

Dr. Jane Orient at Caffeinated Thoughts nails it:

The Washington Post of October 18 says that the biggest issues in the midterm elections are the threat that Republicans will slash Medicare and Social Security, and maybe get around to repealing ObamaCare after all. It quotes a tweet from Sen. Tammy Baldwin (D-Wis.) that Republican statements about “adjusting” entitlements are “Washington-speak for cutting the Medicare and Social Security benefits you have worked hard to earn and making you pay for tax breaks to millionaires and billionaires.”

So, will rescinding the tax cuts and taxing the “rich” even more fix the problems?

Think about it for just a minute. Didn’t seniors already earn their benefits? If so, why the need to tax the rich to pay them?

The ugly truth is that the payroll taxes paid by today’s retirees were taxes, not contributions to a protected pension program. That money was spent immediately on yesteryear’s retirees—and any excess on reducing the deficit. The money in the “trust funds” is only a claim on future tax revenues.

There is no longer any excess. Payroll taxes from fewer than three working Americans are supposed to support one retiree, and the trust funds are being drained. Retirees’ and Medicare providers’ checks are coming from the wages of burger flippers, teachers, construction workers, or anybody else who is employed. Even if you think this is fair, it is a precarious and unsustainable situation. As the Baby Boomers retire, workforce participation by men of prime working age is shrinking, and wages have been stagnant.

The rich are not sitting in their counting houses counting out their money. The money is mostly invested in enterprises that create jobs (and payroll tax revenue) and produce the goods and services we all need. Even if a draconian increase in taxes produced an increase in revenue—and it usually doesn’t—it would likely crash the economy.

The situation for all of us, not just seniors, is deadly serious, and it requires economic realism, not name-calling, bickering, platitudes, and magical thinking. 

There is no disputing this. At some point, post-America must engage in a very grown-up conversation about it.

Utterly worthless as an investment instrument

Rachel Greszler, a policy analyst at the Heritage Foundation, offers alternative outcomes of a variety of scenarios - people with various personal financial situations and how they fare with Social Security vis-a-vis personal savings:

While virtually all workers—across income levels, both genders, and generations—would be far better off with personal savings than Social Security, younger workers get the worst deal from the government program.

The average young male worker is virtually guaranteed a negative rate of return from Social Security. Take these hypothetical examples:

Marc Perez is 23 years old and earns an average income of $60,006 per year. He will pay $547,088 in Social Security taxes (excluding disability insurance taxes) throughout his lifetime. In return, he will receive a monthly benefit of $2,209 in retirement.

If he instead invested that same amount—$547,088—in a conservative mix of stocks and bonds, he would accumulate more than $1.5 million in a retirement account and could use that to purchase a lifetime annuity that would pay him $6,185 per month, or nearly three times what Social Security will provide.

Even lower-income earners, like Ashley Martin, who generally receives higher returns from Social Security, would be better off saving and investing in their own personal retirement accounts. 

Martin is also 23 and makes $19,768 per year. She will pay an estimated $119,426 in Social Security taxes toward a program that will provide her with a $902 monthly benefit in retirement.

If she instead invested that same amount—$119,426—in her own retirement account, she would accumulate $354,731 in savings. That would be enough to purchase an annuity that would provide her with $1,262 per month, or 40 percent more than Social Security can provide.

Given the preceding examples, it will come as no surprise that high-income earners like Courtney Jones get the worst deal from Social Security. 

However, if she invested that $860,050 in her own retirement account, she would accumulate more than $2.8 million in retirement savings—an amount that could provide her with a monthly annuity of $10,132, or almost four times what Social Security can provide.

If workers did not use their personal savings to purchase annuities, but instead drew down on them as needed in retirement, they would be able to leave sizable bequests to their heirs.

In contrast, workers who die before reaching Social Security’s retirement age or shortly thereafter often receive little to nothing in return for their hundreds of thousands of dollars in payroll taxes.

The ability to leave bequests would be especially meaningful for lower-income workers. Not only do lower-income workers tend to have lower life expectancies, and therefore receive less in Social Security benefits than higher-income counterparts, but their families do not receive the same leg up from bequests that middle- and upper-income families often receive from their elders to pay for a grandchild’s education or to purchase a home.

After payroll taxes and other levies, there simply isn’t much left for lower-income workers to save for the benefit of their heirs.

A young male earning only half the average wage would have enough in a personal account to provide the exact same income that Social Security provides, and to also leave $479,000 to his heirs if he died at the average life-expectancy age of 76. Even if he were to live to age 90, he would have $270,000 left in savings to leave to his heirs. 

The Framers did not intend for government to be used to address the two given conditions of individual life: getting sick and aging.

Thursday roundup

Everything Robert Reich says or writes is, without exception, completely idiotic, but he has outdone himself with his latest proposal:

Robert Reich isn’t merely a former cabinet secretary, he’s a Rhodes Scholar and Yale Law grad . . . You need some mighty elite education to produce something this embarrassing.

The only response to an unconstitutional presidency is to annul it. Annulment would repeal all of an unconstitutional president’s appointments and executive actions, and would eliminate the official record of the presidency.

Annulment would recognize that all such appointments, actions and records were made without constitutional authority…

After all, the Supreme Court declares legislation that doesn’t comport with the Constitution null and void, as if it had never been passed.

It would logically follow that the Court could declare all legislation and executive actions of a presidency unauthorized by the Constitution to be null and void, as if Trump had never been elected.

What does “eliminate the official record of the presidency” mean? In the presidential portrait gallery, there’ll just be a big question mark in a frame where number 45 should be?

Thinking about the chaos that would result if the courts suddenly nullified 18 months’ worth of executive branch action across all arms of the government makes me crave sedatives. The immigration tangle alone would be a mess of historic proportions. If only to avoid the bureaucratic red-tape apocalypse, SCOTUS would never go along with Reich’s suggestion. Plus, how could one hope to show that collusion was a but-for cause of Trump’s victory? Absent the Kremlin fiddling with vote totals, which no one has claimed, the counterargument will always be offered that collusion was essentially harmless error — an impeachable offense, sure, but by no means evidence in itself that Trump wouldn’t have won anyway without Putin’s help.

My recent posts about McCain have generated some spirited back-and-forth, and in the days since his passing, I've thought a great deal about just how much weight his basic and undeniable patriotism should be given vis-a-vis the hard-to-forgive moves - voting against "A"CA skinny repeal comes to mind - which is one way his pettiness and vindictiveness (granted, not uncommon traits in the world of politics) manifested itself. But this business of deciding before he passed who would and would not be welcome at his funeral, and putting his 2008 running mate Sarah Palin in the latter group stains his legacy not a week out from his death.  Especially juxtaposed against the fact that the Most Equal Comrade is going to deliver a eulogy.

LITD likes this: A trend is afoot whereby restaurants are starting to ban diners' use of cell phones at their tables.

What is the best way to proceed on this? Victor Davis Hanson at NRO says the VSG administration should declassify any and all documents pertaining to the Mueller probe.  On the other hand, Lee Smith at Real Clear Investigations sees reasons why the VSG continues to opt to not do so.

LITD and other outlets have had some titters over this year's Burning Man and how it's become stratified, ranging from the scroungy hippies to high-livin' types who have lobster flown in, and how rules of conduct for the Orgy Dome have become a point of focus. A piece in the SF Gate today looks over the gathering's entire history and makes clear that, from the outset, it's been a prime example of how bored and worn-out the counterculture - which some time ago really became the culture - is, and how full of themselves those who've been perpetuating it for the last 50-plus years are.

Michael R. Strain of the American Enterprise Institute gives a big thumbs down to Marco Rubio's idea of funding paid family leave by letting people take some of their Social Security build-up early.

Identity-politics jackboots never let an opportunity to baselessly accuse someone of racism, and they got right to work when Florida Pub gubernatorial candidate Ron DeSantis said this:

Florida elections are always competitive, and this is a guy who, although he’s much too liberal for Florida, I think he’s got huge problems with how he’s governed Tallahassee, he is an articulate spokesman for those far-left views, and he’s a charismatic candidate. I watched those Democrat debates, and none of that is my cup of tea, but he performed better than those other people there. So we’ve got to work hard to make sure that we continue Florida going in a good direction, let’s build off the success we’ve had on Governor Scott, the last thing we need to do is to monkey this up by trying to embrace a socialist agenda with huge tax increases and bankrupting the state. That’s not going to work.

You know exactly what word they pounced on, don't you? Of course, all normal people are going to roll their eyes at the ridiculousness of the attempt to impart a sinister motive, and so you'd think that the Dem candidate, Andrew Gillum - he of the proposal to raise the corporate tax rate to 40 percent - would have just quietly moved on to something substantive, but, no, he got in on the grandstanding.

And the kicking-around of the idea that perhaps DeSantis should have paused and searched for a term less susceptible to controversy makes me want to puke. That's rank capitulation to the jackboots.

I'd rather see more of the attitude of this guy at Facebook:

"We are a political monoculture that's intolerant of different views," Brian Amerige, a senior Facebook engineer, wrote in a post entitled "We Have a Problem with Political Diversity." The New York Times first obtained and reported on the post.

"We claim to welcome all perspectives, but are quick to attack — often in mobs — anyone who presents a view that appears to be in opposition to left-leaning ideology," Amerige charged. "We throw labels that end in *obe and *ist at each other, attacking each other's character rather than their ideas."

"We do this so consistently that employees are afraid to say anything when they disagree with what's around them politically," the engineer explained. "HR has told me that this is not a rare concern, and I've personally gotten over a hundred messages to that effect." On political issues like "'social justice,' immigration, 'diversity', and 'equality,'" Amerige warned, employees "can either keep quiet or sacrifice your reputation and career."

The engineer also noted events that demonstrated these fears are justified. "We tear down posters welcoming Trump supporters," he admitted. "We regularly propose removing [Peter] Thiel from our board because he supported Trump. We're quick to suggest firing people who turn out to be misunderstood, and even quicker to conclude our colleagues are bigots."

Amerige warned that Facebook has "made 'All Lives Matter' a fireable offense." He noted the "witch hunt" against Palmer Luckey, the founder of Oculus, who was pressured to leave Facebook when news spread he had donated to an organization that spread memes against Hillary Clinton online. "We ask HR to investigate those who dare to criticize Islam's human rights record for creating a 'non inclusive environment.' And they called me a transphobe when I called out our corporate art for being politically radical," Amerige noted.

A former A&R person for Atlantic Records has written a memoir that gives a sordid account of Ahmet Ertegun's behavior that is, shall we say, unflattering.

Watching porn in the office, using dildos as decor, and executives bragging about the size of their manhood: This was the record industry before the age of MeToo. 

Dorothy Carvello, the first female A&R executive for Atlantic Records - the label responsible for bringing us musical legends such as Ray Charles, The Rolling Stones, Led Zeppelin, and Aretha Franklin - was 24 years old when she landed a job as a secretary for founder Ahmet Ertegun.

The music mogul had a nightly routine which consisted of downing 14 vodka tonics, four lines of cocaine, two joints, and plenty of women.

And every morning, it was Carvello's job to clean the drugs and vomit off his clothes and track down at which clubs he had left his credit cards.  

Once again, we see that a singularly visionary shaper of American culture had flaws commensurate with his greatness. Another post about human sexuality and human nobility may be brewing.

The older I get - and I mean with each passing day - and the more I witness the exposure of great artists' dark sides (and Ertegun while certainly a businessman, was also an artist), cultures of animal-level hedonism within heretofore respected institutions of entertainment, journalism and even Christianity, and the pettiness and turf protection that so thoroughly permeates our government, the more I see that there is no substitute for turning ourselves toward - and turning ourselves over to - Lord Jesus:

. . . genuine Christianity thrives under hardship. This does not mean that we should welcome persecution and the erosion of religious liberty but rather that if they do come, we’ll be alright. 

Don’t be afraid. Don’t allow the politics of fear to control and consume you. 

Do you remember in the last presidential election when President Trump kept claiming that the system is rigged? He was right but in a completely different way than he was intending. 

If you are a Christian, the entire system of the universe if rigged in your favor. No matter who gets elected or what rights are recognized or taken away, everything ultimately works together for your good and God’s glory (Romans 8:18-39). 

So the next time you step into the booth, don’t vote scared. 

Vote like the citizen of another, better, eternally good kingdom. 

You have a living hope. 

No one can take it away.

A Brown University professor of behavioral and social sciences published an article in a respected journal presenting the findings of her study of rapid-onset gender dysphoria - in other words, the phenomenon of momentum gathering in the number of kids wanting to claim they resent the DNA they were born with, because it's this decade's cool thing to do - and, once the school realized what she quite objectively presented, it removed the article from news distribution.

Social Security: still a looming crash-and-burn, and still going unaddressed

Myra Adams at NRO takes a fresh look at the truly unsettling numbers. She begins by pointing out that official Social Security Statements include the warning that "by 2034, the payroll taxes collected will be enough only to pay about 77 percent of scheduled benefits."

It's a classic case of more going out than is coming in:

According to the Trustees of Social Security, the problem is fueled by two factors: First, from now until 2034, “the ratio of workers paying taxes to support each Social Security beneficiary will decline significantly from 3:1 to 2:1. In 1970, this ratio was nearly 4:1.” Second, by 2034 the total number of beneficiaries “is projected to reach 87 million — 41 percent more than the number in 2017.”

Of course, aging Baby Boomers born between 1946 and 1964 are central to the issue. Pew Researchreports that in 2019 there will be 72 million of us.

Unfortunately, time is running out for Social Security to be drastically reformed. Beginning in 2026 we’ll see what I call the Social Security “bulge years.” This is when all Boomers, including the youngest born in 1964, will have turned 62 and be eligible to collect retirement benefits.

Then, eight years later in 2034, when the 1964 crop celebrates their 70th birthdays and the oldest Boomers turn 88, the “bulge” is projected to burst, and only 77 percent of benefits can be paid. Sixteen years from now — if the problem is not properly addressed — such a drastic reduction has the potential to shake this nation to its very core.

Meanwhile, the cost of Social Security is staggering as displayed on the U.S. Debt Clock. (What I often refer to as the U.S. government’s “ticking time bomb.”)

Today, Social Security is the government’s second-largest annual budget expense at $967.5 billion. (It’s surpassed only by Medicare/Medicaid at $1.085 trillion.)

But in 2022, the Debt Clock’s furthest future year, the cost of Social Security is projected to be $1.166 trillion — the largest budget expense — surpassing Medicare/Medicaid at $1.138 trillion. Remember, 2022 is still four years from the beginning of the “bulge years” that start in 2026, when Social Security costs will significantly escalate.

Now get ready for some numbers that should spur Congress into action — but won’t.

Currently, per the Debt Clock, Social Security’s liability is $17 trillion, but that will grow to $24 trillion by 2022. Even worse by comparison is Medicare/Medicaid with its current liability at $27.8 trillion and slowly rising to $28.4 trillion by 2022. 

• Moreover, both Social Security and Medicare/Medicaid, along with federal-employee and veterans benefits and debt held by the public, feed into the “mother of all numbers” —  the U.S. government’s total unfunded liabilities. The cost of benefits that the U.S. government is obligated to pay its citizens now stands at $113 trillion, but increases to $140 trillion by 2022.

Contrast those immense unfunded liabilities with the U.S. Gross Domestic Product (GDP) and federal tax revenue: 

• GDP, now at $20 trillion, is projected to increase to only $22 trillion by 2022.
• Federal tax revenue, currently at $3.33 trillion, rises to $3.4 trillion by 2022.

It does not take a math genius to recognize that sitting in drab Washington, D.C., federal buildings are teams of budget analysts who know that Social Security retirement is not the only government benefit program that will be forced to cut smaller monthly checks in the ensuing decades. According to the Social Security Trustees, for example, “Without legislative action, approximately 11 million disabled people and their families could face across-the-board benefit cuts of 7 percent in 2028.” 

After all these years and all this indisputable data, "entitlements" remain a third rail.

Plus, compared to any other method of planning for one's sunset year's it has an abysmal rate of return.

Thank you, Michael Strain!

I've already posted on this topic, linking to, and excerpting extensively from, a piece at The Federalist by Robert Tracinski, but Michael Strain of the American Enterprise Institute articulates the essence of the matter so cogently that I want to give his weighing-in a platform here as well:

Republicans have traditionally opposed government-provided paid leave, which their reticence reflected. But the Trump administration, led by first daughter Ivanka, is trying to change that.

The State of the Union speech breathed new life into the idea, along with a compelling proposal to fund paid leave without — its advocates claim — burdening employers, reducing job opportunities for women or increasing taxes. The idea is simple and elegant: Allow new parents to collect early Social Security benefits after the arrival of a child, provided that they are willing to delay collecting benefits when they begin their retirement decades into the future.

Consider a 26-year-old new mother with five years of work experience earning $31,100 per year. Under this plan, she could receive 12 weeks of paid leave, at a rate of close to $300 per week. In exchange, she would delay claiming retirement benefits by about six weeks.

This idea is gaining traction. Senator Marco Rubio, the Florida Republican, is working with Ivanka Trump on drafting a bill. Earlier this week, two other Republican senators, Joni Ernst of Iowa and Mike Lee of Utah, discussed the plan in a press call hosted by the Independent Women’s Forum, which first outlined the new approach. Some prominent conservative intellectuals are also getting behind the idea.

To its designers' credit, this is the best federal paid-leave proposal being discussed. My Bloomberg View colleague Ramesh Ponnuru agrees, writing that he hasn’t “seen a better plan.” Its underlying philosophy — that society should invest more in the young and less in retired individuals — is sound.

But it’s still a bad idea.

Spending on Social Security is projected to rise by 1.5 percentage points of annual economic output over the next three decades. Policy should be focused on decreasing projected spending to preserve Social Security for future generations. Social Security spending needs to be cut, not redirected.

And one wonders what else Congress might want to finance using future Social Security benefits if a family-leave plan creates that possibility.
Since Social Security is underfunded, the concept of letting people borrow from future benefits is on shaky ground. Social Security will soon pay out more to retirees than it receives in tax revenue and interest income, and its “trust fund” reserve is projected to be exhausted in 2034. By the time today’s new parents reach retirement age, either benefits will have been reduced or taxes will have increased. If the former, it is imprudent to allow new parents to use promised money ahead of schedule, since the anticipated benefits won’t be there in full when they retire. If the latter, then the claims of advocates that their plan doesn’t require tax increases could be misguided.

In addition, the realism and enforceability of the plan are questionable. It would be decades before the first wave of retirees would face reduced benefits because they tapped into Social Security when they welcomed a child. In the interim, Social Security could be significantly changed. In that case, those who received early benefits might not receive reduced benefits upon retirement, undermining the promises of the plan. Or future lawmakers could decide that retirees shouldn’t be “penalized” with lower benefits because they took paid time off. Any policy where the benefits are enjoyed today and the costs aren’t realized for decades should be met with skepticism.

Strain goes on to talk about how the shakeout of implementing this would be businesses hiring fewer women, women who had gone to the trouble and expense of getting good educations and preparing themselves for meaningful career trajectories.

That gets us closer to the bottom line of all this, as I pointed out in my first post on the subject: It is government injecting itself into the free market. Alway bad and wrong. And if government does so, businesses will respond in the most market-based way they can, much like water seeking its own level.

So, hats off to Michael Strain. Some of his AEI colleagues think this scheme is a great idea. If a back-and-forth ensues with them, I have every confidence that his better argument will prevail.