Social Security: We're So Fucked
Blogger Dawn Smit did some stats comparison, writing:
A friend of mine posted this on Facebook: "Interesting statistic - in 1930 the average life expectancy in the US was 58 for men and 62 for women.
Six years later, Social Security established a retirement age of 65.
So Social Security was designed in 1935 with the intent that it would only kick in at end of life. Which fits the goal of Social Security: protect the most vulnerable elderly. (The modern idea of retiring before you had to physically stop working was only gradually percolating through the country at the time.)
Was Social Security truly intended to protect the elderly? Could it, say, have been intended to make the public more dependent on the government teat?
Or here's George Will:
"People forget Social Security was advocated ... in the 1930s, as a way of getting people to quit working, because they thought we were confined to a permanent scarcity of jobs in this country."
And here's what looks like some confirmation from that from an 1935 "fireside chat" by then-President FDR:
Roosevelt said, "The program for social security now pending before the Congress is a necessary part of the future unemployment policy of the government. ... It proposes, by means of old age pensions, to help those who have reached the age of retirement to give up their jobs and thus give to the younger generation greater opportunities for work and to give to all a feeling of security as they look toward old age."
Flash forward to today and how 65 is no longer old -- again, from Smit:
As of 2014, the number of people surviving to 65 was 84% overall. Social Security was never meant to send benefits to that much of society. Receive taxes from, yes. Pay out to, no. To get an equivalent survival rate in 2014, the retirement age would have to be over 80.
Uh-oh.
Predictions?
Oh, and don't forget to factor the looming crisis that is public pension funds -- paying out hundreds of thousands a year to RETIRED! workers formerly in the public sector.
Here's Aaron Brown, a former managing director and head of financial market research at AQR Capital Management, writing at Financial Advisor magazine:
The next phase of public pension reform will likely be touched off by a stock market decline that creates the real possibility of at least one state fund running out of cash within a couple of years.The math says that tax increases and spending cuts cannot do much. For one thing, as we learned from Detroit, at a certain point high taxes and poor services force people and businesses out.
The numbers are just too big in some states to come out of the budgets. For another, voters won't stand for it. The voters in these states have refused for decades to pay the full costs of the services they were already enjoying; they're not going to have sudden conversions to paying full costs, plus the accumulated costs from the past.
State constitutions will be amended if necessary and big legal battles will be fought. I cannot see any plausible scenario in which full promised benefits are paid.
More on pension reform from the Reason Foundation. And here's Reason Foundation VP, Adrian Moore, with five principles he's identified of successful reform efforts:
"First, reforms must ensure adequate benefits and secure retirement for workers while at the same time being sustainable for taxpayers and avoiding passing debt on to future generations. Second, you have to stop digging the hole deeper and a key part of that is shifting all new employees to a quality defined contribution or hybrid pension plan. Third, you have to make full adequate payments into the pension system to cover the costs of commitments made. Fourth, you have to assess if workers and taxpayers are both fairly contributing to the cost of current benefits. And fifth, you have to ensure governance of pension plans-from pension boards to oversight and auditing to actuarial assumptions-are sensible, transparent and accountable."
What happens if nothing is done? Well, picture calling 911 and the call going to voicemail. We've got such a heavy toll to pay for retired cops, firefighters, and other emergency personnel that, eventually, we won't afford to hire much in the way of their replacements for the current force.
via @instapundit
Federal pensions are under control, and not nearly as generous as most people think they are.
But this post is mixing apples and oranges. Social Security is past the point of no return as far as going in the hole. Two solutions, and they may be implemented in tandem. Those two things are means testing benefits, and inflating our way out of it.
When it comes to the bigger problem of state public employee pensions, when the states can’t borrow anymore money they will go bankrupt, and stop paying their debts. This will trigger a bond meltdown, and also, as I understand it, the Resolution Trust corporation taking over the payment of defaulting state’s public pensions which means that the big obscene ones will get slashed to the bone. Pennies on the dollar. If anyone else out there knows more about what will happen, feel free to chime in. This is not my area of expertise.
I do happen to have a freind who retired from a California sheriff’s department several years ago, at fifty I believe. Last I checked, her pension was 106,000 dollars a year defined benefit.
Contrast this with my husband, retiring after thirty two years with the federal government as a Civil Engineer, P.E age 62, will get maybe 34,000 a year if my calculations are correct. Anything else has to come from Social Security, his army reserve retirement, (very small) or his 401k.
Isab at May 6, 2018 12:32 AM
Third, you have to make full adequate payments into the pension system to cover the costs of commitments made.
Fuck that noise, I made no commitments, those were made by politicians running for office and getting kickbacks from the unions promised that money.
Person A promised Person B Person C's money (often before person C was even born)
As Person C, I have no moral of ethical obligation to pay for deals I was never party to. Those fuckers pulling public pensions can sue the no longer in office politicians for THEIR money, or the union they belonged to, but as the never consulted, cashiered sack of money they want to drain - fuck them
lujlp at May 6, 2018 1:33 AM
Isab, on social security you missed the option where they just chose to pay less. SS is a welfare program not a pension. You have zero property rights. The payments can be changed in any way shape or form by just changing the law. The Supreme Court in Flemming vs. Nestor already ruled on this and was clear that you have no legally binding contractual rights to Social Security benefits.
On inflation, SS is indexed to it. So unless you lie about the inflation numbers you don't actually get anything. (Not that I'm saying they won't lie about the numbers)
On means testing, SS is already means tested. On a practical political side means testing enough to actually put the program into balance would probably cut so many people out of the program you would lose enough support that cutting the program out entirely would become a viable option.
On state bankruptcy, technically this has never happened and is not covered under current law. In 1933 Arkansas did default on it's debt. In the end the FDIC bailed them out. But what happens is anyone's guess. It will largely depend on who is running the federal government at that time. If Illinois defaults (the most likely candidate) then anything from the federal government bailing them out to them reverting back to territory status is possible. But there isn't much middle ground available. Cities and counties can default and fall under the control of the next level higher government. But there are laws that authorize that. Currently there is no law authorizing the federal government to take over a state. There is also no law authorizing a state to declare bankruptcy.
On a related note, the state of Texas is looking to convert all new hires to 401k style plans. They don't think they can move the current people over but are looking into that too.
Ben at May 6, 2018 5:33 AM
Hubby and I are assuming we will work until no longer able to-we both enjoy our work-and that social security wont be around. Medicare in its current form needs to go too. It's obscene the amount of money we pay on revolving-door elderly hospital admissions. Our end of life thinking needs a complete paradigm shift.
Momof4 at May 6, 2018 6:02 AM
How about a special 'fair pension tax', applied only to govt pensions to make up the balance. I think the voters would get behind it. Tax gov't pensions at 95% for any amount above the average wage in the state/county. If govt workers were actually being underpaid, like many (teachers especially)it would not effect them at all.
Joe J at May 6, 2018 6:05 AM
Public Union leaders will cry asking the government for help when the pension funds they were assigned to manage magically evaporates.
But, if the first thing the government does to help is to send a third-party team of auditors, the union leaders will throw a hissy fit and threaten to rile up the masses to a strike. Their idea of help from the government is more money.
And of course, the unions will back them no matter what, because not one of them wants to admit the embarrassment of putting such thieving scum in charge.
Sixclaws at May 6, 2018 6:42 AM
Good luck with that one. Unless you're self-employed, you have no guarantees that you'll have a job until you're no longer able to work. Even then....
And looking for a job after 40 is no picnic. You're assumed to be a technophobic luddite and a high-cost employee. It's assumed you won't be able to relate to or work with younger peers. It's assumed you will be openly resentful of taking a step backwards (e.g., from management to staff). And if your role in your last company was middle management, you're doubly screwed. It's assumed you won't know how to manage the coveted Millennial workforce.
In a creative field, it's assumed your best years are behind you.
I moved from the West Coast to the East Coast for a family emergency last year and am running into all of these walls, despite a high degree of technical proficiency, higher than most Millennials.
The irony is that if I were still in California, I'd be employed by now - all the highly-educated young workers want to work in Silicon Valley, so the pool of educated workers willing to work outside the Valley skews older. My only choice out here is to go into real estate (a dying field) or buy a franchise (a colossal investment).
Age-specific filters on social media job ads mean older workers are never made aware of job openings shown to younger workers. While a bias toward younger workers has always been present, employers have not until now had this kind of power to limit exposure to older applicants.
So, yeah, let's tell Gramps he can't have Social Security, that he can just go back to work. Then, let's all piss and moan about how Grandpa is leeching off the system.
Conan the Grammarian at May 6, 2018 6:59 AM
I figure that Social Security will be gone and I'll have to work until I'm dead. I hope I can, because I have a really dumb career. Previously, I thought I could work hard as a writer and be middle class. And you really could. Now, with the incredible decline in pay for anybody in a creative profession, I'm lucky not to be homeless. Working on retooling to get speaking engagements -- those pay. Also, I'm writing a medical expose that has information people cannot get elsewhere. That's gotta be worth something.
Depressing times!
Amy Alkon at May 6, 2018 7:06 AM
This is after the government took 12.4% of his salary for all of his working life and promised he'll start getting it back at 65. That the government spent it on frivolous political boondoggles instead of investing it is somehow his fault now.
Properly invested from the beginning, the Social Security fund would be highly solvent today. Instead, the funds were commingled with the general fund and wasted. Treasury Notes were placed in the "lockbox" as IOUs and called an investment. The government loaned itself your money and promised to pay itself back with more of your money.
__________________________________________________
How long until means testing based on current savings becomes means testing based on historic salaries? "Well, Bob, based on your tax returns, you should have saved more than what you did, that expensive cancer notwithstanding, so we're going to cut your benefits. We've got a lot of poor people to provide for, you know."
Conan the Grammarian at May 6, 2018 7:15 AM
Not only that, but if you write a novel after 50, you'd better be prepared for rejection and rewrites. Publishers want younger - younger characters, younger writers, younger readers.
Conan the Grammarian at May 6, 2018 7:22 AM
lujip:
I made no commitments...
Person A promised Person B Person C's money...
As Person C, I have no moral of ethical obligation to pay for deals I was never party to.
Problem is, so long as you have a visible income you can't get out of it.
kenmce at May 6, 2018 7:32 AM
This is after the government took 12.4% of his salary for all of his working life and promised he'll start getting it back at 65. That the government spent it on frivolous political boondoggles instead of investing it is somehow his fault now.
It is, it is no secret what they were doing with the funds, everyone was aware and continued to vote for politicians promising them crap they didnt really need, so yes, it is grandpas fault.
The guy should have voted for fiscally responsible candidates
lujlp at May 6, 2018 10:01 AM
Do you know he didn't?
Conan the Grammarian at May 6, 2018 11:03 AM
If all those grandpas had voted for fiscally conservative candidates then they would have gotten elected. Yes we do know he didn't. Of course he wasn't a grandpa at the time and retirement looked so far off . . .
Ben at May 6, 2018 11:32 AM
If you want to bring things into balance (at least for the moment) then the federal government needs to cut spending by 33%. Social security, medicare, medicade, and yes even the military need to cut spending by at least 33%.
And you have to give up on that 12.4% you paid in the past. SS was always a welfare system. There is just no denying that fact. You've paid into a lot of different government programs and you don't get your money back. Social Security is no different.
And for those who complain 'The politicians lied to us!!!', so what! This wasn't a secret. Since the beginning people have seen the problems and exposed the lies. This is no different from someone looking at your house and claiming it is an elephant. You know it is a house. They know it is a house. If you are willing to be 'tricked' by such an obvious lie then you are responsible for the outcome.
Ben at May 6, 2018 11:37 AM
Actually, Social Security is different.
People who paid into Social Security were promised money back from that "investment" when they retired or reached a certain age. Even the responsible ones made plans around that expected income.
People paying taxes for defense or welfare aren't usually expecting to get their money back later, at least not in cash form. A secure country with no favelas is the payout for that tax. Police, Fire/Rescue, and schools are the payout for local and state property taxes. People understand that.
Arbitrarily dropping the amount or reducing Social Security retirement payments is going to leave a pissed off bloc of voters, both the already retired and the soon-to-be retired. And, unlike the pissed off socialists calling themselves college students these days, this bloc votes.
And the optics won't look good with Grandpa eating dog food to survive because some politician told him to "give up" on the 12.4% of his income he "invested" in a government-backed retirement scheme.
Social Security reform ain't gonna happen - 'cause even the Millennials who complain Social Security will be broke by the time they retire aren't saving anything.
Conan the Grammarian at May 6, 2018 2:04 PM
No it isn't different. If you actually believed that lie about pensions or investment then you were willfully deluding yourself. From the first day SS was written as a welfare program. It was administered as a welfare program. Plenty of people saw that is was a welfare program and alerted people. The courts ruled back in 1960 that you had no rights to any benefits, just like you don't with any other welfare program.
I agree most people still don't want to admit it is a welfare program. They don't want to admit they or their parents are on welfare. And finally being forced to face that reality is going to piss a lot of people off. But in the end reform will happen. Just for the simple reason we don't have the money. Promises were made that flat cannot be kept. So they won't be kept. And the boomers are going to take this on the chin. Just for the simple fact they are a large mass of people and there aren't enough young people to keep the system going.
And yes, we will put off reforming things for as long as possible. So instead of reforming today and reducing spending by 33% we will wait and wait and borrow and borrow and eventually we will have to reduce spending by 80% or more.
Ben at May 6, 2018 3:03 PM
Damn it, Ben! It's not that I believed it. It's that it was sold that way. No other tax was or still is sold as an individual investment. Log into MySocialSecurity.com and see what the government is promising you, in cash. The government still calls it your money. The government doesn't call any other tax "your" money.
Conan the Grammarian at May 6, 2018 3:09 PM
The first step in reform will be for the government to stop calling it "your" money. But that's going to be a hard sell to people who gave up 12.4% of their income for fifty years.
The confusion in welfare vs. retirement exists because the benefits are individual contribution based - if you made more, you contributed more, and you get more back.
Not to mention that it's tied to a distinct Social Security Number, making it an individual benefit, not a widespread social welfare program with generic hurdles to be met for gaining or losing benefits (e.g., number of kids or marital status).
Conan the Grammarian at May 6, 2018 3:15 PM
Conan, so what you are saying is if I piss in a bottle and sell it to you as lemonade it will magically become lemonade?
Hey did you know the Affordable Care Act was sold as a plan to reduce the cost of insurance?
lujlp at May 6, 2018 3:45 PM
Conan, I'm just saying the promises won't be kept based on the simple logic that they cannot be kept. You said "Social Security reform ain't gonna happen". I'm responding that yes it will because it has to. I get that this is a very seductive lie and people like this lie a lot.
"If you like your doctor you can keep your doctor.", "Depends on what the meaning of is is", "Read my lips, no new taxes."
Doesn't matter that people like this lie. The program is getting closer to the point of collapse. And there is no realistic way to stop that.
I agree that most people and the government will keep denying the reality that SS is a welfare program and when they run out of money they will borrow to keep the lie going. But eventually there will be a bond sale failure. At that point SS will collapse and payments will have to drop by 80% or more. As will many other federal spending programs.
Ben at May 6, 2018 4:07 PM
No, luj, that's not what I'm saying. Not at all.
You're probably right that Social Security's fate will be collapse rather than reform.
A big part of the problem in getting people to accept your Social-Security-as-welfare argument is that eligibility is tied to a personal identification created solely for that purpose, one's Social Security Number, and the size of the payout it is influenced by how much the person contributed in life.
In addition, if you didn't pay enough Social Security taxes, you won't have accumulated enough credits to be eligible at retirement. Welfare eligibility requirements do not generally require that a recipient have paid into the system prior to collection, so most people do not consider Social Security to be welfare.
Conan the Grammarian at May 6, 2018 5:56 PM
Yes, I did. And I argued even then that it would not, and that it would also ruin the quality of care.
Conan the Grammarian at May 6, 2018 6:06 PM
"How long until means testing based on current savings becomes means testing based on historic salaries?"
It'll probably be based on total assets. Did you work for 30 years to pay for a nice house, some investments, and a 401K? Too bad, no Social Security for you, even though you might no longer be capable of working.
"If you actually believed that lie about pensions or investment then you were willfully deluding yourself. "
True. But it also doesn't change the fact that Grandpa had to pay that 12.5% tax all his working life. If he had had that to invest, things might be different.
Cousin Dave at May 6, 2018 6:10 PM
"And looking for a job after 40 is no picnic. You're assumed to be a technophobic luddite and a high-cost employee. "
Back around the beginning of the year, I started looking around when it looked like the funding for my current program might be in trouble. I had a recruiter from the proverbial Major Aerospace Company call me, out of the blue. We talked; I told her a bit about my qualifications and work history. She put me in contact with an HR person who discussed job openings with me.
Then they found out that I'm 58 years old... and interest dried up overnight. Of the job openings I applied for, they didn't even do me the courtesy of sending a "thanks but no thanks" notice for most of them.
Cousin Dave at May 6, 2018 6:16 PM
"On state bankruptcy, technically this has never happened and is not covered under current law. "
Hmm. Read up on the Yazoo Land Fraud, if you haven't already. The executive summary: The state of Georgia originally controlled all territory westward from its western border to the Mississippi River. In 1799, it was discovered that the state had sold multiple titles to many tracts of land in its territorial area. The cost of making good on the fraudulent titles would have bankrupted the state. The federal government agreed to a deal where they would bail out the state by paying to buy back the clouded titles, but in return, Georgia had to cede its claims to the territorial area.
So if California's public employee pension fund has to be bailed out? No problem. The feds step in and clean it up. The catch: California reverts to territorial status. No representation in Congress, no voting for President. When the state leaders form a new government, and pass a new state constitution with provisions to prevent anything like that from happening again, they can apply for re-admission to the Union.
Cousin Dave at May 6, 2018 6:26 PM
I agree CD that the next means test that will be applied to SS is asset based. And it won't do much. We already do this with Medicare. And people respond intelligently by spending all their assets so they qualify.
That is why I responded so strongly to Amy's headline "Ending Welfare For Those Who Can Work". It doesn't actually work that way. You can reduce the number of people on the rolls but there is amazingly little correlation between 'worthy' recipients and number of recipients. Instead the more complex and confusing you make the rules you actually end up with a higher percentage of people you didn't want to help on the rolls. People change their behavior to meet the requirements. Those we most want to help are the least able to change their behavior. Those who don't want to work but are fully capable are quite skilled and innovative on figuring out how to game the system. So keeping rules simple seems to be the best way to help as many of those you want to help.
"But it also doesn't change the fact that Grandpa had to pay that 12.5% tax all his working life. If he had had that to invest, things might be different."
Following historical patterns, no. There would be nothing left. It is inherent human nature to consume all you have. Social security actually changed none of that. The majority of people spend and save just as much as they did before. It is just that now they get welfare dollars from Uncle Sam.
Conan, I understand the psychology. SS was intentionally setup to get people on welfare and destigmatize being a welfare recipient. The idea was to get a lot of people enrolled and then later people would realize they were on welfare all along and that it wasn't that bad. Well, while they were able to convince people SS isn't welfare they failed to destigmatize welfare in general. So people react very strongly when you tell the truth about SS being welfare. But the actuarial numbers are inescapable. There are just too many boomers and not enough young people to keep the system going when the majority of boomers retire. I know you are well aware there are no savings or reserves. SS was always a transfer payment system. All money that came in got spent. Either on SS or general government projects. So once you start taking more money out for SS than revenues are coming in the government will have to borrow to cover that shortfall. At some point the US will fail to sell their next bond and will go into default. At that point a lot of things will change because there isn't any money to pay for things.
On current trend lines you are looking at 50-80% reduction in spending by the federal government just because they don't have the money. (Servicing current debt will be a huge chunk of spending) And Isab is right that massive inflation is a likely result. Claiming that inflation is near zero while quietly issuing 'new' dollars (just like the new pesos from Mexico).
Ben at May 6, 2018 6:47 PM
Been said by a number of folks:
Democracy survives until the voters discover they can vote themselves largesse from the public treasury.
Or, democracy survives until the elected representatives discover they can buy the chump's votes with the chumps' own money.
Richard Aubrey at May 6, 2018 8:33 PM
"And, unlike the pissed off socialists calling themselves college students these days, this bloc votes."
I find it both amusing and ironic that one would have the nerve to try and insult an entire generation by calling them socialists while also expecting that same generation to fund you social security checks.
That group of "socialists" as you call them are literally being forced to pay for your retirement.
You voted for them to pay for your retirement before they were even born.
You also didn't ensure that the government kept your social security payments in a properly managed fund... instead it was raided to help reduce your tax burden.
So in essence your generation voted to rob children who weren't even born yet... and then call them entitled socialists who lack personal responsibility.
If the current crop of retirement age folks didn't plan accordingly why are they socializing their problems on the backs of people who had nothing to do with how things developed???
I think I know who the socialists are... and it isn't current college students.
Artemis at May 7, 2018 9:41 AM
Read it again, Artie.
I didn't call all college students socialists. Nor did I even call all socialists college students. I said "pissed off socialists calling themselves college students."
Nor did I call an entire generation anything.
Nor am I expecting them to fund my retirement. I've got savings for that. I am, however, going to demand at least some portion of my lifetime 12.4% back, even it is an exercise in futility.
If I'd been allowed to invest that 12.4%, I'd potentially have millions today from it.
Wrong again, Artie, as usual.
I voted for the guy who wanted to reform Social Security with individually-managed accounts like a 401K. However, the opposition party in Congress declared that idea dead on arrival.
You might remember the senator who so strongly opposed Social Security private investment accounts when proposed by a president of the opposition party.
She later ran for president advocating almost the same reform.
And Artie's wrong yet again.
I didn't vote to move the Social Security fund to the general fund. That was accomplished long before I was born.
I've been voting for market-oriented Social Security reform since I voted in my first election.
Conan the Grammarian at May 7, 2018 11:43 AM
Conan Says:
"I didn't call all college students socialists. Nor did I even call all socialists college students. I said "pissed off socialists calling themselves college students."
Nor did I call an entire generation anything."
I didn't realize you were quite so particular. I will keep that in mind for the future.
So when you said this:
"Arbitrarily dropping the amount or reducing Social Security retirement payments is going to leave a pissed off bloc of voters, both the already retired and the soon-to-be retired. And, unlike the pissed off socialists calling themselves college students these days, this bloc votes."
You weren't actually referring to an entire voting bloc of young people attending college that would be comparable in size to the voting bloc of soon-to-be-retired folks.
Instead you were referring to a voting bloc of people who are socialists who call themselves college students but may or may not actually attend university.
That cannot possibly be a large bloc of voters any of us should be concerned about.
What do you estimate the population of registered socialists who claim to be attending college actually is?
As far as I am concerned that group is negligible at best and can be ignored regardless of if they show up to the polls or not.
Artemis at May 9, 2018 1:09 AM
That was the point Artie. They are negligible and can be ignored. Unlike the voting block of everyone over 65.
Ben at May 9, 2018 5:23 AM
Ben,
Then it was a silly point.
There is no point to discuss tiny almost negligible sections of the population and call them a "voting bloc".
Now on the other hand... if the point had been to discuss the entire voting bloc of folks between 18 and 23 and discuss them in terms of their proclivity to vote in comparison to older voting groups... then that would have been a real point to make.
I erroneously made the assumption that people here would discuss things of importance.
Talking about segments of the population that amount to a few hundred people as a "voting bloc" (i.e., registered socialists who refer to themselves as college students)is a waste of time.
Usually when talking about voting blocs we are considering a larger subset of the population.
Artemis at May 9, 2018 7:30 AM
And we made the assumption that a sane person would not spend thousands of words nit picking minor points in someone's post and missing the overall point entirely. But you continue to astound us, Artie.
Millennials (who tend to favor socialism) do not vote in the same numbers as the preceding generations (63% of Gen-Xers vote while only 49% of Millennials do). However, due to a greater propensity to vote as one gets older and sheer size, the Millennial vote is expected to be larger than the Gen-X vote by the 2020 election.
In the 2016 election, Millennials continued to have the lowest turnout of all the generational cohorts still in play at 46%. Compare that to the 72% of the Silent Generation that turned out to vote.
By sheer numbers (in terms of both the number of people and the number of years making up the cohort), Millennials may start punching in their weight class soon, even with a low turnout. And that turnout should increase as the cohort grows older - young people tend to be lax voters.
As people get older, they tend to be more concerned with voting - and with retirement. Hence the difficulty of using the ballot box to defund Social Security.
Conan the Grammarian at May 9, 2018 8:12 AM
Here's a link for the Millennials tend to favor socialism comment above.
Conan the Grammarian at May 9, 2018 8:13 AM
Yes Artie the point was silly. Because the point was meant to be silly. I'm glad your reading comprehension has hit that level.
Just to make things easier on you:
Conan - Social security won't change because the group that relies on it is a very significant voting block and they see no reason to change.
Ben - Social security is an unsustainable system. Things that can't go on eventually won't go on. Then I talked about how the system will collapse.
For other thinkers:
The grandpa is going to be eating dog food isn't a real expectation of what will happen when SS collapses. Eating dog food is more of a sign of dementia than of poverty. Instead the reality is much worse for younger people. Grandma and grandpa aren't going to huddle under a bridge and freeze in the winter. Instead they are coming home to live with their children. A major component of SS and medicare was for only 12.5% of your income someone else will pay to keep your parents in their home, put food in their belly, and take care of their medical problems. You don't have to wipe your mom's butt when she can't. Instead the government will pay someone else to do it for you.
So an obvious result of SS falling apart is a return to the extended family. But think about what that looks like for Gen-X and Millenials. Few people's parents stayed married. Are you going to have two bitter divorced people living together in your home? Ok, split them up among the kids. But so many people only had one kid. What about non-biological parents? Mom may have had five different marriages. Where does daddy 1-5 stay?
I'll admit I don't have a clue how that would shake out. All I can tell is it is going to be a mess.
Ben at May 9, 2018 10:16 AM
That's what happens when you keep kicking the can down the road.
I though George W. Bush had the germ of a decent idea to start some sort of SS reform. He proposed putting 1/2 of a person's collected SS tax into a fund over which the beneficiary would have limited control, like a 401K. And investing the other half as a fund for some sort of retirement stipend for those who didn't make enough to qualify or for those who wouldn't get at least a minimum level of benefit.
Bush's plan would have locked at least half of SS into being an actual retirement fund and not a slush fund for Congressional spending junkies. It would also have turned SS into a defined contribution plan and not a defined benefit plan.
Nancy Pelosi and Hillary Clinton joined a chorus declaring that any Social Security reform that included even a minuscule level of privatization would be "dead on arrival" to protect the seniors. And, thanks to having to respond to Al Qaeda destroying the twin towers, Bush's political capital was too low by his second term to force the issue.
Ironically, it was Hillary Clinton's husband who, as president, first proposed investing Social Security funds in Wall Street rather than t-bill IOUs. And she later ran for president proposing at least some limited privatization of Social Security.
Conan the Grammarian at May 9, 2018 11:38 AM
Well, that isn't a kicking the can down the road issue. Relationships in the US have gotten very weird over the last few decades. And that isn't really a part of SS.
For example my brother in law's baby momma had a 'father' who her mother was no longer married to but they were still quite close and went to family parties he hosted. It is fairly obvious that without SS to foot the bill the mother can't afford to live in her house. She has no significant savings. But her daughter is an old druggie with little to no ability to support herself. My brother in law is an alright guy. But would he be willing to adopt ex-grandma? I don't know. What about the various ex-husbands? I don't know.
But this is actually fairly common these days. Boomers made an incredible mess of their personal lives. And their kids continued the trend. So when the shit hits the fan and something has to be done to clean up the mess I can't even guess how things are going to get cleaned up.
And on your topic, it would have been nice if Bush could have gotten things into an IRA format. Even if only partially. But yes, there wasn't the political willpower then and there isn't the political willpower now. SS is already running a deficit. The only way they show a positive cash flow is from 'interest' on T-bills. But that is like giving yourself a loan. There isn't an actual increase in cash. So I don't see much value with the idea today. They need 110% of your tax money just to pay the current bills. Putting some of that into an individual account impacts current beneficiaries.
On a brighter note Texas is looking to convert all public pensions into 401k style plans. That would do a lot to bring long term stability to things here.
Ben at May 9, 2018 1:08 PM
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