Social Security says system's costs will exceed income this year(cbsnews.com)
cbsnews.com
Social Security says system's costs will exceed income this year
https://www.cbsnews.com/news/social-security-says-costs-will-exceed-income-this-year/
116 comments
We've known this was coming for a long time...as a Millennial, I don't expect to ever see a cent of Social Security benefits.
As a millennial, I do. There are just too many easy mitigations here that will extend life several decades:
- Remove the cap and tax income above $120k, just like medicare and income tax
- Increased tax rate, possibly just on payroll not income (the employer-paid portion)
- Limited forms of means-testing (Maybe, attenuated survivor benefits as your estate value clears a certain high mark like $3 million)
- Eliminate "early" retirement ages and force the "full" age
- Extending minimum retirement age to 70 and beyond
- Remove the cap and tax income above $120k, just like medicare and income tax
- Increased tax rate, possibly just on payroll not income (the employer-paid portion)
- Limited forms of means-testing (Maybe, attenuated survivor benefits as your estate value clears a certain high mark like $3 million)
- Eliminate "early" retirement ages and force the "full" age
- Extending minimum retirement age to 70 and beyond
Came here to say the same thing. There are some very sensible fixes to extend SS to younger folks.
Medicare, however, is another story.
Medicare, however, is another story.
The easy way to fix Medicare is to get medical costs under control.
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means testing is super unfair to those who sacrificed lifestyle in their youth to save for retirement.
Consider the person that could have, but didnt, live a lavish lifestyle and instead responsibly saved. Then a benefit (which they paid into, and maybe rely upon) is removed after the fact? Bad news.
Consider the person that could have, but didnt, live a lavish lifestyle and instead responsibly saved. Then a benefit (which they paid into, and maybe rely upon) is removed after the fact? Bad news.
>Consider the person that could have, but didnt, live a lavish lifestyle and instead responsibly saved. Then a benefit (which they paid into, and maybe rely upon) is removed after the fact? Bad news.
Such a person wouldn't be able to live a "lavish lifestyle" with the benefits alone - that's not what they're for. And if they saved up throughout their entire life then they wouldn't depend on those benefits in the first place, and could likely live far more lavishly than the average recipient, anyway.
Such a person wouldn't be able to live a "lavish lifestyle" with the benefits alone - that's not what they're for. And if they saved up throughout their entire life then they wouldn't depend on those benefits in the first place, and could likely live far more lavishly than the average recipient, anyway.
If I am paying into SS in my 20s and expect to get, say, $1000 per month in my 60s, and I responsibly design my 401k savings etc around that promise, and then have it taken away because I saved more than the average person then I will have a $1000 hole in my budget .
Itd be no different than a bank keeping the contents of my savings account and giving me the excuse "we changed the rules"
Itd be no different than a bank keeping the contents of my savings account and giving me the excuse "we changed the rules"
Except Social Security isn't a bank account, nor is it really a "promise," at least not a promise of a specific return on investment.
One could argue that designing your financial expectations around that program remaining exactly as is for the forseeable future given that history wouldn't be reasonable - any number of events could lead to that $1000 hole in your budget. Who's "keeping your savings" when stocks fall or inflation rises?
But, if the feasibility of the Social Security program as a whole depends on restructuring the program, as it has in the past, then I believe it's better for society that those cuts be distributed to those who can best afford them.
One could argue that designing your financial expectations around that program remaining exactly as is for the forseeable future given that history wouldn't be reasonable - any number of events could lead to that $1000 hole in your budget. Who's "keeping your savings" when stocks fall or inflation rises?
But, if the feasibility of the Social Security program as a whole depends on restructuring the program, as it has in the past, then I believe it's better for society that those cuts be distributed to those who can best afford them.
Unfairness is arguably in the eye of the beholder. If someone “responsibly saved” then they are not relying on the benefit as much as someone who didn’t or couldn’t save. Is it fair that a person who does not need financial aid receives it anyway?
But this then incentivizes people to not save and spend their money while young instead, on the assumption that social security will help them when they're old, leading to even larger burdens on the system.
Social Security is not a retirement account. We're paying today for the current generation of retirees so we don't have a class of elderly homeless eating cat food and dying in our streets.
Means testing is consistent with this outcome.
Means testing is consistent with this outcome.
Means testing gets you nowhere because there are so few people who would qualify as too rich- it would be less than a drop in the bucket "saved." It would be purely symbolic, and it's another way for those in power to say that we punish the rich and social security is a wealth transfer to the poor, then use that as a reason to abolish it. The idea of means testing is totally counterproductive to your goal.
Also as an aside, there are wealthy elderly people already not cashing their social security checks, you just don't know it because it makes nearly no difference in the scheme of things.
Also as an aside, there are wealthy elderly people already not cashing their social security checks, you just don't know it because it makes nearly no difference in the scheme of things.
Probably true, though separate from the argument that means testing is "unfair".
Incentives are much more powerful than intent. It isn't meaningful to talk about intent when assessing the likely outcome of an economic initiative. I can't emphasise this as strongly as I'd like to; in economics we want fairness and the incentives to align, but if they are not going to then incentives trump fairness. Fairness with poor incentives drives bad outcomes, and usually reveals that 'fairness' is 'fairness for some in groups, at the expense of the rest'.
Resources are no longer growing as quickly relative to population as they were in the 70s and 80s. We need normal people to make uncomfortable decisions _not_ to consume. Otherwise there are not enough resources when they grow old.
Incentivising spending in the present is not a clever idea, even if it isn't intended.
Resources are no longer growing as quickly relative to population as they were in the 70s and 80s. We need normal people to make uncomfortable decisions _not_ to consume. Otherwise there are not enough resources when they grow old.
Incentivising spending in the present is not a clever idea, even if it isn't intended.
One of the problems with means testing is that as the average payout declines, so too does support for the program. Without broad support, cuts/changes to SS become less of a third-rail problem.
> so we don't have a class of elderly homeless eating cat food and dying in our streets.
Too bad we already do, and the number seems to be increasing rapidly: https://www.nytimes.com/2016/05/31/us/americas-aging-homeles...
So if Social Security isn't helping with that, what other excuses are there?
Too bad we already do, and the number seems to be increasing rapidly: https://www.nytimes.com/2016/05/31/us/americas-aging-homeles...
So if Social Security isn't helping with that, what other excuses are there?
The fact that elderly homeless people exist does not imply that current social security policy does nothing.
Presumably, if we did away with SS, there would be more on the streets.
Presumably, if we did away with SS, there would be more on the streets.
The marginal value of each dollar of social security benefit is smaller for those with independent wealth. Means testing is a way of making sure that each SSI dollar is highly valued.
If it's not a hard cutoff as suggested upthread but just a progressive phaseout then the responsible person still has a reward and yet the benefits can be focused on the needy.
I'm a proponent of BI but I have to point out that means-testing doesn't imply perverse incentives.
I'm a proponent of BI but I have to point out that means-testing doesn't imply perverse incentives.
> - Eliminate "early" retirement ages and force the "full" age
I'd really be interested in seeing the math on this. If a person retires 2 years early (receive 86% of benefits) that person's total social security withdraw should be equal to someone that retired at normal age 13 years after retirement. With a retirement age of 67 and considering a life expectancy of 80, retiring early looks like favors the goverment on average.
There are additional factors to consider:
* How much more a person will pay into social security while continuing to work longer.
* If the last two years are the highest earning then it can increase the base payout.
* Does retirement age have an impact of life expectancy?
* Does a person's current health have an impact of if they decide to draw early?
* I don't really know how inflation changes social security, but it seems relevant to consider.
I'd really be interested in seeing the math on this. If a person retires 2 years early (receive 86% of benefits) that person's total social security withdraw should be equal to someone that retired at normal age 13 years after retirement. With a retirement age of 67 and considering a life expectancy of 80, retiring early looks like favors the goverment on average.
There are additional factors to consider:
* How much more a person will pay into social security while continuing to work longer.
* If the last two years are the highest earning then it can increase the base payout.
* Does retirement age have an impact of life expectancy?
* Does a person's current health have an impact of if they decide to draw early?
* I don't really know how inflation changes social security, but it seems relevant to consider.
As a millennial-ish, I think the government should stop stealing my money and make Social Security opt-in only.
As a millennial, I think the problem with that approach is that no one would opt-in, but everyone would feel entitled to receive the benefits if they failed to save enough for their own retirement (and realized it).
Yes, I think the entire point of social security is to help people who don't have the foresight to help themselves. Since the program is dysfunctional and our representatives continuously borrow against the program, who is it really helping?
As a millennial, I take issue with anyone who mischaracterizes taxes as theft for ideological gain.
This country was literally founded because of excessive and tyrannical taxes brought by the British empire. How long until America becomes that empire?
It's funny, I see this meme sometimes around tax day: "Well, I just paid my taxes. Those roads should be fixed anytime now". It's funny because the excuses people use (my roads!) to justify reckless and out-of-control taxation ($21T debt, that's T for Trillion) are almost never at the head of where the tax revenue is actually spent.
As a US government contractor, governments are great at overspending and under-delivering.
It's funny, I see this meme sometimes around tax day: "Well, I just paid my taxes. Those roads should be fixed anytime now". It's funny because the excuses people use (my roads!) to justify reckless and out-of-control taxation ($21T debt, that's T for Trillion) are almost never at the head of where the tax revenue is actually spent.
As a US government contractor, governments are great at overspending and under-delivering.
"This country was literally founded because of excessive and tyrannical taxes brought by the British empire. How long until America becomes that empire?"
There were far, far more inputs to that than just "taxes are bad".
"As a US government contractor, governments are great at overspending and under-delivering."
And as a contractor, you're part of that problem.
There were far, far more inputs to that than just "taxes are bad".
"As a US government contractor, governments are great at overspending and under-delivering."
And as a contractor, you're part of that problem.
> There were far, far more inputs to that than just "taxes are bad".
Very true, and excessive taxation was one of the major factors.
> And as a contractor, you're part of that problem.
Not myself, but it's a reasonable accusation about the company I work for. Even if that were true, we offer a product that the government could never engineer. The product is good, the government needs it, so they take money from their citizens to buy it. My points still stand unfortunately.
Very true, and excessive taxation was one of the major factors.
> And as a contractor, you're part of that problem.
Not myself, but it's a reasonable accusation about the company I work for. Even if that were true, we offer a product that the government could never engineer. The product is good, the government needs it, so they take money from their citizens to buy it. My points still stand unfortunately.
Social Security is opt-in; you choose it by choosing to work in a job which (either by mandate applicable to the job or by choice where not mandated, as is the case for some public sector jobs) participates in Social Security. You opt out by choosing to work in a non-participating job or to rely on some means other than wage labor for income.
Doesn't sound like much of a choice to me.
As a Millenial who tries to not hot-take, I do expect to receive Social Security benefits. I'm not planning on it being a requirement to survive, but I am expecting it to be there in a nontrivial form. As is widely noted the trust funds will, at current projected rates of usage, be tapped in 2034, but projected income (hence the "further looting" part) covers around 75% of all benefits at that point.
Baby Boomers will be dying off at that point, which should reduce the stress on the system, and there are a number of fairly politically safe ways to improve the financial position of Social Security like removing the caps on income. Don't get me wrong, Social Security is not a great system in a lot of ways, but it's not gonna just disappear and there is a recovery point in there if we should choose to take it.
Baby Boomers will be dying off at that point, which should reduce the stress on the system, and there are a number of fairly politically safe ways to improve the financial position of Social Security like removing the caps on income. Don't get me wrong, Social Security is not a great system in a lot of ways, but it's not gonna just disappear and there is a recovery point in there if we should choose to take it.
I don’t know if caps are politically safe. After all even Obama wasn’t able to remove 529 college savings plans which purportedly benefit the upper middle class who don’t need that much help. Caps going up to say 500,000 sounds like it would meet a lot of resistance to me.
It's not a hot take to think that an unsustainable service that many members of government have campaigned on reducing or eliminating entirely wont exist in 30+ years.
While the exact current level of service might be unsustainable, some level of is completely sustainable as long as either: the working population grows OR the wages (under the cap) grow OR the cap grows OR the tax rate grows OR the things the fund is invested in grows.
As a millenial, I'm eating a teaspoon of cat food each day to prepare my body for the day when it becomes my full-time diet.
Just learn to purr and chase balls of yarn; you can be coddled as some rich old spinster's pet.
There are cheaper sources of protein than catfood, sold for human consumption. This is a weird meme.
Though, if I was a retired person, I'd move back home in the mountains and eat trout and squirrel and deer meat everyday. Buy a lot and a trailer for a pittance. Get a library card.
God, that'd be a life...
Though, if I was a retired person, I'd move back home in the mountains and eat trout and squirrel and deer meat everyday. Buy a lot and a trailer for a pittance. Get a library card.
God, that'd be a life...
Typical, lazy millennial. You should be getting out there and catching your own birds, lizards, and other prey.
This was also the longtime belief of my parents, who both recently began collecting Social Security benefits. Social Security will only die if we let it be killed.
I'm pretty sure it can die from math, too.
Well not if we put it in a money market mutual fund, then we'll reinvest the earnings into foreign currency accounts with compounding interests, AND IT'S GONE.
That’s like blaming math on a bankruptcy that follows not paying your bills.
You will have Social Security. You just might receive something closer to the current level of social security benefits rather than a more generous package. Social Security benefits are indexed to median wages, which rise over time. If they just don't increase benefits so quickly system will be fine. Likewise, a hike in taxes which would still leave us one of the lower-taxed industrialized countries would do the trick.
A funny thing is that we have both fear of automation and fear of insolvent social security. If the economy gets more automated it will grow quickly, and it will be easy to tax the additional income to pay for social security---although we may have to use a value-added tax or a higher corporate tax rather than payroll taxes.
A funny thing is that we have both fear of automation and fear of insolvent social security. If the economy gets more automated it will grow quickly, and it will be easy to tax the additional income to pay for social security---although we may have to use a value-added tax or a higher corporate tax rather than payroll taxes.
"If they just don't increase benefits so quickly system will be fine."
Problem is that the current level of benefit is completely inadequate.
"A funny thing is that we have both fear of automation and fear of insolvent social security. If the economy gets more automated it will grow quickly, and it will be easy to tax the additional income to pay for social security"
But will that be countered by the larger numbers of unemployed who no longer have an income due to automation?
Problem is that the current level of benefit is completely inadequate.
"A funny thing is that we have both fear of automation and fear of insolvent social security. If the economy gets more automated it will grow quickly, and it will be easy to tax the additional income to pay for social security"
But will that be countered by the larger numbers of unemployed who no longer have an income due to automation?
I'm not sure why millenials have to worry about it. Social Security is not an aquifer that will be tapped out by the time we get to it. It is a pay-as-you-go system. The current crunch is coming from having a large retiring generation (the baby boomers), supported by relatively smaller working generations. Millenials will not necessarily have the same problems (unless the elect to have even fewer kids than baby boomers did, which is a possibility).
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Total fertility rate has been pretty flat for several decades now in the US and I believe is declining if you don't include immigrants, so I expect the problems with social security to continue into the future.
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> as a Millennial, I don't expect to ever see a cent of Social Security benefits.
Even if the Trust Fund is fully exhausted, beneficiaries will see a sizable fraction of full benefits from current payroll taxes.
The only way this doesn't happen is if the program is modified to affirmatively deny people already-earned benefits, which is probably less politically viable than fixes that would protect full benefits even with pessimistic projections.
Even if the Trust Fund is fully exhausted, beneficiaries will see a sizable fraction of full benefits from current payroll taxes.
The only way this doesn't happen is if the program is modified to affirmatively deny people already-earned benefits, which is probably less politically viable than fixes that would protect full benefits even with pessimistic projections.
Social security will always be around in one form or another. Despite the fact that many Americans detest the idea of a welfare state, we're still collectively bright enough to realize that you can't simply leave no options for the sick, poor, and disabled.
The better question to ask is whether you will be happy living out the twilight of your life on a government controlled amount of money. This amount will likely always gravitate toward the prevailing poverty line. Unlikely to lead to a truly comfortable existence. Definitely not enough to live in any high COL location. Average monthly benefit in 2017 was ~$1,300, and MAX was $2,687 [1]. ~$15-$30K will cover the basics in most lower COL parts of the country, but not much more.
[1] http://time.com/money/4644332/maximum-social-security-benefi...
The better question to ask is whether you will be happy living out the twilight of your life on a government controlled amount of money. This amount will likely always gravitate toward the prevailing poverty line. Unlikely to lead to a truly comfortable existence. Definitely not enough to live in any high COL location. Average monthly benefit in 2017 was ~$1,300, and MAX was $2,687 [1]. ~$15-$30K will cover the basics in most lower COL parts of the country, but not much more.
[1] http://time.com/money/4644332/maximum-social-security-benefi...
The US is already a welfare state, we're just worse at it than other countries.
In any case, if you are young and aren't happy living out your life on whatever social security pays there is a simple solution: pretend like it doesn't exist and plan accordingly.
In any case, if you are young and aren't happy living out your life on whatever social security pays there is a simple solution: pretend like it doesn't exist and plan accordingly.
Social security is eminently and easily fixable. It's just been obstructed for decades by people of bad faith who want to burn it, and the country, to the ground.
As a Gen-X'er, I don't expect to see it either.
Also get off my damn lawn you filthy heathen.
Also get off my damn lawn you filthy heathen.
You'll receive social security. Benefits will be in tomorrow's inflated dollars but at today's amounts.
I've been predicting huge inflation for a long time for the simple reason that housing has inflated so much. Housing is so unreasonable and house prices are so sticky (people hate to take a loss and most are on loans) that the only reasonable way out of the housing affordability crisis is for the rest of the economy to inflate until house prices are reasonable again. This will also neatly "solve" the social security funding problem.
I've been predicting huge inflation for a long time for the simple reason that housing has inflated so much. Housing is so unreasonable and house prices are so sticky (people hate to take a loss and most are on loans) that the only reasonable way out of the housing affordability crisis is for the rest of the economy to inflate until house prices are reasonable again. This will also neatly "solve" the social security funding problem.
I don't know why you are getting downvoted. I think this is what will happen as well. It also helps solve the pension crisis.
Not that it's a "fair" solution but it is a solution.
Not that it's a "fair" solution but it is a solution.
It's a more politically viable solution than large tax increases or nominal benefit cuts and a much less painful solution than default. It also "solves" the impending student loan crisis by writing down all those loans.
Maybe people didn't get my rationale around housing. Put more simply I see housing inflation as the leading edge of a giant wave of inflation. Housing has inflated first because QE money first went to banks and coupled with historically low interest rates this allowed banks to pump massive amounts of money into the housing market via cheap mortgages. So the housing market is where the big wave of post-crash re-inflation money went. But houses do have a turnover rate, so the money is not going to stay there forever. All those people who made 200-600% profit on their homes will sell those homes and use the money for old age care and other personal expenses or pass it on to their children who will likely spend it. Housing may fall a bit but it's more likely that the rest of the economy will just inflate to meet it.
Maybe people didn't get my rationale around housing. Put more simply I see housing inflation as the leading edge of a giant wave of inflation. Housing has inflated first because QE money first went to banks and coupled with historically low interest rates this allowed banks to pump massive amounts of money into the housing market via cheap mortgages. So the housing market is where the big wave of post-crash re-inflation money went. But houses do have a turnover rate, so the money is not going to stay there forever. All those people who made 200-600% profit on their homes will sell those homes and use the money for old age care and other personal expenses or pass it on to their children who will likely spend it. Housing may fall a bit but it's more likely that the rest of the economy will just inflate to meet it.
There are two problems with SS, one fixable, one less so. The hard to fix problem is slowing population growth. SS depends on young workers to fund the payments to retirees. But this is really only a problem if aggregate income growth declines with population growth, and it hasn't; the aggregate income of all Americans has quadrupled since 1982, the last time this shortfall occurred. The problem is that the vast majority of the income growth has been captured by a small portion of the population, who don't pay withholding taxes on it. If we had sane progressive tax policy in the US, the SS shortfall would evaporate.
> If we had sane progressive tax policy in the US, the SS shortfall would evaporate.
Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxe....
The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/.... The system is set up so not only do the needy get a public subsidy, but most people do.
Caps on retirement taxes are not specific to the U.S. Germany and France, for example, have similar ceilings. Germany, for example, has a 19.6% payroll tax up to $80,000. The U.S. tax is 12.4% up to $127,000.
Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxe....
The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/.... The system is set up so not only do the needy get a public subsidy, but most people do.
Caps on retirement taxes are not specific to the U.S. Germany and France, for example, have similar ceilings. Germany, for example, has a 19.6% payroll tax up to $80,000. The U.S. tax is 12.4% up to $127,000.
Is our tax policy still among the most progressive if you account for the full payroll tax (not just the employee side as apparently that study does) as well as the many other federal, state, and local taxes we pay?
Yes: https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri...
Looking at those additional taxes for both U.S. and Europe generally makes the U.S. even more progressive. For example, sales taxes are highly regressive. European countries rely heavily on 20-25% VAT taxes to raise revenue, while U.S. states typically have 5-10% sales taxes. The maximum rates and various caps just generally kick in much earlier. In Germany, the income tax rate is 42% for $63,000+, just a few percent below the maximum bracket of 45%.
Looking at those additional taxes for both U.S. and Europe generally makes the U.S. even more progressive. For example, sales taxes are highly regressive. European countries rely heavily on 20-25% VAT taxes to raise revenue, while U.S. states typically have 5-10% sales taxes. The maximum rates and various caps just generally kick in much earlier. In Germany, the income tax rate is 42% for $63,000+, just a few percent below the maximum bracket of 45%.
Thanks!
From your link "...and turning 65 in 2010 would have paid $722,000 into Social Security and Medicare and can be expected to take out $966,000 in benefits."
So basically, employees are giving the government a 45 year loan at zero interest. Even at just a 1.5% rate, the typical employee pays their own way.
So basically, employees are giving the government a 45 year loan at zero interest. Even at just a 1.5% rate, the typical employee pays their own way.
That's already accounted for in the "paid-in" figure:
> (Remember, the couple didn’t literally pay out $600,000; that’s the current value of what they paid out over the years, plus an additional 2 percent they may have gotten had it been invested.)
Even accounting for inflation and investment, the average worker still is paid out more from Social Security than they paid in.
> (Remember, the couple didn’t literally pay out $600,000; that’s the current value of what they paid out over the years, plus an additional 2 percent they may have gotten had it been invested.)
Even accounting for inflation and investment, the average worker still is paid out more from Social Security than they paid in.
> Even accounting for inflation and investment, the average worker still is paid out more from Social Security than they paid in.
The source cited combines “Social Security and Medicare”, it doesn't (at least in the quoted excerpt) address SS separately. These are different programs supported by different Trust Funds funded by different taxes applicable to different income and with different dynamics driving costs.
The source cited combines “Social Security and Medicare”, it doesn't (at least in the quoted excerpt) address SS separately. These are different programs supported by different Trust Funds funded by different taxes applicable to different income and with different dynamics driving costs.
But the government is not investing that money for the later pay out. They spend it immediately and write IOUs.
From your linked article:
"Why, according to the OECD, is the US system so progressive? Not because the rich face unusually high average tax rates, but because middle-income US households face unusually low tax rates--an important point which de Rugy mentions and Chait ignores.
How does the picture change if you take indirect taxation into account? That would make the US system look even more progressive, because the US doesn't rely on a flat consumption tax like most other governments.
What does the tax-rate schedule tell you about progressivity? Very little, until you factor in deductions, thresholds and opportunities for avoidance. High top rates are meaningless if nobody is paying them.
What happens to tax progressivity at the very top of the US income distribution--inside the top one percent, or 0.1 or 0.01 percent? Good question. When it comes to international comparisons, I don't know of any good answers..."
The real point of the article is that progresssivity is hard to measure. But when so much of the income growth in the country is captured by a class that doesn't pay into the SS system, the result speaks for itself.
"Why, according to the OECD, is the US system so progressive? Not because the rich face unusually high average tax rates, but because middle-income US households face unusually low tax rates--an important point which de Rugy mentions and Chait ignores.
How does the picture change if you take indirect taxation into account? That would make the US system look even more progressive, because the US doesn't rely on a flat consumption tax like most other governments.
What does the tax-rate schedule tell you about progressivity? Very little, until you factor in deductions, thresholds and opportunities for avoidance. High top rates are meaningless if nobody is paying them.
What happens to tax progressivity at the very top of the US income distribution--inside the top one percent, or 0.1 or 0.01 percent? Good question. When it comes to international comparisons, I don't know of any good answers..."
The real point of the article is that progresssivity is hard to measure. But when so much of the income growth in the country is captured by a class that doesn't pay into the SS system, the result speaks for itself.
No, the real point of the article is that "according to the OECD, "the US system [is] progressive." The most salient feature of the U.S. tax system is that "middle-income US households face unusually low tax rates"--i.e. the system is highly progressive.
The U.S. tax system is progressive well into the top 1% of income earners (by contrast, Germany, Sweden, and Denmark have a relatively flat tax structure after about 1.5x the median income). There is a lot of focus on tax breaks for the top 0.1%, but 90% of U.S. income is earned by people outside that group, and 80% is earned by folks outside the top 1%.
The U.S. tax system is progressive well into the top 1% of income earners (by contrast, Germany, Sweden, and Denmark have a relatively flat tax structure after about 1.5x the median income). There is a lot of focus on tax breaks for the top 0.1%, but 90% of U.S. income is earned by people outside that group, and 80% is earned by folks outside the top 1%.
Read it all the way to the end. Again, from the article:
"Should the US system be even more progressive than it already is, bearing in mind the skewness of the pre-tax distribution, especially at the very top? Maybe it should--but a steeper tax-band schedule is a dumb way to improve fairness and raise more revenue."
A progressive tax system is progressive in effect, not just in form. The author is saying that people who focus on the tax rate bands are barking up the wrong tree, because the US system already looks like one of the most progressive, even though it may actually not be.
"Should the US system be even more progressive than it already is, bearing in mind the skewness of the pre-tax distribution, especially at the very top? Maybe it should--but a steeper tax-band schedule is a dumb way to improve fairness and raise more revenue."
A progressive tax system is progressive in effect, not just in form. The author is saying that people who focus on the tax rate bands are barking up the wrong tree, because the US system already looks like one of the most progressive, even though it may actually not be.
From your quote: "Should the US system be even more progressive than it already is..." The only way to read that is as acknowledging that the system already is progressive. Indeed, according to the title of the article, it is "unusually progressive."
The part about tax-band schedules is not an assertion that the system is not progressive "in effect." (That theory cannot be reconciled with the data presented in the article, which looks at taxes paid, not tax bands.) Instead the author is saying that if we want to make the system "even more progressive than it already is"--which he does not concede we should, he leaves that as a "maybe"--then we should be looking deeper than tax bands. (And he points out that the possibility of loopholes and preferential treatment does not indicate that the U.S. system is not progressive, because other countries do that too.)
The part about tax-band schedules is not an assertion that the system is not progressive "in effect." (That theory cannot be reconciled with the data presented in the article, which looks at taxes paid, not tax bands.) Instead the author is saying that if we want to make the system "even more progressive than it already is"--which he does not concede we should, he leaves that as a "maybe"--then we should be looking deeper than tax bands. (And he points out that the possibility of loopholes and preferential treatment does not indicate that the U.S. system is not progressive, because other countries do that too.)
What about health insurance? USA's privately funded health insurance is equivalent to flat or regressive tax, not a progressive tax.
Half of US health care expenditures come from the government. Medicaid is funded by general tax revenues (based on highly progressive income taxes). Medicare is funded by a flat tax with no income cap.
In Germany by contrast, health care is paid for with a regressive mandatory insurance premium of 15.5% on income up to about $60,000.
In Germany by contrast, health care is paid for with a regressive mandatory insurance premium of 15.5% on income up to about $60,000.
> Our tax policy is among the most progressive in the developed world
Not as applies to Social Security, which has a dedicated funding stream independent of general revenue, consisting entirely of a flat tax on labor income below a certain level and no tax above that level which constitutes a two-timer regressive tax on labor income made even more regressive on total income because the high end of the total income distribution consists largely of people whose income comes largely from capital rather than labor income.
Not as applies to Social Security, which has a dedicated funding stream independent of general revenue, consisting entirely of a flat tax on labor income below a certain level and no tax above that level which constitutes a two-timer regressive tax on labor income made even more regressive on total income because the high end of the total income distribution consists largely of people whose income comes largely from capital rather than labor income.
A flat tax on labor income, with a cap, is a typical model for Social Security in Europe. E.g. France, Germany, etc. Ours is more progressive because the cap is generally higher.
> A flat tax on labor income, with a cap, is a typical model for Social Security in Europe.
Yes, and the US funding system is similar to that norm, not unusually progressive as claimed upthread.
Yes, and the US funding system is similar to that norm, not unusually progressive as claimed upthread.
I said this above as well, but our latest DoD budget is $700,000,000,000.
I agree with the crux of your analysis. But I also think we literally can't afford to ignore how $700 billion contributes to a multitude of our problems.
I agree with the crux of your analysis. But I also think we literally can't afford to ignore how $700 billion contributes to a multitude of our problems.
I would be the last person to say that there isn't a lot of waste in defense budgets. But you can't spend zero on defense. And the United States also defends all of NATO and a lot of Asia as well as certain other allied countries. Let's say you could somehow shave a few hundred billion out of the budget without materially impacting our defense capabilities and obligations. That's not enough to fix our bigger problems with entitlements.
No one said anything about spending zero on defense (straw man).
And if we can’t solve it completely in one shot, why bother at all? (false dichotomy/nirvana)
0 for 2 on your arguments there.
And if we can’t solve it completely in one shot, why bother at all? (false dichotomy/nirvana)
0 for 2 on your arguments there.
We have the resources. What we lack are necessary priorities and the resolve to fix them.
The latest DoD budget is $700 billion. Russia's DoD budget is approx 10% of that. That's not a typo 10%. China might not be an ally - in the historical European sense - but given our symbiotic economic relationship it would like take quite a bit for a true military conflict to break out between the two countries.
Even if our DoD budget was 2x Russia's, the ~$550+ billion is still a lot of money. Money cant love, nor evidently priorities rooted in the 21st century.
The latest DoD budget is $700 billion. Russia's DoD budget is approx 10% of that. That's not a typo 10%. China might not be an ally - in the historical European sense - but given our symbiotic economic relationship it would like take quite a bit for a true military conflict to break out between the two countries.
Even if our DoD budget was 2x Russia's, the ~$550+ billion is still a lot of money. Money cant love, nor evidently priorities rooted in the 21st century.
I've fantasized about this as a solution before. If you tell the military that in 10 years you're cutting their budget to $250 billion and somehow manage to instill in them that a) you're serious and b) you will not repeal your decision, I have no doubt they would successfully adapt (just like every industry who complains about regulations have ultimately adapted).
I am curious, however, in HOW they would adapt.
I wouldn't want them to drop their research budget (much). Research is almost always good.
For one, you could discharge some of our 1.5 Million active troops [1]. I don't really know why we have that many. That'd measurably cut down on the second largest chunk of the budget (wages) [2].
The highest is 'Operations and Maintenance' and the third highest is 'Procurement'. With a reduction of manpower, they need to procure less. They can retire many assets. I would prefer they NOT sell them to more local police, but thats a different discussion. Procurement could be done MANY times smarter. The F35 is a disaster of design by committee and if each military branch had designed their own plane, I'm sure they'd each have gotten a better one. And, of course, with less money, they have more incentive to push back on the industrial part of the complex for more reasonable prices.
[1] - https://en.wikipedia.org/wiki/United_States_Armed_Forces#Per... [2] - https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_... (it's 2010, but the proportions should be similar)
I am curious, however, in HOW they would adapt.
I wouldn't want them to drop their research budget (much). Research is almost always good.
For one, you could discharge some of our 1.5 Million active troops [1]. I don't really know why we have that many. That'd measurably cut down on the second largest chunk of the budget (wages) [2].
The highest is 'Operations and Maintenance' and the third highest is 'Procurement'. With a reduction of manpower, they need to procure less. They can retire many assets. I would prefer they NOT sell them to more local police, but thats a different discussion. Procurement could be done MANY times smarter. The F35 is a disaster of design by committee and if each military branch had designed their own plane, I'm sure they'd each have gotten a better one. And, of course, with less money, they have more incentive to push back on the industrial part of the complex for more reasonable prices.
[1] - https://en.wikipedia.org/wiki/United_States_Armed_Forces#Per... [2] - https://en.wikipedia.org/wiki/File:USA_2010_Military_Budget_... (it's 2010, but the proportions should be similar)
2 wks ago on one of the NPR shows these was an interview with one of the members of Congress, Dem from VA I think. He has something to do with the Russia hacking investigation.
In the middle of the interview he mentions the DoD budget and more or less says - as an active member of Congress can - we're wasting too much money on 20th century warfare and not enough on 21st century (cyber) capabilities.
General + POTUS Eisenhower is in heaven laughing, "I warned you. I told you so. You morons."
In the middle of the interview he mentions the DoD budget and more or less says - as an active member of Congress can - we're wasting too much money on 20th century warfare and not enough on 21st century (cyber) capabilities.
General + POTUS Eisenhower is in heaven laughing, "I warned you. I told you so. You morons."
I mean, that is also true, but if we take 50% of our '20th century' budget and spend it on '21st century' stuff, we still will spend too much.
Put another way, inefficient allocation is an orthogonal problem to giving too much to the allocator.
Put another way, inefficient allocation is an orthogonal problem to giving too much to the allocator.
that's not wrong but for the sake of argument perhaps its better to look at the DoD budget through the political lens ... its a corrupt jobs program in which the government funnels money to a broad swath of American states and counties, mostly via defense contractors.
Yes its incredible dumb and inefficient but many millions of people earn their livelihood, healthcare and pensions by building useless bombs, so its hard (politically) to say we'll take that away to shore-up Social Security or whatever.
Yes its incredible dumb and inefficient but many millions of people earn their livelihood, healthcare and pensions by building useless bombs, so its hard (politically) to say we'll take that away to shore-up Social Security or whatever.
If only it's politically feasible to slowly redirect their activities to peacetime activities, like reassign a lot of that personnel to the Army Corps of Engineers, and have them fix America's crumbling infrastructure.
It does seem a little insane that we don't adopt the part of the Roman professional military system that was arguably one of the most effective.
It would be an interesting experiment to see what would happen if the cut the US military budget dramatically. I am of the opinion that it would decrease the world stability and millions of people would die. But YMMV.
When did it become our job to police the world? Especially when it creates blowback (e.g., UBL).
You might be right. But the USA's DoD budget is more than the NEXT 10 countries COMBINED. So we're VERY afraid? And we're alone with that having that fear?
Maybe we find what we're looking for?
You might be right. But the USA's DoD budget is more than the NEXT 10 countries COMBINED. So we're VERY afraid? And we're alone with that having that fear?
Maybe we find what we're looking for?
The fundamental/fucked-up thing is that if you cut the military budget it's not that soldiers stop getting recruited it's that tank/jet/boot/GPS/mre companies start firing people. The Military Industrial complex is a huge welfare/workfare program that no one in power is willing to cut. So until we can convince essentially EVERY voter (any party: libertarian, green, D or R) that it's okay to have a real safety net then politicians who campaign against the military budget are basically lost causes.
A lot of military spending is building stuff to blow up. I rather pay people to build windfarms and trains.
Oh God So Would I.
I'm on my phone otherwise I could list umpteen better uses of the money. But they all involve firing people then hiring people. MRE quality assurance however is not co-located or skill- transferable to installing solar panels in the llano estacado. And people losing their jobs are always going to be more motivated voters than people who might get a job.
I'm on my phone otherwise I could list umpteen better uses of the money. But they all involve firing people then hiring people. MRE quality assurance however is not co-located or skill- transferable to installing solar panels in the llano estacado. And people losing their jobs are always going to be more motivated voters than people who might get a job.
Some jobs deserve to end. - like insurance sales jobs and ceo's, medical billing, and excessive military jobs that we don't really need. What value does insurance really have? It's a glorified red-tape filled billing system. All it does it take money, split it up to pay employees, and then give like maybe 40% to the actual doctors and hospitals providing the services (made up #, no idea what they really get) -- but then the hospital employees hundreds of medical billers to work w/ the insurance agencies and negotiate rates and procedures and get paid as much as they can.
One reason GBI/universal healthcare would be beneficial is because then we can have a reason to end useless jobs that we don't really need to have, and eventually (hopefully) we have post-scarcity, low-employment, and high-enjoyment because AI/Robots do the work, and we all live in varying degrees of middle-to-upper class life. Maybe we spend 18 hours per week working (the same as during the middle ages), and the rest of our lives we actually live.
The rich can still be uber rich and live in mansions and fly on their jets, but lets fill the millions of vacant homes, and make sure everyone has a home, basic comforts, and food.
Life is precious, we don't get much time. We spend 10 full years out of 90 working -- that's if you add up all the hours and divide by days/years.
Then you sleep 8 hours per day. That's 1/3rd of the day. 30 years of life gone to sleep. Now we're at 40 years gone -- 40 years that we do not get to keep at all for ourselves.. This is a middle-ages life-time. They only got 40 years total, and we waste all of that.
There's tons of other stuff we waste time on with school, eating, restroom, commuting to work, etc... That might add up to 10 more years. This means you may get 40% of your life --to claim for yourselves, this is ONLY if you don't have to ever work more than one job, and ONLY if you never ever work overtime or more than 40 hours per week.
If you work on side projects or moonlight projects, it's more fun and rewarding but you're also losing time spent with family and loved ones, or enjoying life.
This keeps me up at night, knowing I could die at any time, and never really have lived because of all the things I have to do just to make sure I make it through next month - financially.
I'm a freelance developer, but have months where I do really well, and others where I'm on the verge of losing everything, because my pipeline dries up. I'm hoping I can even it out, and make it work, because when it works the stress is so much less than commuting to a corporation.
One reason GBI/universal healthcare would be beneficial is because then we can have a reason to end useless jobs that we don't really need to have, and eventually (hopefully) we have post-scarcity, low-employment, and high-enjoyment because AI/Robots do the work, and we all live in varying degrees of middle-to-upper class life. Maybe we spend 18 hours per week working (the same as during the middle ages), and the rest of our lives we actually live.
The rich can still be uber rich and live in mansions and fly on their jets, but lets fill the millions of vacant homes, and make sure everyone has a home, basic comforts, and food.
Life is precious, we don't get much time. We spend 10 full years out of 90 working -- that's if you add up all the hours and divide by days/years.
Then you sleep 8 hours per day. That's 1/3rd of the day. 30 years of life gone to sleep. Now we're at 40 years gone -- 40 years that we do not get to keep at all for ourselves.. This is a middle-ages life-time. They only got 40 years total, and we waste all of that.
There's tons of other stuff we waste time on with school, eating, restroom, commuting to work, etc... That might add up to 10 more years. This means you may get 40% of your life --to claim for yourselves, this is ONLY if you don't have to ever work more than one job, and ONLY if you never ever work overtime or more than 40 hours per week.
If you work on side projects or moonlight projects, it's more fun and rewarding but you're also losing time spent with family and loved ones, or enjoying life.
This keeps me up at night, knowing I could die at any time, and never really have lived because of all the things I have to do just to make sure I make it through next month - financially.
I'm a freelance developer, but have months where I do really well, and others where I'm on the verge of losing everything, because my pipeline dries up. I'm hoping I can even it out, and make it work, because when it works the stress is so much less than commuting to a corporation.
"This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034.
...
It should be stressed that the reports don’t indicate that benefits disappear in those years. After 2034, Social Security’s trustees said tax income would be sufficient to pay about three-quarters of retirees’ benefits." [1]
We can argue about how honest this is, but the claim is that it will still be there for Millennials. It seems feasible because by the time Millennials are 67, the bulge of babyboomers will be gone.
[1]: https://www.marketwatch.com/story/medicares-finances-are-get...
We can argue about how honest this is, but the claim is that it will still be there for Millennials. It seems feasible because by the time Millennials are 67, the bulge of babyboomers will be gone.
[1]: https://www.marketwatch.com/story/medicares-finances-are-get...
Social Security is a insurance program, not a retirement program.
Old-Age, Survivors, and Disability Insurance (OASDI)
https://en.wikipedia.org/wiki/Social_Security_(United_States...
>>Income derived from Social Security is currently estimated to have reduced the poverty rate for Americans age 65 or older from about 40% to below 10%
When 40% (or an extra 30%) of a country ends up in poverty without it kind of does become a retirement program. Or at least an 'old-age' program.
When 40% (or an extra 30%) of a country ends up in poverty without it kind of does become a retirement program. Or at least an 'old-age' program.
“Retirement” and “insurance against becoming aged and/or disabled” are different framings for the same thing.
One interesting side effect of this will be on the interest rate.
Social Security has been investing the surplus, most (or all?) in Treasury bonds. As outflows exceed income, they're going to have to sell bonds. That should drive prices down, and therefore interest rates up - to what degree, I don't know.
Social Security has been investing the surplus, most (or all?) in Treasury bonds. As outflows exceed income, they're going to have to sell bonds. That should drive prices down, and therefore interest rates up - to what degree, I don't know.
Why don't we focus on using government bulk and "peace"-time military support to provide some of the services that "social security" (tax the young now to support the retired now) provides; directly, instead of as money or vouchers?
Right now Social Security is paid for from it's own special tax. The idea then is that it isn't subject to yearly budget concerns, it just keeps ticking along regardless of congress' priorities.
If we start using the military, whether budget, personnel or infrastructure, then as soon as a war starts up or if we ever get a congress' that has the spine to cut back on military spending then those services get cut and we have to have a giant argument about how to replace them before settling on "do nothing and hope we get elected anyway".
If we start using the military, whether budget, personnel or infrastructure, then as soon as a war starts up or if we ever get a congress' that has the spine to cut back on military spending then those services get cut and we have to have a giant argument about how to replace them before settling on "do nothing and hope we get elected anyway".
That'd be because a lot of US politicians are ideologically opposed to any welfare program.
As are the countless people who elect them, even though those same voters as a bloc rely far more on Social Security than those who vote for the other party.
If you poll those same voters on individual social welfare programs, particularly Social Security, you'll find they support them.
It's really upsetting.
It's really upsetting.
If the voters are so dumb that they're voting directly against their own stated interests, then maybe they shouldn't have those programs.
Maybe we should actually have a meaningful test that is based on scientific evidence of understanding things like consequences and the current (at the time) structure of the government.
Failing the test, BTW, doesn't mean an individual can't vote (ever, just until they re-pass "high school"): it means society has failed them and they now qualify for extended schooling to correct their lack of education. Including provided room and board while they are studying as well as medical care to correct for sources of learning defects (such as poor vision, etc).
If someone is too impaired to be able to pass high school in that supporting environment then they should be 'retired' the same way someone with a more obvious disability is.
Failing the test, BTW, doesn't mean an individual can't vote (ever, just until they re-pass "high school"): it means society has failed them and they now qualify for extended schooling to correct their lack of education. Including provided room and board while they are studying as well as medical care to correct for sources of learning defects (such as poor vision, etc).
If someone is too impaired to be able to pass high school in that supporting environment then they should be 'retired' the same way someone with a more obvious disability is.
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Some comments by millenials say that they expect to receive SS benefits, but this is not a secure basis for financial planning. A person's retirement planning should be independent of any expected SS receipts and if you happen to receive SS then it's just a windfall.
I'm less than 15 years from retirement age, and I don't expect to get any Social Security.
Congress repealed the creation of the Independent Payment Advisory Board, that would cut the cost of Medicare without cutting service much. Thus Medicare costs are higher, thus spending exceeds income. Reinstate this board, as well as some other measures, and it will be back on target.
It is a manufactured problem. Anything benefiting the taxpayer like Social Security or schools is always being cut, while the funds to move the US embassy to Jerusalem or send the Navy to the South China Sea seems to be bottomless.
It is a manufactured problem. Anything benefiting the taxpayer like Social Security or schools is always being cut, while the funds to move the US embassy to Jerusalem or send the Navy to the South China Sea seems to be bottomless.
>Congress repealed the creation of the Independent Payment Advisory Board, that would cut the cost of Medicare without cutting service much.
Medicare services are already being rationed covertly via wait lists and via the increasing numbers of physicians who refuse to take Medicare or Medicaid.
The IPAB would most likely decrease access to services by cutting payments even further below market rates which would decrease supply of those services.
Medicare services are already being rationed covertly via wait lists and via the increasing numbers of physicians who refuse to take Medicare or Medicaid.
The IPAB would most likely decrease access to services by cutting payments even further below market rates which would decrease supply of those services.
Market rates are inflated due to lack of price controls in programs like Medicare and Medicaid, plus employer-sponsored insurance plans are not as incentivized to negotiate for lower prices as individual consumers are.
Couple that with the supply side problems where doctors need 7+ years of training before they can perform simple procedures like testing for strep throat or prescribing antibiotics, and the fact that a large fraction of medical spending does very little to prolong life or improve quality of life and you can see that the current health care system is incredibly wasteful.
Couple that with the supply side problems where doctors need 7+ years of training before they can perform simple procedures like testing for strep throat or prescribing antibiotics, and the fact that a large fraction of medical spending does very little to prolong life or improve quality of life and you can see that the current health care system is incredibly wasteful.
Medicare and Medicaid are the definition of price controls for paying physicians: they pay below market rate such that private insurance is billed higher to offset. There are week price controls for medical equipment and pharmaceuticals and the failure to address overuse of unnecessary equipment costs way more than the savings from price controls.
Testing for strep and prescribing antibiotics represent the smallest fraction of healthcare resources. Why didn't you include brain or spine surgery on your list of things that shouldn't require 7 years of training? Expensive end of life care isn't the fault of hospitals or clinicians: it's the fault of families who can't say no to excessive and futile end of life care.
If you want to get into getting rid of "wasteful" spending, why aren't you recommending everyone should smoke a pack of cigarettes per day? Most people would work and live a productive life until they die of lung cancer at age 65? Saves 15-25 years of unnecessary "end of life" care.
Testing for strep and prescribing antibiotics represent the smallest fraction of healthcare resources. Why didn't you include brain or spine surgery on your list of things that shouldn't require 7 years of training? Expensive end of life care isn't the fault of hospitals or clinicians: it's the fault of families who can't say no to excessive and futile end of life care.
If you want to get into getting rid of "wasteful" spending, why aren't you recommending everyone should smoke a pack of cigarettes per day? Most people would work and live a productive life until they die of lung cancer at age 65? Saves 15-25 years of unnecessary "end of life" care.
Sorry, you are right about price controls. I think it's still a problem that they incentivize unnecessary care.
I don't think we're actually that far apart on what we think the problems are. I wasn't trying to say that requiring large amounts of school in order to test for strep and antibiotics are the only cause of our high costs of healthcare, but they obviously contribute.
I agree (and I think any thinking person would agree) that you should have training to perform more specialized procedures.
Expensive end of life care is partly the fault of clinicians who get paid to authorize expensive procedures and who don't want to tell their patients and their families that there is very little they can do to prolong their life, so they should just surround themselves with loved ones and prepare to die.
And we can both agree that there is wasteful spending without arguing that people should kill themselves sooner. Just looking at our healthcare expenses relative to other countries shows we pay somewhere between 1.5-2x more for roughly the same level of care. That's obviously a market failure.
I don't think we're actually that far apart on what we think the problems are. I wasn't trying to say that requiring large amounts of school in order to test for strep and antibiotics are the only cause of our high costs of healthcare, but they obviously contribute.
I agree (and I think any thinking person would agree) that you should have training to perform more specialized procedures.
Expensive end of life care is partly the fault of clinicians who get paid to authorize expensive procedures and who don't want to tell their patients and their families that there is very little they can do to prolong their life, so they should just surround themselves with loved ones and prepare to die.
And we can both agree that there is wasteful spending without arguing that people should kill themselves sooner. Just looking at our healthcare expenses relative to other countries shows we pay somewhere between 1.5-2x more for roughly the same level of care. That's obviously a market failure.
>and via the decreasing numbers of physicians who refuse to take Medicare or Medicaid.
do you mean "increasing number of physicians"?
do you mean "increasing number of physicians"?
Yes, you're right, I wrote it incorrectly.