What do you think about Social Security and the debt? Published by Jane the Actuary View all posts by Jane the Actuary
26 thoughts on “Forbes post, “Yes, Social Security Does Indeed Add To The Federal Deficit””
no need to “re-think” Social Security…simply eliminate the income cap on which SS taxes are paid (now!)…of course, that (or other measures) should have been done a couple of decades ago…
Agreed! Just like they do for Medicare.
So there really is NO deficit ANYWHERE in government operations, because we just RAISE taxes whenever we like without ANY consequences, right?
The GOP cuts taxes and increases spending…thus Trillion Dollar Deficits, and more.
Your argument was hard to read and follow and frankly made no sense. You just took the information that was written by Teresa Ghilarducci and put another spin on it. Frankly, if I were a woman who bets, my bet would be on Teresa. Who has 25 years as a professor of economics at the University of Notre Dame.
Gee Jane you didn’t mention the hundreds of millions owed to SS by our government (meaning us). I assume this is because paying it back would mean tax increases for, well, everyone. So, to save SS both eliminating the salary cap and stopping using SS to close budget gaps will be necessary. If you don’t know that you’re either a liar or incredibly stupid, or both. Next time, how about telling the whole story.
You must have missed this section of the article: “each dollar of Trust Fund bond redeemed, is another dollar which the requires the issuing of more bonds.”
Issue one dollar of bonds … Pay off 1 dollar of trust fund bonds …net change to total debt? ZERO!
I read your argument. I am not convinced in the least. SS can not borrow money. So there is no way it can add to the deficit. If nothing is done, then benefits will have to be cut.
The “duck” government spends more than it earns. It has no savings. It borrows to make up the difference. It refuses to stop borrowing, getting deeper and deeper in debt.
The “duck” SS spends less than it earns (at least from 1983 to now). It has a nice savings account invested in treasury bonds. When the day comes when it has no savings and needs money, it will tighten its belt and live on what it earns.
Sorry. Those are polar opposites.
Right now, Social Security is collecting in FICA taxes just 92% of what it pays out. In 2034, when the last treasury bond is redeemed, it’ll collect 77% of benefits in FICA taxes. No one imagines that Congress will simply let across-the-board 23% benefit cuts take place.
You seem like a cool person Jane, but I think your article should have been labeled an opinion piece. At minimum, as long as it funded, it is not affecting the deficit. When it goes in the red, it can be discussed again.
Nor should they. Your own article says 2% of GDP will make SS solvent at current levels. Adopting Universal Health Care can save this country 6% of GDP.
All it takes is an act of congress to increase the tax by 2% of GDP and social security is solvent.
Hell, we can save 6% of GDP by going to universal health care. Our problem is a GOP that is dedicated to wiping out every thing good for the working class.
To me, and I’m no accountant, your omission of the actual reason for the largest deficit increase ever (the 2017 tax cut for the rich), makes your points seem more like smoke. You can argue your points about the program(s) need for reform, but the real issue is that our deficit is on track for an increase of $1.5 Trillion and how many people are going to be hurt by literally robbing from these programs. Unfunded wars and tax cuts for the rich few are the enemy of the People.
I’m a conservative and wide open to your premise, and I have an MBA from the University of Chicago. But I simply cannot follow your argument as stated here.
And to the previous commenter: as I understand it, since the 2017 tax cut, fed revenues have actually increased, so we can’t really blame the cut for the deficit increase. So what does explain it? That would be the even larger increase in spending.
How much was the change inflation adjusted. Increase spending by half a trillion, cut taxes by any amount, adjust for inflation, and what do you have? A certain percentage of govt spending comes back to the govt as taxes. Tax revenue increase because of a govt funded spending rush in the private sector, still adds up to more debt.
The general fund owes SS 2.4 trillion in money it borrowed, that should never have been borrowed, which would easily cover and “deficit” in out going money if it was given back.
Please explain exactly HOW redeeming the 2.4T Treasury Bonds that the SS trust holds will help SS? It doesn’t help. In fact, it would make it much worse for the SS trust. Those bonds are paying interest that the SS trust is counting on to pay future benefits. If the money was returned, then what? The SS is just supposed to sit on it and let inflation devalue it?
The accounting projections for SS already predict the return of principal and interest on the bonds, and they still come up short. So there is no way that redeeming the bonds comes close to solving the problem.
Please do some basic fact research before parroting lies told to you by some uninformed source.
Sorry, wrong, the money in the Soc Sec trust fund was put into govt bonds, borrowed, from day one of the program. It has always been that way.
Social Security taxes flow into Social Security’s bank account. That money is used to pay current benefits, and the excess beyond benefits paid is invested in US government bonds. Those bonds are specific issue bonds, for Social Security investment only, by decree of Congress. The income from those bonds goes into the Social Security Trust to be used for future payment changes. When the trust funds should become exhausted (more SS recipient payouts than SS payer taxation), benefits may have to be cut so income balances with payouts.
SS accrued benefits only can be considered “part of the deficit” because the government borrowed the funds from SS monies for its regular operations. The government owes that money to SS the same as if it had borrowed money from any other source.
The real reason the government wants to cut SS, is because politicians do not want to “raise taxes” on higher income earners to provide benefits to other future recipients. With a growing income disparity in the US, and companies not keeping average wages up to a reasonable level, the only source of additional SS income is to tax higher wage earners, those making above the the current wage tax ceiling. Clearly, particularly for Republicans, this is not something many politicians want to do. Also, because those making the higher incomes may not need SS to retire, they have no desire to contribute more than they might receive back.
Medicare is essentially the same type of self-supported program, with the same issues…but there is no current income ceiling for Medicare taxation. The wealthier folks want income caps or benefit cuts for that program to save themselves money. Most can afford the best health insurance one can buy, for less than the growing cost of their Medicare taxation.
If the average wage earner made more money, part of projected shortfalls could be addressed with taxes on their higher incomes. Otherwise, there is no other place to get the money but from high income earners, and the rich do not want to pay.
That is about as simple as it all gets.
Medicaid, however, is a government and state supported partnership program.
DAMN! You said exactly what I have been saying in other forums for a long time.
Nice to know I’m not the only one to see that. Higher incomes mean higher Soc Sec tax income.
Is the argument here that (1) The trust fund invests its surplus in government bonds; (2) the government will have to borrow money to pay interest on and ultimately redeem the bonds; and (3) borrowing money to pay off the bonds will increase the deficit; then (4) social security increases the deficit?
If that’s the case, then can we also blame t-bill investors for increasing the deficit by purchasing bonds because the government will have to borrow money to pay them off?
This article is an amazing example of twisted reasoning. I have no idea if the author believes herself or if she is just paid to try to fool the people. David, above, explains it as well as I could in a few words, so I just want to add the “actuarial deficit” in SS own accounts (NOT “the budget”) can be closed entirely by allowing the people to save an extra dollar per week per year via FICA. No need to “tax the rich” or cut benefits or raise the retirement age.
if this is an unmonitored address, this is a waste of time. probably a waste of my time anyway. but the Forbes article I commented to is so dishonest I don’t think i’ll be able to stand reading any more like it. >
The entire article is a fraud. The Fraud starts with the first claim that the trust fund selling bonds back to the govt increase the debt. One dollar of bonds redeemed means one dollar less on the total debt, and one dollar more on the debt owed to the outside world. Net change = zero.
That is why any discussion of the “Debt owed to the public” strarts with a fraud. In the end it’s all owed to the public.
I know its an old story but it still applies today. The whole debate about Social Security being part of the deficit is just a distraction from the truth. For years Social Security ran surpluses and like me or you invested in treasury bonds which they are now redeeming to pay benefits. It’s no different than me loaning you a $1,000 and in order to repay me you have to take out another loan and then you blame me for your extra debt. That’s what Republicans do, blame the creditor (Social Security) for their own spending and lack of tax revenue (Corporate tax cuts) for all the other non-social security programs. Social Security right now pays it’s own way through tax revenue AND the savings/investments they made. The first thing is the cap on taxable wages should be eliminated to increase revenue & social security income should not be taxed or at least the taxable income limits should be raised to account for inflation since it was implemented in the Reagan years.