Re: The N95 shortage America can't seem to fix

Funny how we heard all the same prognostications when I was 30, and SS is still around now. If it needs help, all they need to do is raise the cutoff level so that richer people continue to pay into the system.

The difference is 40 years ago when we heard the warnings, we might have been able to do something but SS is upside down now, drawing from the general fund to survive (where do you think that "interest" gets paid from) and Medicare that has been eating the non existent trust fund capital for a while. That is all general fund dispersement. Considering we borrow a third of it, the crisis is here now.

Raising the cutoff to infinity is not saving Medicare and the little extra money it would raise will not save SS. If it had been politically viable, the thing that might have saved SS/MC would be to raise the retirement age to reflect life expectancy. The full SS age should be more like 80-85 with the minimum age for partial benefits around 72 if we were using the same demographic model as they had in

As for SS/MC, You still have the demographic problem that the Baby Boomers who made FICA flush with cash and generating huge surpluses are now taking the money out with fewer workers behind them to support the program.

Not true. SS is working as planned.

"Chart 1 shows trust fund total income exceeding trust fund expenditures from 1984 through 2019, generating annual surpluses. Beginning in 2020, total income is projected to be less than expenditures, generating annual deficits (shown as negative surpluses). The point at which the surplus changes to a deficit in 2019–2020 corresponds with the nominal-dollar peak in reserves shown in Chart 2, panel A.7 An annual deficit means only that the trust funds are redeeming their assets: There is no borrowing and there is no debt."

Nice piece of bookkeeping gibberish but the fact remains they are "redeeming their assets" from the general fund. There is no big pile of money somewhere they are dipping into. The government spent the surplus and put an IOU in the box. That interest and eventually the principle is going to be covered with current tax revenue that was only covering about 2/3ds of expenditures before the pandemic. We are borrowing or just printing out of thin air, far more now. Bottom line, any SS/MC expenditures that are not covered by the payroll tax are coming from current revenue, plus what we borrow so we are borrowing to pay benefits. If you don't think so, you tell me where the ACTUAL money is coming from.

My understanding is that the funds are invested in treasury bonds. They cash them as needed. So, not coming from the general fund. Coming from a very legitimate investment.

Step back a little and look again. Where does the government come up with the money? I know they went through the paper game of papering the loan but the federal government still needs to come up with the cash to write those SS checks. That is general revenue money that is covering the shortfall from FICA money (real cash taken from workers). around a third of that general revenue money is borrowed.

Pure sillyness, ignoring the facts. US treasuries are a good investment that huge numbers of people and businesses and even governments invest in. So by your silly view, THEY are all just taking the money from the "general fund". NO! They are getting the promised return for their loan to the US, and they have full right to do so. That is the commitment the US made to get the loan.

WHERE does the money come from?

The US does not have a bond fairy that leaves money under your pillow. It comes from current revenue or it is borrowed. You can spin this any way you like but the fact is the federal government pays people back from general revenue.

That's not true. SS will only start to draw down the trust fund in

(where do you think that "interest" gets

The trust fund, established in the 30s is still there and like from day one, it's invested in US govt securities, similar to the ones traded everyday in the open markets and held by institutions, mutual funds and world banks. So the trust fund is only non-existent and worthless if you consider all those bills, bonds and notes worthless. You may, but investors worldwide who have their money on the line disagree. We could wind up unable to pay it back, but then when Trump was pushing through his tax cut that helped double the deficits, we didn't see you here objecting, saying it was going to make the US financial situation worse.

AFAIK, there is no FICA shortfall yet, it's projected to start in 2021.

You;re right. I've been through this with Fretwell many times now. The SS trust fund is real, the securities are no more worthless than any of the rest of the $27 tril in outstanding US debt. Those are held by institutions, mutual funds, banks, corporations and state banks around the world. Those investors don't consider them worthless. Now we certainly are headed in a bad direction, where that assessment could change and it could change suddenly, where investors come to believe the US can't meet it's obligations. It's happened to other countries, we are not immune. But that's an issue related to all our debt versus all our spending and tax receipts, etc., nothing special about SS.

That would be true if we were paying down the national debt, but we are not. The Treasury just replaces one govt debt obligation with a new one. When a Tbond matures, Treasury sells a new one in the markets to replace it. When the SS trust fund starts net redemptions, the same thing will happen. Treasury will issue and sell new debt in the open markets. An investor will buy it and that cash will go to the SS trust fund redemption. The net US debt, the cash position, does not change. It's not new borrowing, it's not new spending, it's swapping one existing debt instrument for a similar one.

Where does that "interest" come from?

You are starting to get it. Those debts (AKA assets to SS) are only as good as the faith in the dollar and we are printing dollars like Monopoly money. How long is it going to be until the world figures out the paper is worth less than we say it is? We are already having trouble selling our paper for the interest we are willing to pay, that is why the Fed had to buy about $7 trillion worth over the last decade or so. What happens when our paper starts requiring the interest rate that reflects our actual credit rating? We pay over a half trillion now in interest alone at the 1-2% rate.

What if that went to 4%?

How about the Carter era $11-12%?

It can happen, we saw it in our lifetime.

That hasn't been true for a couple of years In 2019 SS took in $885B and paid out $994B This year the projection is SS takes in $994B and paid $1053B.

They pad those numbers with "interest" payments and the income tax on benefits but that is coming from general revenue.

They say right in the preface, these projections do not reflect Covid and all the loss of FICA revenue. Those SS checks still keep coming.

Debt is only an asset when it is someone else's debt. When you borrow money from yourself then spend the money, it is just a bookkeeping trick like the ones that put Bernie Madoff in jail.

Ah but they don't. The market is so soft that the Fed has to buy our paper or we would have to raise the interest we would have to pay to make it attractive. At a certain point, we may have simply saturated the market with all the paper we are generating. There may not be that much loose capital around.

Exactly. I just said the same in another thread.

The contribution limit has not been raised to infinity, but the financial models I've seen show that raising it to infinity will make the trust fund solvent for the foreseeable future. I suppose if you look around enough, you can find a model that says differently.

I don't buy any of that.

Precisely why step one should be to remove the SS/MC contribution limit. With that done, we can start to have a conversation about the contribution percentage.

There are exceptions but corporate America kicks most people to the curb around age 60.  Lots of people were covid-fired this year as well.

We can't all have a $175,000/yr do-nothing job like AOC.