The Intergenerational Racial Politics of the Proposed Payroll Tax Moratorium

Politics & Elections
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We’re all aware that Trump has permitted stopping collecting the employee part of the Social Security tax = “the payroll tax” from now to the end of the year. Which amounts to a ~6% take-home pay bump for most wage earners. And which supposedly would be paid back by taxing the same people double some time in early 2021. See also:

My contention is this is the opening move in yet another RW attempt to defund SS. If Trump is elected they’ll find a reason to not reinstate the tax and SS will quickly “go broke” and need “urgent reform”.

Here’s some more background.

    SS in general is a variant on a pyramid scheme where our taxes today are not going to "save up" money for ourselves later, but are going to pay benefits to the elderly today. Who, when they were working, had been paying the benefits of the then-elderly before them. etc., back to the beginning.

    SS need not be a failed pyramid scheme as long as the economy grows fast enough. And due to the US’s growth since the 1930s SS has not been a failed scheme yet, despite vast and often unexpected increases in the number of beneficiaries and the real level of benefits paid out.

    And yes, there is a trust fund, and there are legit planned differences over the years between total SS tax intake and total SS benefit outflow.

That's all a sideshow to my topic and I do NOT want to bog this discussion down in the solvency or lack of SS as a whole, or the politics or accounting of what the "trust fund" really means.

My actual topic:

So far the vast majority of the money going out from SS has gone to white people. Historically, the vast majority coming in has also been from white people. But that is changing. Just due to demographics it’s a foregone conclusion that if nothing else changes by 2050 the recipients will be vastly whiter and wealthier while the payers-in will be vastly browner & relatively poorer. It has long been recognized that this may pose a problem for the long term political legitimacy / viability of SS.

If the Rs succeed in hammering SS in the next 5-10 years they will have the effect of “pulling up the ladder” before many brown people get on the receiving end of the payout. Almost all historical benefits will have gone to white folks of the mid-boomer era and earlier.

At the same time they’ll also screw a lot of white folks presently in their 50s & early 60s = late Boomers / early next-gen who’ve been expecting to receive benefits that will be “reformed” into unrecognizability.

Conversely, from the younger browner folks’ POV they’ll be unburdened from paying for the white elder Boomer overclass. But will be forced to fend for themselves in old age or disability.

So: Net net, is the racial aspect of this RW move my imagination, a bug, or a key feature of their design?

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Late edit: Change 2050 to 2035 in the above sentence.

3

It’s incidental. They’ve been talking about it for decades, it’s a privatization thing not a race thing.

It may be ironic that if they can plant the seeds of doubt about solvency in enough younger people’s minds, they’ll be the ones who end up saying fuck it and go along with it.

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I wouldn’t trust a source that can’t tell the difference between a pyramid scheme and a Ponzi scheme.

5

Not that it really makes a difference, but that’s a ponzi scheme. Repaying Peter with money you borrowed from Paul.
(edit, it would make a difference since running a ponzi scheme will get you put in jail. There’s nothing inherently illegal with a “properly run” pyramid scheme.)

Why is that? And, I’m honestly asking because I hadn’t heard it before (but I don’t pay a whole lot of attention to the SS System). Is it that white people live longer or that white people are better at navigating the system? Something else?

I think that’s probably the main reason people of that age that have traditionally been right are slowly moving over to Biden’s side. Don’t get me wrong, it’s technically a selfish reason. They want to vote out Trump so they can collect money that other people put into the system. But it’s a screwed up system. In theory, even if SS tax stopped today, they should still be able to collect based on what they put in.
You’d think in the nearly 100 years it’s been around, they’d have figured out some way to make sure that anyone who pays into the system, gets money out on the other end. If my bank collapses, the FDIC will make me whole again. I assume the SS system doesn’t have anything like that.

I know it’s been seemingly on the brink of collapse for a while, but I was surprised when I heard just how close it was. I wouldn’t have thought that deferring or altogether waiving SS tax for the lowest earners would mean it’s gone in just a few years. Or, when they say that, are they saying it’ll be gone in a few years if we stop collecting it from everyone?

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As to pyramid vs Ponzi there’s a bit of each if you dig onto the technicalities. I didn’t want to freight the discussion with any more pejorative connotations than was minimally necessary.

It’s three factors.

Mostly that current e.g. 80 yos were born in e.g. 1940. The white vs non-white percentage breakdown of 1940 US births is far whiter than the percentage breakdown of 1980, 2000, or 2020 births. In short, all else equal, white people are a bigger majority of current 80 yos than they are of current 10 yos. But all else is not equal …

The second factor is simply that in 1950-2000 USA, the wage premium for being working class white is larger than it is now. So while there certainly are non-white elderly SS recipients today, they’re heavily concentrated at the low life time earnings = low SS payout end of the spectrum. The money flow to the retirees skews whiter than the headcount does.

Last of all it’s well understood that being non-white in the US means a lower life expectancy. Which means a reduced likelihood of surviving to SS recipient age, or for staying there long after one does make it. So the e.g. 80 yo cohort is whiter today than it was at birth.

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These two statements seem to contradict each other. If you consider only the young-to-old wealth transfer effect of SS, changing demographics (increasing proportion of young non-whites) would imply a continuing transfer from non-whites to whites, so shouldn’t a purely pro-white race-driven agenda imply a motivation to expand SS over the next 30 years, to continue to transfer wealth from young non-white taxpayers to old white recipients? And at the point in the future when young non-white taxpayers become older recipients, that is proportionately funded by new young non-white taxpayers, so it’s not as though the racial effect ever reverses, it just becomes racially neutral as demographics stabilize.

9

The overall transfer situation is much more complex, though. You have several different wealth transfer dynamics.

young > old
high income > low income
short lifespan > long lifespan
healthy > sick
non-disabled > disabled

…and numerous other subtle transfer effects

I found this paper that seems to analyze exactly what your discussing:

Figure 3 sums up their analysis, showing benefit-to-tax ratio by ethnicity, including projections through 2040. It shows that for whites the ratio is currently about 1.2, and projected to increase to 1.5 by 2040.

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ETA: @Riemann This is aimed at your first response. I’m now off to read your cite.

Understood there are countervailing factors as you say.

A thoughtful analysis is the kind you did. Right now SS is definitely a brown(er) -> white(er) system but will eventually become the cafe-au-lait -> cafe-au-lait system once the relative demographics stabilize and a little later we’ve interbred the color variation out of all of us. Speed the day!

A less-well reasoned analysis goes like this. It’s better to prevent much / any tranfer to brown people. That’s all that really matters. They must be deprived. Even if some white people miss out as a result.

We’ve certainly seen that same “logic” in lots of other RW attitudes to economic fairness. The RW big hate for the ACA is mostly that it helps brown people, despite the fact that numerically far more working class whites benefit from it.

Given the Administration’s love for making moves having thought only briefly at all and even then only about first order effects, is this “pull up the ladder early” a part of what they see as a selling point / good feature?

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Yes, it’s typical of MAGA idiots to claim to hate socialism and big government while cashing their government checks, to hate Communist Obamacare while getting levels of healthcare they’ve never been able to afford before. No doubt they think the beneficiaries are disproportionately lazy brown people, while in fact the opposite is true.

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And so IF that’s a vote-getter, is that what’s motivating the R leadership in this case? Is it all politics and no policy?

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On careful reading, though, this ratio assumes a large overall deficit in 2040. In 2020 the 1.2 benefit-to-tax ratio for white people appears to be funded by contributions from other races. The projected increase to a 1.5 benefit-to-tax ratio for white people in 2040 is the result of an increasing overall deficit - in other words, the ratio for all ethnicities increases over the next 20 years.

I think a more informative graph on the changing cross-racial effect over time would have recalibrated the data to assume no surplus or deficit.

14

Who the hell knows. I mean we’ve seen this already with healthcare, right? The MAGA idiots cheer and vote when Trump says he’s doing away with socialist Obamacare, because we all hate evil socialism, right? Then when Trump tries to do anything, the Republicans in Congress block him because they realize that the constituents who elected him on this platform actually love the healthcare they are getting for the first time in their lives. We see it with the fact that states that receive the most Federal money being populated disproportionately by MAGA idiots who profess to hate big government and socialism.

Somehow the Republican party have conned people into voting against their own economic interests for decades. Fox News isn’t going to inform them, all we can hope is that eventually reality bites.

15

The civil service will be withholding social security payments starting next week, for all civil servants making less thatn $130000. I don’t know why that particular number was selected but I can speculate that’s the base amount that Presidential appointees of the lowest rank make.
And for readers who believe civil servants get ‘cushy pensions’, that went away in 1985. We get a 3 legged stool of a minimal (tiny) pension, a 401k like program, and social security. It’s not a lot.

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Republicans have been trying to kill Social Security for 80 years now. With some minor tweaks it can remain solvent forever. But you can’t simply stop collecting payroll tax, else it will be dead in a few years. Which is exactly what Republicans want.