> The current system is mathematically unsustainable pretty much by the design of a certain political faction interested in demonstrating the incompetence of government.
The current system is mathematically unsustainable as a result of politics.
If you're going to untie benefits from payments then the first sensible thing to do is to make the same payments to everyone instead of giving more to people who made more money, but this would result in large numbers of affluent retirees voting against you.
If you're going to untie benefits from payments then the second sensible thing to do is to eliminate social security tax whatsoever and fund the program from general revenues, which would remove the need for the farce of a "social security trust fund" (the government owes itself money: it's a debit and a credit in equal amounts and nets to zero). But then people would condemn you for "bankrupting social security" or "stealing the trust fund" or similar nonsense, funded by the people the tax burden would be shifted onto.
Removing the cap while leaving the program as it is not only is worse than either of these things, it doesn't even solve the problem, because the program as-designed would then be making higher payments to all of those people when they retire which would consume more than all of the money they paid in because people who made more money tend to live longer.
The government has a fund that is used to pay for SS. The fund is an asset they’ve committed to using to pay the liability of their pensioner promises.
That fund is an asset full of assets. Those assets are government debt. Owning your debt basically nets to 0.
I agree for a snapshot in time. I think the distinction is that if the liability includes future payments to current citizens posting into the system, the liability may outpace the asset.
The amount of expected social security payments is independent. They don't have enough "money" in the "trust fund" for that regardless.
The point is that the "trust fund" is a NOP. It's like writing a check to yourself. When you go to deposit it into your account, your account balance doesn't change.
Every penny the Social Security Administration withdraws from the "trust fund" is either coming out of that year's general revenues or is causing the US government to sell more treasuries into the bond market. It's the same thing that would happen if the "trust fund" was empty and the money the Social Security Administration pays out in excess of what it collected that year came out of general revenues or deficit spending.
Worrying about what happens if it "runs out" is ridiculous. It's like worrying about what happens if you run out of checks you wrote to yourself. What you need to worry about is where you're actually going to get the money.
Which you can go ahead and do already because both "social security tax" and "deficit spending" aren't particularly ideal, but that's what's happening today. Social Security tax is one of the most regressive taxes we have.
>The amount of expected social security payments is independent.
This is the kind of economic theory that loses people. It’s like what economists say deficit spending doesn’t matter because a govt isn’t like a person. It certainly matters if confidence in the system matters.
The fact that you acknowledge the money comes from side other source implies there’s a tradeoff. There’s no free lunch here, regardless how creative the accounting gets.
The Social Security Administration charges tax to Bob and then uses the money to make payments to Alice. For some years it was taking in more than it was paying out, so it used the rest to buy US government bonds, which is really just giving the money to Congress to spend on something else. Then Congress spent it on something else. It's all gone. All you're left with is a piece of paper that says the government owes itself money -- and not even as much of it as Bob was promised.
Now Bob is retired and expects his money back. But most of the money went to Alice and the rest went to Congress in 1994. There's no money. If you want money to pay Bob then you need to collect more taxes or sell more government bonds into the market.
So which of those things do you want to do? And if you want to use tax revenue, do you want it to be the regressive inefficiently duplicative social security tax or general taxes that don't charge higher effective tax rates to people who make less money?
I’m aware of the system, but all you’ve done is explain how the tradeoff works. It’s also how governments raid pension coffers to pay for something else like infrastructure (see Illinois). I’m not claiming I receive “my” money in SSI, but I am saying there is a point beyond which the system becomes untenable. At some there is a tradeoff because the money is gone. You could raise taxes or pay interest on a new loan, but again, that only works when there’s still confidence in the system. What happens when there is no longer confidence? Interest rates become untenable or the citizenry will not continue to support additional taxation.
Now I will agree that this is a contrived problem because SSI is a contrived system. We could just change the rules and make it continue to work, but that will come with tradeoffs.
The current system is mathematically unsustainable as a result of politics.
If you're going to untie benefits from payments then the first sensible thing to do is to make the same payments to everyone instead of giving more to people who made more money, but this would result in large numbers of affluent retirees voting against you.
If you're going to untie benefits from payments then the second sensible thing to do is to eliminate social security tax whatsoever and fund the program from general revenues, which would remove the need for the farce of a "social security trust fund" (the government owes itself money: it's a debit and a credit in equal amounts and nets to zero). But then people would condemn you for "bankrupting social security" or "stealing the trust fund" or similar nonsense, funded by the people the tax burden would be shifted onto.
Removing the cap while leaving the program as it is not only is worse than either of these things, it doesn't even solve the problem, because the program as-designed would then be making higher payments to all of those people when they retire which would consume more than all of the money they paid in because people who made more money tend to live longer.