A Social Security Reality Check

Two decades ago, at the beginning of the millennium, then-President George W. Bush sounded the alarm on Social Security. After his re-election, he made good on his promise to pursue much-needed reforms. Thanks to a pandering and lying Democratic Party, a feckless Republican Party, and rampant misconceptions about "lockboxes" and "my money" in the electorate, his rather substantial efforts to line up public support failed.

As I recall, Social Security's insolvency was projected to be 30-40 years out at the time. Like all pay-as-you-go (aka Ponzi) schemes, Social Security relies on cash inflow to pay its "promises" to retirees. It was this way since its inception, and it relied on a growing population and a lower life expectancy than we see today to sustain the scam.

When SS began, retirement age coincided with average life expectancy, i.e. 65 years old. Today, full benefits for those not already retired begin at 67, though delaying to 70 increases your receipts. Average life expectancy, however, reached 79 before COVID skewed the numbers down a couple years.

At its inception, SS had 42 workers per retiree. Today, it's 3 to 1, and by 2050 it'l be 2 to 1.

The Social Security Administration recently reported that insolvency is now projected for 2035. That's eleven years from now, and barring Congressional action to the contrary, an automatic 21% reduction in benefits will trigger. Medicare, by the way, goes insolvent a year later, and that would trigger an 11% reduction.

These aren't "a long time away, we'll figure it out when we get there" problems. These are pretty immediate.

They are not, however, so immediate that our political leaders feel any pressure to act. Fact is, neither Biden nor Trump have any intention of addressing the problem. Fact is, both Biden and Trump can only serve another 4 years, meaning that they can ignore the problem. Fact is, both Biden and Trump are more likely than not to be dead by the time the insolvencies hit. Fact is, "they want to throw Granny onto the street" deceptions about SS reforms have proven incredibly effective campaign tactics.

Here are some more facts:

The national debt during GWB's big reform push was 56% of GDP. Today it is 116% of GDP. It is expected to grow to 129% by 2033, 157% by 2043, and 192% by 2053.

That debt was a big number 20 years ago, it has reached absurd levels today, and it will likely push into an inflation doom loop in the next couple decades absent vigorous action.

The longer that action is delayed, the more difficult and costly it will be. At this point, it is pretty much a certainty that, unless you are already retired, you will see your promised benefits cut before you shuffle off this mortal coil. While Congress could vote not to cut benefits, the only way to make good would be borrowing and printing money, which will trigger inflation and which, even with the inflation adjustments baked into SS, lower the value of the money you receive.

I'm seeing a lot of "Only Trump can save the nation!" histrionics on my social media feed lately. However, not only has Trump walked back the small noises he made about minor fixes to SS, he ripped his primary opponents for making similar noises. Coupled with his spending record from his first term (even apart from COVID), and no one should have any real hope that Trump will rescue SS or Medicare.

Of course, Biden hasn't even made those small noises. His party's attitude, much as it is with everything else, is to accuse the other side of fear-mongering while Chip Dillering the gullible.

The whole thing is going to crash and burn, but even many fiscal conservatives and deficit hawks are "it's my money, hands off!!"

"Your money" doesn't exist, other than as a pile of IOUs in a fictional "trust fund" that has been raided by every president since LBJ. It has been spent, like any other tax, on other people. You can demand that, when it's your turn, you get yours, but math doesn't care. That many of those on the Right who are making that demand are also thumping the drum against immigration just adds to the unreality of the matter. Absent robust (and, yes, legal) immigration, America will suffer population decline, and accelerate the insolvency as fewer workers have to sustain more retirees.

It's time (long past time) for real, difficult conversations about real, difficult, painful reforms.

That those conversations are tantamount to political suicide is an affirmation that:

Those of us who have been screaming about this for decades will tell you "we told you so." Unfortunately, we are going to be harmed just as much as you, whether it be by benefit cuts, inflation, or both.

My advice to everyone, young and old. Plan for your retirement assuming you won't see your SS. You will almost certainly see some of it, but figure on that being "bonus." The government is too feckless to fix the problem it created, and your fellow citizens are too mule-headed to demand it be fixed.

As for what those fixes might look like?

A two-pronged approach is needed:

• First, a decades-long effort to transition from the existing Ponzi scheme to an individual account system, similar to the private sector's transition from defined-benefit pensions to defined-contribution 401Ks and equivalents.

• Second, a "shared pain" set of reforms that will sustain the system until the transition is complete. That would include raising the payroll tax for everyone and increasing the retirement age for those not already close to retiring. These would be the most equitable, but other changes, such as raising the payroll cap and means-testing benefits, could be on the table, no matter the inequity or injustice of further soaking the successful. Everyone will lose if inflation ends up being the "remedy."

The only way these fixes happen is if people stop clinging to the “my money” fallacy and tell their representatives “fix it now!”

In closing, I piggyback a vulgar quote from Full Metal Jacket:

Social Security is a huge s### sandwich and we're all gonna have to take a bite.