The cherry on top is that our parents generation, who made more and had access to cheaper house, education, healthcare, etc., still barely saved for retirement. Unless, god forbid, your parents drop dead early, we are going to be stuck supporting them for a long time.
If the 0.1% can successfully convince people to blame their grandparents and magical robots for stealing all of the country's wealth then this trend is likely to continue.
I wish I could up vote this more. Supporting elderly people, or disabled people? These are good things that are good to do. Corporations paying for the negative externalities they dump on everyone else, and for upkeep on the society they owe their existence to? Also good things that are good to do.
It's not their fault we make less, but they should have personal responsibility for their own retirement, especially since the massive amount of growth in housing value and the stockmarket over their lifetime.
We're talking about people who fall within a certain age range. Personal responsibility is something that makes sense when talking about a person, not a population. To my mind, therefore, personal responsibility doesn't have much to do with good policy.
Is someone wealthy just because the house they own has grown in value? Practical wealth is how much you have relative to the cost of living. Someone in a $1M house is not necessarily more wealthy than when their house was $100K if all their other living expenses have also grown 10x.
Because the increasing trend is that it is not financially viable for younger families to buy a home. So they would thus not have a mortgage to reverse in the first place.
Rather, they would be stuck paying rent and hopefully have enough savings/Social Security/other income to cover it as long as they needed.
There is also the issue of population growth rates.
Future generations CANNOT keep growing like that. Be it by directed reproduction limits or global resource wars/pollution/plagues/extinction from the preceding the population will shrink.
Great question. I don't know the answer, but you can imagine what some of the considerations might be...
Population growth in the US is slightly declining and generally remaining flat, although life expectancy is increasing.
So it seems likely the older people will need their homes longer than previous generations. When they die they might pass them along, but that certainly doesn't happen to everyone, and in many cases they might be sold, increasing supply.
That said, home value distributions are interesting. Jobs are stagnant or disappearing throughout much of the country, and it is primarily the cities where people are increasingly moving due to availability of jobs. This means those cities are much more desirable, and there is still too little supply, even with people turning things over to children.
Realistically though, the vast majority of the population has near non-existent savings. Many of these Baby Boomer retirees will need to downsize, reverse mortgage, or do something to tap their home for cash as that is still by far and away most families biggest investment. This might point more to the house being sold.
Still won't be enough to meet demand though in big cities since that is increasing, not decreasing. And if fewer are living in places without jobs, those homes may not be options for many families.
I think the idea is that we won't have the option to help us support our parents, because we'll need to keep living in the house (and haven't finished paying for it so we don't have the equity to borrow from anyway).
You make it sound as if before Social Security, people saved for retirement because they recognized they had to.
But of course they didn't-- because they didn't earn enough to save-- just like people nowadays.
Social Security is insurance against destitution in old age. It really doesn't function to take away any saving incentive. It just keeps old people from being homeless and starving.
It's hard for me to understand how my ancestors, alive since the beginning of time, reproduced so much that not every person in the family line has a house.
Could you imagine working your whole life and end up with not even a shelter to pass on to the person "replacing" you?
I never plan to have a kid, but if I did I would feel obligated to give them a head start in this shit life. They wouldn't be fucking renting or taking out loans that's for sure.
I don't judge people who didn't or couldn't save enough for retirement and are living on SS and Medicare exclusively. I like Socialist safety nets of those sorts, and am happy to pay into them. One day I will be old and sick too. We all will be, except those who die early.
I judge you if you didn't hold your government representatives accountable for excessive discretionary spending, which was borrowed out of Social Security and will need to be paid back with higher tax rates.
Medicare is fine, some social security facets are fine, such as disability.
Social security as a general retirement plan? Shitty program.
What it should be AT MOST: mandated investment in a retirement account that you can't touch. Although I would prefer to not even have policy here at all. This is only necessary because people are by and large shit with money and will not save without being forced to.
What is is: take money from workers and transfer it directly. It's not even invested to generate additional wealth.
> What is is: take money from workers and transfer it directly. It's not even invested to generate additional wealth.
Its invested, by law, in the safest asset known to man: Special issue US treasuries that can always be redeemed at face value (principal + interest), which come ahead of general issue treasuries.
"By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.
In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash."
Why not invest in bonds or stocks? The amount the US government would need to invest would disproportionally move markets, but most importantly, the losses (when they occur) would be backstopped by the US taxpayer. There is no reason to needlessly invest the Social Security trust fund in equities when its most important asset is the ongoing ability to collect taxes (equities can go to zero; the ability to tax isn't going away under almost any circumstance, barring a complete collapse of the US government).
EDIT:
> The treasuries are just an IOU in legal form.
All debts are IOUs in legal form. The reason the US government gets such low rates is because the market believes they're more likely to pay the debt back then Joe Schmoe. And the market would be right, which is why capital scrambles into treasuries at the first sign of global financial trouble.
"Invested". Only the US govt can use that term and mean "borrow" instead. The treasuries are just an IOU in legal form. Given the high debt level in the US, I wouldn't think of the literal term "invested."
The disability program is hurting society. You can get disability for having autism.
Once they are on it, they have incentives to stay on it forever. If they make even one dollar working they lose it all, so they make extra cash under the table through committing fraud, selling drugs, etc.
No one can sue them and take it away, so they do things like go without insurance, buy things on credit with no intent to pay, titling their car in someone else's name, and hundreds of other tricks they learn in their new 'job'. By day they can do whatever they want. People who work have to pay not only to sustain them but also for the damage that they are causing directly to them.
Seconded. That stood out to me too in his post. Disability seems to be widely abused in the western world. I'm for social welfare, but I'm not for mismanagement and abuse. Disability as it exists today is a concern that needs to be addressed.
You guys have the advantage of being able to work. Your minds and bodies are healthy. Man up and take care of those less fortunate, even if it means a minority game the system.
That's not at all what I meant, attacking the legitimately handicapped. You should be ashamed of yourself taking it out of context on purpose just to self-righteously complain.
> I know someone who is literally blind and he works just fine. Even know a guy with ALS who can barely move who still works.
> but I choose not to be a degenerate leech and actually work.
Your viewpoint is disappointing. It is not okay that someone who has ALS must work. You are not a leech if you are physically disabled and cannot work because of it. I'm not even mad man, I just feel sorry for you. Push the keyboard away and spend time cultivating some empathy.
> Well said. Critics rarely consider the potential personal benefit of SS in the future. Now, it's not a perfect system, but it has its upsides.
Critics definitely consider the personal benefit. The problem is that they don't trust that it'll actually be there, or that it's a system that actually can work as it has been designed.
For example, in the 80 years that it's been in effect, the OASDI tax rate has increased sixfold and then some. That increase was fairly steady for a period of time - and the reason it's stagnated recently is not because the tax revenue is sufficient (it isn't) but because political ramifications have prevented the tax rates from increasing. Obviously this isn't sustainable. You can say, "well, the solution is just to raise taxes" - but relying on periodic changes to tax rates is not a recipe for creating a system that can achieve a stable steady state without being subject to political meddling in the long-run.
A further problem is that Social Security hinges upon the idea that the current working population will be responsible for paying for the current retiring population. Unfortunately, the respective sizes of these populations can vary dramatically, which means that some generations will end up paying far more than others. People talk about Social Security like it's true time-shifted income (ie, savings), but it's not.
One way we've dealt with this so far is to increase the number of people who are paying into the system while remaining ineligible for collecting benefits from it, but that's also not sustainable (and it's also a really horrible way to treat people).
Once again, getting the state involved just makes things messy. Let people be responsible for their own well-being as they age. Without safety nets, people tend to be much more cautious and thoughtful when spending. Plus, people who are fit to raise smart and healthy children will also be more apt to do so, which is a must for any society!
Nah, screw that. We all deserve comfortable retirements, and we should fund it as a society.
Wealth inequality being what it is, yes, the wealthy can afford to chip in for the well-being of the rest of us. Or rather, we can afford to redistribute our wealth claims as a society in this way.
Why not? Wealth is a logical fiction we've invented, as to who has what monetary claims we enforce, and we can bend this fiction to our goals (including, as stated, the moral imperative to provide comfortable old age for all, regardless of personal means).
Social security in its current form doesn't even provide a comfortable retirement; it single handedly is keeping millions of seniors just a bit out of poverty. For that alone, it should be protected.
"Researchers at the CBPP used the Census Bureau's definition of poverty, which in 2015 meant $11,367 or less for an elderly individual, $14,342 or lower for an elderly couple, and $24,257 or less for the average family of four, and compared poverty rates for the elderly (ages 65 and up), adults (ages 18-64), and children (under age 18) with and without Social Security benefits.
The findings showed that Social Security benefits have kept nearly 22.1 million Americans out of poverty, with a reduction in poverty rates observed in all 50 states and Washington, D.C. As you might have rightly imagined, the bulk of those being kept out of poverty are elderly Americans, which comprise about two-thirds of all enrollees to begin with. However, children and adults younger than 65 benefited, too.
In total, 15.07 million elderly folks, 5.94 million adults, and 1.08 million children are all lifted above the poverty rate thanks to monthly Social Security payments. For all ages, Social Security reduces the estimated poverty rate in American 7 full percentage points to 13.5% from an estimated 20.5%. But the biggest effect is seen on seniors.
As you can see above, without Social Security income, just over four in 10 seniors would be living at or below the poverty rate. With Social Security income, just 8.8% of seniors are living in poverty. We'd obviously like to see that figure fall to 0%, but for such a vulnerable group of individuals who may not have other forms of income beyond Social Security, this data would imply that the program is doing its job."
Right. Ideally, Social Security would be even stronger, but at any rate, it acts right now as a "safety net" which would be horrific to abandon. (Let's not forget the reasons we were led to institute it in the first place! Ah, but all of recent American economic policy is a matter of just such cultural amnesia…)
> Wealth is a logical fiction we've invented, as to who has what monetary claims we enforce, and we can bend this fiction to our goals
What would the transition from our current state to one with significantly altered monetary claims look like? Would it be a voluntary transition, or a forceful one?
I may be reading too much into what you are getting at with your second question, but: What does it even mean to draw that distinction in this context? Our current state is already a forceful one (as would be any other distribution of claims with any real power of enforcement). Wealth, like anything else, is ultimately enforced by, er, force.
(E.g.: What is it for you to own land? It's the ability to have me forcefully expelled should I walk on it against your wishes. What is it for you to own a car? It's the ability to have me forcefully prevented from or punished for driving it myself. Etc., etc.)
To bend the wealth distribution is just to say: Ok, we as a society no longer recognize you as having $X amount of wealth, as we were doing before. We now recognize you as having $Y amount of wealth, and will carry on our claim enforcement mechanisms accordingly. We can bend the wealth distribution anyway we like… so long as we collectively decide to. (Sometimes we call this "taxation", sometimes we call it other names, but let's never lose sight of the fact that wealth, in the relevant sense, is a social construct in the first place, not a brute fact. It's numbers written down somewhere that we continually agree to.)
Everyone may have a word or two to say about every aspect of how society is run; such is democratic politics. But you speak as though the amount of money someone is construed as having is a physical quality intrinsic to them, instead of a social relation we agree to. The idea that taxation is a taking imposed after the fact on an otherwise natural distribution is muddled; it's all just numbers in ledgers, the tokens of a game whose rules are chosen by society in the first place.
Well, I hope you don't judge people for an accounting fiction.
Any treasury bonds held by the federal government (for example, by the Social Security) is money the government owes to itself and has no real-world effect. The only part that matters is treasuries held by private investors.
Less government spending in the past would mean lower government debt (owned by private investors) today. That's only real effect. You can blame people for running up government debt if you like, but might as well skip talking about Social Security.
> Any treasury bonds held by the federal government (for example, by the Social Security) is money the government owes to itself and has no real-world effect. The only part that matters is treasuries held by private investors.
I do not agree it has no real world effect. That money will need to be paid back to Social Security to pay people out. Its either paid by taxpayers, or by everyone through inflating our way out of the debt. Regardless, its an obligation to be paid.
Stop wasting taxpayer money and start using it to take care of citizens. That's what the role of government is.
Money has to be lent to be saved, of course. If the money is not invested in the provider or public sector, then the wealth won't exist later to meet the deferred needs.
I'm not sure you understand the implications of the argument you're making.
> Any treasury bonds held by the federal government (for example, by the Social Security) is money the government owes to itself and has no real-world effect.
That is 100% correct. Which is the point. Those bonds are not a meaningful asset for Social Security; they have "no real-world effect" because they're an IOU payable by the same entity who offered it.
But the promises Social Security made do have a real world impact, and those promises will need to be redeemed. But Social Security doesn't have any assets of the type you say "matter".
As I understand it, the implication is that it doesn't make a whole lot of sense to think of the government as saving money specifically for the future expenses of retirees. At the level of the federal government, it's a pay-as-you-go system. Current taxes and treasury sales (deficit spending) pay current expenses.
(And it's a bit weirder than that because the Fed can retire government debt if it wants to, just by creating new money out of thin air and buying treasuries.)
Looked at from a certain perspective, federal taxes exist mainly to keep the treasury bond market from getting too big due to deficit spending.
So the financial question is really whether the treasury bond market is bigger than it should be, given anticipated expenses. I don't have any opinion on this. I'm not sure the average voter would have any idea either? Low interest rates seem to indicate that the market isn't too worried?
There's really two (equally valid) ways to look at this, from an accounting point of view.
1) SSA is independent. It has liabilities (the promises made to enrollees), and assets (the trust fund). Liabilities exceed assets in the long run, but until then (currently projected as 2034) the system is fine. The federal government, on the other hand, needs to count those liabilities at full value. This means government debt is significantly higher than generally reported, the Clinton surpluses never actually happened, and a lot of spending decision, in retrospect, look quite reckless.
2) SSA is not independent, but is part of the federal government. Social security has liabilities (the promises made to enrollees), but the trust fund is a wash. This means that the lower "net" totals for government debt are technically correct, and that there was a budget surplus in the 90s...but it also means that no provision was made to cover those liabilities; the system is being run strictly on a pay-as-you-go basis. And while they may not be technically debt, given the scale of the liabilities social security represents to the federal government, a lot of spending decisions, in retrospect, look quite reckless.
What's important to note is that these two stories are completely identical. It's like arguing whether a liter of water weighs 1kg or 2.2lbs; the answer is "both". :) In both cases the money collected via the payroll tax was used to fund general expenditures, leaving an unfunded liability. The size of the liability isn't in question, nor is the matter of who has to pay it. It's really just a qyestion of what you label the boxes.
> it doesn't make a whole lot of sense to think of the government as saving money specifically for the future expenses of retirees.
That's not inherent in the concept of a pension system. It could have been run on a funded basis, with actual savings accounts; it was not due to political reasons. I took toomuchtodo to be decrying that fact. Yes, the system we have is a pay-as-you-go system, but in retrospect doesn't that seem like a pretty poor idea?
Also:
> the Fed can retire government debt if it wants to, just by creating new money out of thin air and buying treasuries
That is legally impossible. (It also wouldn't work from an economic POV; it's effectively the same thing as just printing money to pay for SSA liabilities directly, and we know that funding government directly via the printing presses doesn't work.)
You say "unfunded liability" like it's a bad thing, but it's perfectly normal for the government to promise to do things based on future tax revenue.
The choice here is (1) tax people ahead of time, invest in financial markets for X years, then pay it out, (2) wait until the money is needed and tax it then, (3) spend first, tax later (deficit spending).
In case (1) you'd have no government debt (no U.S. Treasury market) and the government owning a large part of the private sector. In (2) you'd have neither a treasury market nor assets. (This is sort of like how non-profits work.) For (3) you have what we have today, which is a huge number of treasuries available, which everyone depends on as a safe investment.
It's not clear that having $13.6 trillion in treasuries available for investors (including foreign governments) to own is actually a problem. Lots of investors like having a safe investment. There's sure to be some level that's too high, but it's unclear what it is.
> actual savings accounts
This is another way of increasing government intervention in the financial system via owning financial assets. (Presumably there would be rules about which investments are allowed and when they can be withdrawn, so the government would still have a lot of control over this money.)
> not inherent in the concept of a pension system
The difference is that individuals and private pension funds need assets because they don't have a guaranteed source of income and can actually run out of money. The main risk for the U.S. government is Congress deciding to start a financial crisis. But that's politics, not being unable to raise the money.
> legally impossible
It happens all the time. Look up open market operations. The Federal Reserve sent almost $100 billion to the U.S. Treasury last year. [1]
(That's just an aside. Compared to $3200 billion total revenue, it's not that much, and I agree that it would not scale to paying off government debt, or even paying the interest. Still, nothing to sneeze at.)
I think you're focusing too much on accounting labels, and need to step back and look at the bigger picture. From the point of view of the economy as a whole, the baby boomer generation retiring is extremely expensive. In general, societies need to budget around extremely expensive events like that, eg, deferring other expenses, making sacrifices, saving up in preparation.
You seem to be arguing that, uniquely, the US doesn't need to do this; they can just promise whatever, then borrow all the money cheaply from foreigners. Perhaps so! And I really, really hope you're right (and all the textbooks, financial models, and experts are wrong).
> they don't have a guaranteed source of income and can actually run out of money.
That income is finite, therefore, the US can most certainly "run out of money", hence why the budget is a nasty political fight every single year. Now, it is highly likely that the politics of social security will make it a priority come what may, and thus I'm confident that money can be found for it, but only at the expense of other things. Hopefully none of them end up being important. But the reality of social security is that the national savings rate when the baby boomers were at their most productive was extremely low. (Even right now, the US savings rate is almost half that of the EU-15.)
In a different universe, the US would have saved more during the long post-war boom, and would be in a much better shape to, eg, pay for the boomers retirement and replace our aging infrastructure.
> It happens all the time. Look up open market operations
The Federal Reserve does not (and cannot) retire or forgive the US debt it holds.
I'd rather not live in a dystopic high-tech, low-life society where the elderly and destitute are tossed aside. But, as I walk down the street, I see homeless people sleeping just outside the entrance of Snapchat HQ (latest valuation @ ~$25 billion).
A older friend of mine who structured financial products said that the worst thing we did for the healt of the Social Secuirty fund was the war on cigarettes. He said it in jest... but he wasn't wrong.
The TLDR is: smoking and obesity cause you to die sooner with less total medical costs[1]. This is great for things like social security since you can pay in over your entire life but never collect.
The story I remember hearing (and couldn't find a specific citation) was that anti-smoking groups made up a bunch of big numbers about smokers' high medical costs to scaremonger. To fight back Phillip-Morris did a study and legitimately found that smokers died sooner and total costs were lower. Unfortunately, that's not something you really want to publicize, so anti-smoking people can keep making up scary numbers and cigarette companies can't really fight back.
If I remember correctly he was structuring a derivative contract based on life expectancy/actual life time. The goal was to hedge risks between health insurers and life insurance policies.
Life insurance policies policies want to offset the risk of a group dying prematurely in the defined time window and health insurance companies want to offset risk a group of people living long but with signifiant health problems.
At the time it didn't go anywhere because some folks dubbed it "Death Derivatives" and he was working on it at the mortgage crisis was unfolding.
