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Culture War Roundup for the week of October 2, 2023

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I'm not sure any solution can be evaluated outside of what has caused the problem. Probably chief among them, an aging population. Even if it's aging slower than other first world nations "thanks" to immigration, it's still aging. So the ratio of young people supporting old people on social security keeps skewing worse and worse.

The other reason, which may be less supported, is Federal Reserve policy. When the whole system is funded with T-Bills, every time inflation spikes or rates get slashed, social security takes it dry. Even in good times, the same "use it or lose it" dilemma the Fed forces consumers into to keep our consumer economy consuming along with their 2% inflation target is punishing social security. Both by increasing the rate at which it needs to make it's inflation adjusted payouts, and for the last 15 years of low rate environment destroying it's interest payments because inflation supposedly wasn't high enough.

Raise the payroll cap, raise the payroll taxes, widen the tax base, privatize the system, none of it will matter. You need to goose the fertility rate, and not play silly games with immigration to fake the numbers. And you need sound money. Everything else is a bandaid doomed to fail.

Raise the payroll cap, raise the payroll taxes, widen the tax base, privatize the system, none of it will matter.

What makes you say that? The numbers I looked at suggest those tax changes would go a very far way towards addressing funding shortfalls. Raising birthrates would be ideal but if we could do that on command, we definitely already would. Most likely we'll have a combination of raising taxes, cutting benefits, and raising the retirement age - all stuff nobody likes, unfortunately.

What makes you say that? The numbers I looked at suggest those tax changes would go a very far way towards addressing funding shortfalls.

Do those numbers take into account continued declines in fertility? Do they take into account Fed policy decisions in line with the last 20 years of Fed policy decisions? What assumptions did they make about T-Bill returns or inflation?

I just can't be brought to trust the numbers anymore. Estimates in advocacy for policy changes always make optimistic assumptions to make the numbers work. Although perhaps I did come on too strong saying "none of it will matter". It might buy us a few more years, and I'm sure some politicians will pat themselves on the back for yet another non-solution.

Do those numbers take into account continued declines in fertility?

Social Security makes projections 75 years into the future and does take declining fertility into account:

The costs of both programs will grow faster than GDP through the mid-2030s primarily due to the rapid aging of the U.S. population, and generally continue to increase thereafter at a slower rate through 2076. This is because the number of beneficiaries rises rapidly as baby boomers retire and also because the persistently lower birth rates since the baby boom cause slower growth of employment and GDP.

Re:

What assumptions did they make about T-Bill returns or inflation?

The return on investment in the trust funds has been consistently about 10% total and 6% for OASI. Social Security payouts have a COLA increase based on inflation each year, and can sometimes adjust upward month to month based on the CPI. This is all factored into their budget & projections.

I'm sure some politicians will pat themselves on the back for yet another non-solution.

I mean it may be imperfect but raising taxes is more of a solution than hoping we have more kids.

I mean it may be imperfect but raising taxes is more of a solution than hoping we have more kids.

They're somewhat in opposition, insofar as raising taxes in the ways you suggest would transfer resources from the fertile population to the infertile population. Imagine raising social security contributions, but transferring the extra income to people under the retirement age who are medically certified as infertile. Of course, it's hard to say how much of an effect such transfers would have on the birth rate, but presumably they would be negative.

Fair counterpoint. OTOH, raising retirement ages probably also has some effect on the job market & wages as well, in terms of decreasing potential promotion opportunities. No idea how large that would be either and I assume in reality we'll do a mix of everything, maybe raise taxes slightly plus raise retirement ages and reduce benefits.

Yes. My preference in such cases is usually for reducing benefits (either in each case or through means-testing) but I appreciate that it's not usually a sufficient solution.

Raise the payroll cap, raise the payroll taxes, widen the tax base, privatize the system, none of it will matter.

Yes it will. Read the trustees report and stop being so hysterical.