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Fixing the budget is quite easy conceptually. Just cut Social Security. Old people have had their whole lives to get their affairs in order. The “fat” is the fact that we pay people simply for being alive once they reach a certain age. Maybe you need someone with basic math skills to structure the phase-out so that people who have already paid in don’t get completely screwed, but this is a fundamentally simple problem from an operations standpoint.
I would say to cut Medicare too, but I worry that many families would literally bankrupt themselves pouring money into the pit that is the US healthcare system in order to save granny. It is quite hard to evaluate costs and benefits in a dispassionately economic manner in these areas, which is probably why we’re in this mess.
Social Security? How about you make the defense dept do a proper accounting audit for once? Then after that go for social security.
It's worth pointing out that social security spending is now about 2x defense spending. In 2025, a projected $1.6 trillion vs $850 billion.
Defense spending/GDP hasn't been lower since the 1930s.
We could and should make the Pentagon more efficient, but it's not the panacea that many imagine.
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I want to fix the budget, but I'm less than stoked about robbing me of the money I was forced to pay to social security in order to do it. Personally, I think that if politicians can't agree on what to cut (which is a likely outcome TBH) we should just cut all budgets at the federal level by x% in order to make it happen. For example, if we need to cut spending by 20%, every single department budget gets slashed by 20%. No exceptions. While it would be better if our representatives could agree what needs to be cut, this would at least be better than the current status quo where the US just keeps borrowing money it's never, ever going to pay back.
If you got back everything you paid into social security, it would be a pittance, because the program has always been funded by stealing from the young to pay for the old, and reliant on the idea that there are a lot more young than there are old so that stealing a little bit from each young person doesn't hurt too bad but is still enough to pay for the old people.
The demographic transition wrecked that, and now we are just going deeper and deeper into debt while we try to figure out a solution (no, immigration is not a solution).
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Social security's insolvent. There will be automatic cuts in a decade. Expanding lifespans and falling birthrates will make the situation worse. There's no way the program survives long enough for me to get a penny out of it.
Accordingly, your demand that you benefit is actually just saying that you don't want to be the one stuck with the bill—that's for other schmucks. Keep forcing people into the Ponzi, to make sure it's solvent long enough to fulfill the promises it made to you, specifically.
And this despite that it doesn't really promise you any direct reward! There's no accrued payout that's sitting for you on a leger somewhere. That's just the story they tell you to make you think it's reasonable.
It's almost a quarter of our yearly spending.
No. Social security needs to go. At the very least, we should be means-testing. It's unfortunate that there's no political will to touch it.
That is not actually my position. I demand that, after I have been forced to pay money in, that money isn't just ripped away to balance the budget. I accept that, if we stop trying to prop it up, social security is likely to run out of money long before I see a dime. I'm ok with that (relatively speaking). My demand is that we let the money run out first, not just pull the plug. The former is unfortunate but unavoidable, the latter is a vicious slap in the face to everyone who has been forced to pay into this bad program.
Fair enough—it's still a slap in the face to everyone who will have to pay in the meantime, though.
I'm fine with cutting off SS taxes immediately. Though from what @sarker said, that would mean that the money runs out immediately so I guess maybe it amounts to the same thing. I was under the impression that there was money left in the pot, but it sounds like I was mistaken.
I'm not sure, exactly. I'm pretty sure that other government programs took out loans from social security.
Social security is the single largest debt owner for the federal government, isn't it?
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There is no money. Money paid in today is paid out today.
https://www.npr.org/2005/04/06/4580019/shaking-faith-in-social-security
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I thought the money technically did already run out. Didn’t the federal government borrow all of it decades ago?
The government maintains the fiction that there are two separate accounts.
The general account which has a massive debt.
The social security trust fund (funded by employment taxes) which has a positive balance
At some point this farce will no longer be maintained as the "trust fund" will be depleted. In theory, this would cause a reduction in benefits, but I doubt the gerontocracy would allow it. More likely, we will see massive tax increases on the remaining workers to subsidize the old.
The plan seems to be
Borrow until enough Boomers die to transfer political control to the Millennials
Cut off Generation X
Profit.
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That I don't know, unfortunately.
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The fact that we don't means-test, which seems like such an obviously correct and non-controversial idea, is indicative of just how much of a third rail any meaningful cuts to SS are due to the old people voting bloc. Even though it is kind of crazy to oppose making it so that you don't collect SS if you are fabulously wealthy, the topic is like other third rails (guns, abortion) in that even reasonable changes are vehemently opposed. Unlike guns and abortion, though, you are probably not going to get the SC to intervene here, so the only possible approach is legislative. The "adults" from both parties need to get together and get real about SS, publicly contradicting party leaders who attempt to make the issue partisan, and see if they can't at least manage to means-test for the sake of the grandchildren. The Ponzi scheme doesn't have to go to zero - we just need to start cutting benefits as the current level becomes unsustainable. Perhaps another solution would be to embrace more official, non-citizen immigration so that we can have a bigger cadre of workers who pay into SS but never get to withdraw.
The slogan for the upcoming civil rights struggle for these people is already written though... "No taxation without representation!"
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Means testing deprives the program of its third-rail status and turns it into just another welfare program.
Means testing that would actually make a difference would affect far more people than the "fabulously wealthy".
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This is conceptually simple but in practice is a terrible idea.
Departments already running lean are penalized and may dip below the minimum number of people they need to fulfill their core mission.
Corollary: Inevitably the small department that keeps the whole organization running will get thrown under the bus and sooner or later everything goes to shit.
Departments whose heads had the foresight to maintain appropriate blubber reserves chug along unaffected and wasteful. You'd need an 80% cut to start to make a difference.
I've seen this exact scenario play out in corporate cost cutting campaigns.
Selfish request: Please share an anecdote about this. I have a special fascination with corporate restructurings / cost cuttings / re brandings / org redesign.
Related anecdote:
My husband's employer provides various services to other companies, with different departments providing different types of services. They recently had a situation in which $Big_Client had contracts with multiple departments: dept. A's contract was making a ton of money, while dept. B's had over time become unprofitable in ways they were unable to remedy. The guys in A thought it was in the company's overall interest for B's contract to keep going, because A's profit was far larger than B's loss and they thought B continuing to provide their service helped keep $Big_Client well-disposed towards the company overall.
Top management, however, saw only that dept. B was not as profitable as they would have liked, and so that contract has recently been terminated. Only time will tell if this winds up harming dept. A's profits from that client.
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I don't want to give away too many details for opsec reasons.
However, the broad strokes are that I worked at a big company you've heard of. One day the top brass decided that the company has gotten too big and it's time to downsize. Naturally, top brass has no visibility into what parts of the company are load bearing and which are not, they can only tell which parts are cost centers and which are profit centers. So inevitably they lay off large portions of a few teams that are maintaining tooling that nearly every other (productive) employee at the company depends on to do their work.
The company hasn't gone out of business (yet), but there was absolutely a huge productivity hit for me because that tooling was no longer reliable and I needed to work around it somehow. Multiply that out by tens of thousands of employees and you can imagine the scale I'm talking about here.
In my department as well they laid off some of the top guys that were universally admired (and I'm not talking management, I'm talking about guys at the coalface). Meanwhile I was aware of people in other departments who accomplished as much in a quarter as I accomplished in a week (and I am not a particularly productive employee). They kept their jobs, because their bosses liked them and their poor performance was never a matter of record.
Of course, this is all perfectly illegible to the brass. From their perspective, they saved a bunch of cash - mission accomplished!
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Also I've never seen a "cheese slicer" budget cut like this (as they are called here) actually being enacted without the proposing party, right out of the bat, going "well, of course, this sector is the exception" (typically defense) followed by "and this too... and this..."
I think that would be a significant challenge for sure. The only way it works is if there are no exceptions. Not for teachers, not for our troops, not for Grandma who has cancer, none. I'm willing to grit my teeth as the things I care about get hit, but I don't think most Americans are.
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I'm not saying it's the best solution. I'm well aware it would have problems! But we absolutely have to stop racking up debt. The problems you mention are real, but less bad than the status quo.
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I was too busy fighting for my country in Vietnam! (I was a Viet Cong radio operator who immigrated to the US in 1995)
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Fixing Social Security is neither easy nor sufficient to solve the problem.
If we cut the SSA budget by 20%, we'd save $320 billion in 2025. The deficit is projected to be $1.8 trillion.
But even this modest victory is a pipe dream. The political situation in our country prohibits reducing Social Security at all. Our best bet is to fudge the CPI numbers and inflate away the problem. (We've actually been doing a pretty decent job at that).
The trouble with inflating away excessive social security payments means you're also inflating away debt repayments ... and maybe you can gaslight grandma into thinking she's getting a fair deal, but you're not going to pull one over on quants managing trillions of dollars of investments.
From a moral standpoint, it does seem like an improvement to stiff all T-bill owners rather than just grandma. If we were rolling over the debt every 30 years, gently inflating it away would seem to be a tolerable solution. "Aw, you loaned someone disposable income under the impression you were going to get to force their kids to pay it back with interest? Here's some monopoly dollars, and be thankful you're getting that."
But from a practical standpoint ... we're not rolling it over every 30 years. Something like 15% of federal debt is 30 year loans; more than that is one-year loans. And between the one-year loans and the older debt maturing in the same year, we need to roll over something like 9 trillion a year these days, at interest rates that are going to go up as inflation rates do. As soon as we find it too hard to refinance that 9 trillion (because cranking up inflation is when prospective reinvestors realize the game of musical chairs is now ending), the only way to bring it to levels we can repay will be very-non-gentle inflation.
That's a feature not a bug. And quants won't be able to stop it. Here's why.
The Federal Reserve owns a decent chunk of the debt. They don't care if it gets inflated away. In fact, they prefer it.
We just had an episode of inflation in which the debt got inflated away. Bond holders took a bath. Debt/GDP declined from 130% in 2020 to 122% today, despite near-record deficits: https://fred.stlouisfed.org/series/gfdegdq188S
Many institutions are required to hold T-bills. They will have no choice but to accept a soaking.
As recently as 2022, investors were loaning money to Germany at negative interest rates. Not all investors are rational.
It's possible that private investors will simply stop buying debt entirely and the Federal Reserve will take it all. This is exactly what has already happened in Japan. MMT will sneak in through the back door.
I am not claiming that this process will not come with significant disruptions, but it's the only way to avoid default.
Unfortunately, a world where we're comfortable paying for things by printing dollars is not healthy either. Congressmen lose all sense of scale that is created by forcing oneself to compare to revenue taken in and get used to printing more money. We don't want to be Argentina (or take your pick of reckless country).
Regarding 3, will that result in black market or foreign institutions trying to do the same things without the T-bills?
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