Social Insecurity to Go Bankrupt by 2035

A reliable analysis from the horse’s mouth, the Social Security Board of Trustees – not a MAGA outfit -- indicates social security’s main trust fund will flatline around 2035.

The trust fund, the asset reserves of the Federal Old Age and Survivors Insurance and the Disability Insurance trust funds, will be depleted by 2035, around the same time survivors of the Biden administration are due to celebrate their victory over the assassination of the internal combustion engine.

There are different reactions to this distressing news, depending on one’s place in the political scheme of things.

Some multi-term incumbent politicians likely will not be in office when final rites over Social Security are read. Here in Connecticut, Democrat politicians who have held office for more than 30 years – U.S. Representatives Rosa DeLauro and John Larson, for instance -- may not be present to witness the calamitous results of their handiwork. The two congresspersons are now, respectively, 80 and 75. And while neither are as rich as Governor Ned Lamont or U.S. Senator Dick Blumenthal, both millionaires many times over, it would appear that no legislators in Connecticut’s all Democrat U.S. Congressional Delegation have ever stumbled upon a poem written by Hilaire Belloc titled “Advice to the Rich.”

The poem is brief: “Get to know something about the internal combustion engine and remember – soon, you will die.” There is a difference, after all, between a life term and the multiple terms in office of congresspersons in gerrymandered districts. ?As we all know, death, the great equalizer, does not spare politicians, and dying is not at all the same as being voted out of office.

There are only two ways to discharge social security debt – or, indeed, any debt -- which occurs when money spent exceeds money appropriated: 1) You may increase taxes, or 2) you may reduce spending. Generally, progressive Democrats favor increasing taxes to pay down debt, provided only the super-rich shoulder the increase in taxation, and Republicans generally favor programmatic changes that reduce spending.

According to a fairly comprehensive piece in the Epoch Times , “Democrats have proposed bolstering the [Social Security] fund’s finances by asking wealthier Americans to pay more in payroll taxes, with the Social Security tax currently capped at 6.2 percent of the first $168,600 of employee wages.

“A plan introduced in 2023 by Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), along with Reps. Jan Schakowsky (D-Ill.) and Val Hoyle (D-Ore.), proposes to raise payroll taxes on 7 percent of the highest earners, which would keep the OASI fund solvent through 2096.

“The plan, called the Social Security Expansion Act, calls for applying the payroll tax on all income above $250,000 per year, among other provisions.”

A Republican task force recently proposed a solution that involves raising the retirement age to account for increases in life expectancy while reducing auxiliary benefits for high-income earners. Social Security benefits should be apportioned according to need, and the very rich are less needy than the very poor, Republicans argue.

Over the long run, when we shall all be dead, option 1) increases the opportunity to spend recklessly money we do not have in hand and pass on our debts to an already overburdened future generation, an opportunity rarely resisted by politicians on the hunt for votes. The future does not vote on measures that affect it, and the easiest way to gain a vote is to buy one with money appropriated from future taxpayers.

A public debt discharged solely by the raising of taxes is a merry-go-round that invariably increases net spending in future years, because money appropriated to pay down debt is often spent to broaden programs that please the general public.

Option 2) actually reduces long term debt, along with the political prospects of the party that recklessly spends the public treasury to purchase votes.

On May 6, following the Social Security Board of Trustees report, President Joe Biden proposed an easy – much too easy – solution to the problem addressed by the report. “I am committed to extending Social Security solvency by asking the highest-income Americans to pay their fair share without cutting benefits or privatizing Social Security,” said the president.

And here is U.S. Representative John Larson , tackling the problem of debt caused by excessive and imprudent spending: “Democrats are united in not only protecting Social Security but enhancing it (emphasis mine) for the first time in more than 50 years. President Biden was clear at the State of the Union: ‘scrapping the cap’ on the less than one percent of Americans making more than $400,000 a year will allow us to keep Social Security solvent for years to come and strengthen benefits, and Democrats have a plan to do just that. The Social Security 2100 Act is cosponsored by nearly 200 House Democrats and would improve benefits across the board while extending solvency until 2066, while Donald Trump and House Republicans continue their calls to slash Americans’ hard-earned benefits! By contrast, President Biden and Democrats are working to strengthen Social Security, not cut it.”

By “improving benefits” Larson means – extending present benefits to those yet untouched by a solicitous governing authority. Among other measures, the Social Security 2100 Act scraps a tax cap that limits the government’s taxable take to $168,600 per year. The Larson-Biden proposal raises the cap to $400,000, broadens benefits, and does little or nothing to reduce social security spending. Just the opposite, the Act increases spending through an extension of benefits.

Once the rich have “paid their fair share” of social security taxes, spendthrift politicians like Larson will have on hand a cache of money to “improve benefits” and gather in more votes until the next crunch arrives, likely in the not too distant future. This is the usual political merry-go-round that raises net debt, invariably passing it along to generations yet unborn.

Only in a political Cloud Cuckoo Land is the problem of debt solved by pulling off the table reasonable spending cuts and increasing debt by broadening benefits.