There are a number of topics where I've repeatedly posted and/or tweeted on. One that immediately comes to mind involved allegations over Trump's first impeachment; Biden took undue credit for getting Ukraine's corrupt chief prosecutor Shokin fired; Shokin argued Boden was motivated by son Hunter's board seat with Burisma, which Shokin claimed he was in the process of investigating.
Another topic is social security (and to some extent Medicare). To me, it's important as I begin to approach retirement age as a Baby Boomer: I don't have any vested pension, and my own retirement savings have taken hits with stock market corrections, most recently in March 2020, fairly near the bottom when the market was in a pandemic freefall maybe a third to 40% down.
The basic facts should be familiar: basically about 15.3% on the first $169K of earning earnings. (the 2.9% for Medicare is uncapped). Note: half of the payroll taxes are deducted from an employees wages; the employer half comes from pretax benefits in total compensation. The programs are operated on a pay-go basis, meaning current program beneficiaries are paid from current payroll taxes. (To some extent Medicare also requires a monthly premium from beneficiaries for part B (provider vs hospital).) Also, part of social security may be taxed depending on the magnitude of other beneficiary income. So those amounts get added to payroll tax receipts for funding relevant program costs. Any surplus funding goes into low-interest federal debt (which yield far below, say, stock index income/gains). Any relevant interest income may also be applied against current program costs.
So the problem is the giant Baby Boomer generation has started to retire (if you look at early retirement of 62, roughly 2008). An aging workforce and longer lifespans in retirement narrows the ratio of active workers per beneficiary. In essence, the lower payroll tax income and higher aggregate beneficiaries basically flipped the switch from surplus to deficit. And what happens at that point? The government has to liquidate some of its reserve debt. It's been having to do that for some time now. Medicare will probably exhaust its reserve by 2031 and social security by 2033. If and when the reserves exhaust, we'll probably see benefit cuts of up to say, 11% to Medicare and 17% for social security
Note: the Baby Boomer apocalypse has been known for some time. In fact, George W. Bush tackled social security reform as a top priority early in his second term. His basic problem was trying to push a partial privatization; the Dems argue that letting workers invest on their own is like operating a casino. They also fearmongered a funding gap as the funds for personally directed investments were no longer available for pay-go, Even GOP legislators were unwilling to touch the third rail of American politics.
So what sparked this rant? I was watching FNC (something I don't do often but occasionally CNN's leftist bias annoys me). when a fearmongering Trump campaign ad targeting seniors on social security played. It made several points:
- It argued that unauthorized aliens would siphon off senior entitlements
- It swore off any cost-saving reforms, like deferred eligibility, COLA adjustments, means-tests, etc.
- He's promising to end taxation on benefits.
Nobody has argued to cut monthly distributions. Some Republicans have put some other reforms on the table to stretch existing cash flows. Nobody to date has proposed raising payroll tax rates. Dems want to remove the cap on wages for payroll taxes.
About 80 cents of each dollar you pay in Social Security taxes goes to the old-age insurance fund, the rest to disability. In 2023, those taxes — called FICA for people with wage-earning jobs and SECA for the self-employed — brought in more than $1.2 trillion, accounting for 91.3 percent of Social Security's revenue, according to the most recent annual report from Social Security's board of trustees.
The rest of the revenue comes from these sources:
$66.9 billion from interest on money that the trust funds invested in federally backed guaranteed securities
$50.7 billion from federal income taxes people paid on their Social Security benefits
$147,000 from reimbursements to the trust funds from the U.S. Treasury
I didn't see the drawdown in reserves in the above clip. I went to the SSA trustees:
A 2023 annual deficit of $41.4 billion decreased the asset reserves of the combined OASDI trust funds to $2,788 billion at the end of the year.
So, in other words, just like his first-term tax reform, he is not explaining how he'd going to get the $67B in revenues to pay for his bribe for higher-income senior votes. Remember, the employer half of payroll taxes came out of pretax benefits
Okay, now let's briefly remember Trump's record on social security reform:
- Like Obama and Biden, he really didn't want to spend political capital to fix the program. I don't recall the exact quote, but he effectively said, "The reserves will dry up on another POTUS' watch." The problem is, we aren't paying our fair share today for the benefits we're getting next decade. We need to fix that sooner than later.
- During the pandemic he called for an unpaid-for payroll tax holiday. That would have required a drastic drawdown on reserves, hastening the day of reckoning,
