I’m not right wing.
What is the Trust Fund for? Until 1981 it was a surplus used to cover shortfalls. Since 1983, it has been an ever growing rainy day fund. Every year it gets bigger and bigger. Any time the SSA says that we might need to use it, congress cuts benefits or threatens to. Why did Reagan increase the FICA tax we all pay? Why did we build a $3T surplus if we aren’t allowed to use it. This ever growing surplus is bad policy. Bad policy should be corrected.
If you want to disagree with me, please do. But don’t say that my opinion is a joke, and don’t cop out by claiming you can’t explain something to me. I’m an accountant. I understand finances. I have the vocabulary. Implying that I don’t or that my opinion is a joke, is bad debating on your part. It is an ad hominem attack. Please stop doing that.
And if you want to explain something to simple little me, please explain your balloon mortgage analogy and how it applies in anyway to transferring debt from one creditor (the SSTF) to another (any other purchaser of public debt).
Also, please tell me what the $3T in the trust fund is for, if not for paying social security benefits.
You have not, because the 1984 reform of Social Security fixed that solvency problem for more than a generation.
It’s put in better context if you say that there was an increase of about 1%.
And in the last 20 years, benefit payments have gone from $595 billion per year to $1.7 trillion, while the growth in the Trust Fund went from ~15% per year to less than 1% a year.
You may be a good accountant, but I highly question whether you ought to be a CFO.
You might be an accountant I don’t know, but you haven’t displayed much financial savvy by my estimation.
I have two issues with your stances thus far. The first is your complete lack of concern with racking up the nation’s debt. In your own example, you stated that you’d rather just borrow money rather than pay for our bills as we go by raising taxes. That doesn’t seem like solid financial planning to me.
Second, you also seem to have the belief that an entitlement “you call it ‘honor the debt’” means that the government never has to be concerned with how that debt is paid (or honored) as if by that characterization, the debt will magically be paid. You’ve alluded that “the government” will pay it as if you, and presumably the rest of your fellow tax payers, need not worry about how that will miraculously happen. As if fiscal reality has no bearing on this.
I’ve raised this point and others and you’ve yet to address them.
Shouldn’t the plan over the long term be to match revenues to expenses? Between the baby boom and immigration, the US had a long period where the ratio of people paying into the system compared to recipients from the system was pretty high. That ratio’s been declining for years as the baby boomers have retired and post-retirement lifespans have increased. The revenue banked years ago is now being expended - the long term has caught up.
If the tax base continues to grow, while the number of recipients and associated payouts plateaus, then you’d have an argument for a lower reserve. However lowering revenue while expenses are increasing at a greater rate than current revenues would turn a manageable gentle decline into a steep decline requiring a drastic future intervention. That strikes me as bad policy.
At what point since the Reagan administration has Social Security not been predicted by pundits and politicians to disappear?
I believe we should use the trust fund to pay benefits. I believe if any other government agency had this kind of surplus running for 40 years, we would have already decreased the dedicated tax that funds it.
Project out the current surplus and deficit amounts. When does the trust fund cease to exist. Look at passed SSA perdictions, have benefits increased or incomes decreased as much as they have perdicted?
Nothing that I have suggested increases the national debt. Nothing. My proposal lowers the interest rate we pay on the debt, but gas zero impact on the principal of the debt.
I totally agree with matching (plus a reasonable reserve amount) incomes to outflows. Currently I’m not seeing the reserve shrink. It hovers around 200-300%. I would perfer 25-100%.
This proposal you made right here would increase the Federal debt by just under a trillion dollars each and every year. Seriously, who are you trying to fool by saying that stopping collection of FICA wouldn’t raise the debt?
No, it would transfer $1T in debt from the SSTF to other creditors. The $3T in the Trust Fund is debt. It is part of the national debt. If we used $1T to pay benefits, and raised $1T in new debt to pay for it. Then the total debt would be $2T in the trust fund, plus $1T in new bonds. So, how did the debt increase?
So you propose forgoing $1T in revenue, and in its place borrowing $1T, and you can’t understand why our future liability is increasing?
Forgo a $1T in debt for a $1T in debt at a lower interest rate. And that $1T we forgo, who gets to keep it? Wage earners. Self employed people like me, and W2 employees like most everyone else.
Obviously I’m not suggesting we stop collecting SSDI. I’m suggesting we lower the rate, bracket it (like regular income tax), and expand the base by removing the ceiling and taxing nonwage income.
The trust fund surplus should be used. If we don’t ever use it, then why are we paying so much in FICA taxes?
Told by whom? Right-wing liars?
Two big problems here.
(1) The Trust Fund surplus is expected to start declining very soon.
(2) Whether that TF declines or not, some analysts will properly treat SSTF as part of the Government for fiscal accounting. When that is done, it is seen that the net deficit even if SSTF were running a surplus (which soon it won’t be) is still large.
Some say that deficits and debt don’t matter, and they may be right! :eek:
But if we’re striving to reduce the net deficit, cutting taxes is not a solution.
As I state in OP, I’m happy to cut the SocSec tax, but I’d like to see the shortfall made up with other new taxes.
Are you sure you’re an accountant? Like, really really sure?
Swapping $1 trillion for a different flavor of debt doesn’t increase the national debt. Stopping collections on $1 trillion in revenue DOES increase the national debt.
I say this all the time about my car and homeowners insurance. I keep cutting those checks to Farmer’s, but I never see a cent of it back. I must be a total sucker, amirite?
Where’s the lower interest rate coming from?
l0k1’s principle idea is fine, but his timing is off. A corporate analogy would be a company in a mature market that’s been making a profit for years, and has accumulated a large cash balance. In other words, a cash cow. A company in that position should pay a dividend to shareholders rather than just sitting on the cash.
What this analogy leaves out is that the retirement and disability insurance company we’ve been discussing has millions of contracts with future obligations that it will have to fulfil or it will go out of business. My opinion is that l0ki, to use accounting terms, is inadequately accruing for those future liabilities. Under current projections, the reserve is going to go down. It doesn’t need to be maintained at its current levels, and a reserve at something like 50% of annual payout should be fine. However, the trust fund’s trustees’ forecast is that the reserve is going to hit that level in around 10-12 years. The social security trust fund may have a huge cash balance, but that’s offset by huge liabilities. Given that, a dividend, aka a social security tax break, seems like a poor idea.
Having said that, l0k1’s basic idea is still less hare-brained than the idea proposed in the OP.
I don’t know about that.
With Medicare, Medicaid and SS eating up half of the federal budget and growing and with interest on the debt at 10% and growing, adding to the nation’s unfunded liability to the tune of $1T or more per year seems like a path to unmitigated disaster.
Future generations of Americans are at some point going to have to pay the bill for the lifestyle Americans have lived and not funded for the last 50 years. Do we really want to add more debt to our children and grandchildren?
Treasuries sold on the open market are roughly 30 basis points cheaper than the bonds in the trust fund. It’s a little bit of an apples-to-oranges comparison, because the interest rate on the Trust Fund is given as a figure representing all bonds in the fund, regardless of when they were bought, and the rate for new bonds he is referring to is the current market rate.
I agree with your statements but am far less charitable to l0ki’s terrible plan. I have no problem with using payroll taxes to provide a temporary stimulus. I also have no problem with revising payroll taxes as a means to remedy income inequality for what is clearly a regressive tax (but with non-crazy reasons why it is regressive).
But the idea that it is good fiscal and economic policy to replace existing taxes with new debt is just dumb.
My criticism of the OP’s idea is that he’s probably talking about way too much of a tax break that could be reasonably offset through other revenue. If he wanted to give lower and middle income earners a $750 payroll tax break, or something in that ballpark, and make it up on the wealthy (like me), if the numbers shook out well I would be all for it.
I’m not “married” to the $2000 figure and chose it for OP for fear that a smaller figure would be riposted with “With such a pusillanimous cut, why bother to post at all?” With proposals like Yang’s attracting support, mine was intended as a mild bid for compromise.
Anyway, a carbon tax is a good idea for other reasons; and the smallish off-setting carbon tax OP proposes is in just the right ballpark.
It depends on if you consider the social security trust fund and the US national debt separate entities or not, and on how you assess either the trust fund’s estimates of future revenues and expenses, or the accuracy of their historic estimates. Personally, I believe the trustees are relying on actuarial experts and the report should be taken in good faith. (I’m certainly not going to wade through a 260 page document to decide if I agree or disagree.) In that case, a dividend in the form of lower social security tax rates is a mistake. The opposite should happen and the amount of social security revenues should be increased. My preference would be for the increase to be in the form of a raised cap, which indeed happened for 2019.
I don’t want to put words in l0k1’s mouth, but my take on his position is that he believes the trust fund’s estimates of income have been consistently low for many of the past several years resulting in an unnecessarily high cash balance. That position would need to be backed up by numbers proving the estimates were low, and an alternative forecast of future social security revenues and expenses. If those were provided and proved reasonable, they’d be a basis for an argument for a dividend. So while I don’t agree with (my interpretation of) l0k1’s argument, and I think it’s unsubstantiated, the basic principal is sound. Note however, that this idea relies on viewing the social security trust fund as separate than the US national debt. Reducing tax revenues in the face of high national debt is a different conversation.
As for the OP, I think it proposes to remove $354 billion in social security tax revenue, but still provide the “credits” those taxes would have paid for. (Actually, less than $354 billion in taxes would be removed since some people pay less than $1500 than in social security tax, but all wage earners would receive the credit.) First off, half of that tax relief, the employers side, is unnecessary, or at least unjustified. The removed tax would then be replaced by either moving the tax burden to a much smaller pool of high wage earners, or by a carbon tax. I disagree with sudden, sharp tax rises, especially when it’s for a benefit that’s considered separate from general taxation. Regarding carbon taxes, I generally agree with the concept, or at least a measured introduction of them, but I’d like revenue from carbon taxes directed towards supporting low carbon initiatives such as public transportation or wind and solar power. There probably is some merit in an argument about shifting taxes i.e. “next year you’ll pay more in gasoline tax and less in social security tax”. However, if social security is considered to be separately funded, then the accompanying tax reduction should be from income tax. I’d also want to see some mitigation targeted towards rural residents, who would be more impacted by gasoline taxes than urban residents.