OH Those Selfish, Selfish Boomers

Investment Analysis Clubs Macro Economic Trends and Risks
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If U was a millennial or a Z Gen; I would be very concerned about getting screwed by the federal government. Especially as that government continues to ignore the ever increasing national debt.

The “fix” made during the Reagan administration simply kicked the can down the road.

I believe another “fix” will occur. At the very last minute. And it will just kick the can further down the road.

Social Security is perhaps the most vivid example of a pattern you see everywhere across the economy: Baby boomers hold the wealth, millennials carry the costs, Gen Z inherits the receipts.

Americans retiring this decade are on track to collect, in the form of entitlements, about 133% of everything they and their employers paid in taxes, measured in present-value dollars. Strip out the employer match, and the return nearly doubles: Roughly 265% of what workers put in themselves. A median-wage retiree in 2027 will collect about $730,000 in lifetime benefits on combined contributions of less than $200,000.

Benefits outpace total taxes paid after just six years of collecting. They outpace the worker’s own direct contributions after only three.

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The pattern holds across the income spectrum. CRFB found every income quintile of this decade’s retirees is scheduled to receive at least as much as they paid in. The bottom quintile does best in relative terms

Even the wealthiest retirees, who come closest to a one-to-one match, still collect roughly double their own direct payments once you exclude the employer share.

Baby boomers didn’t design Social Security’s pay-as-you-go structure, and they aren’t the first generation to collect more than they paid in: Every cohort of retirees since the 1940s has received a similarly favorable deal, back when the worker-to-beneficiary ratio was far more forgiving.

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Why would you strip out the employer match? That is/was real money. It existed. It was collected. It was paid by the employer on behalf of the individual employee . If the person was self-employed, they paid both halves themselves.

This is an obvious attempt to say “big bad boomers” by wildly exaggerating (removing HALF the funding!). Boo hoo.

PS: Everybody on the planet knows this is “not a savings program where workers’ payroll tax contributions are saved in an account…” It’s a pay/go system, and has been for almost 100 years. This is needless hysteria, inaccurate, stupid.

We, or at least those of us hereabouts, know there is no “trust fund”; it’s paper IOUs that the government has written to itself. We also know that there’s no trust fund for the Pentagon, either, but every time they say they need more, money magically appears. That’s not “baby boomers”. We also understand that there’s no trust fund for bank bailouts, car company bailouts, even FEMA bailouts for disasters, but when there’s a need, money magically appears.

Let’s try not blaming “baby boomers” and start on the system that allows politicians to offer benefits they’re not willing to pay for. Then, maybe, you’ll have a news story worth a headline.

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Social Security is perhaps the most vivid example of a pattern you see everywhere across the economy: Baby boomers hold the wealth, millennials carry the costs, Gen Z inherits the receipts.

Sounds OK to me :slightly_smiling_face:

Here in the UK taxing wealthy pensioners is being looked at more and more. I have read somewhere that one in four people in receipt of state pension are millionaires (probably due to property ownership)

Andy Burnham should raise taxes on wealthy pensioners to rescue the public finances, Labour’s favourite think tank has urged.

The Institute for Public Policy Research (IPPR) called on the Prime Minister to introduce National Insurance on pensioners’ incomes to shield workers from further levies.

Economists said in a new report that the policy, along with higher taxes on property wealth, was essential to combat growing financial pressures caused by an ageing population.

https://archive.is/rUGfA

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Because if Social Security ended, it’s unlikely that the so-called “job creators” would give you a raise in the amount of the current contribution rate. It’s almost certain that the money would be used to bolster excessive Executive Compensation.

intercst

.

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Of course that’s true, but the “IF” in that sentence is irrelevant. The piece is comparing “money in”” with “money out”. The employer contribution is surely “money in”, and saying “Well, let’s just pretend that doesn’t exist, and look how much Boomers are taking out” is absurd. You might as well say “Just ignore all the tax receipts the government gets, now look how horrible the deficit is!”

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Isn’t that what is occurring in regard to wages. CEO reap outsized renumeration from market performance.
Workers continue to reap less & less from as a % of GDP. That money drive buybacks propelling market returns in addition to QE that help corporations.
The result- the working/laboring class have no money to benefit from market returns unlike the professional class & elites. So they fall further behind increasing income inequality.[1]
It seems the less workers are paid; the faster the S&P 500 rises. Coincidence or correlation?

[1] more and more people are disgruntled about the current economic system. as evidenced in the 2016 election of an outsider to the presidency and recent success of socialist candidates.
Interesting times ahead. I just hope it does not erupt into violence. Could the US have a yellow vest protest in its future?

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Well tax receipts are inadequate. And aren’t our elected officials ignoring the debt except during elections blaming the other side for the increase?

The wealthy have to pay more for Medicare benefits.
Due to demographics social security & Medicare are not actuarially sound.
Both programs have been “sold” as “earned” benefits. But beneficiaries were not taxed enough to fund the system.
In reality they are partially earned & partially welfare. Perhaps it is time to declare them as social welfare for seniors.
Perhaps the wealthy have to receive less benefits eventually going to zero. In effect a tax on the wealthy.

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From the data presented (and if I understand it), 133% doesn’t seem too far off.

And the total taxes plus interest curve tracks the benefits curve, which looks reasonable under sane assumptions.

I suspect Medicare is a different matter, however.

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We project that, under present law (“baseline”),1 the combined Trust Fund (OASI + DI) is projected to be depleted in 2034, after which only 83% of scheduled benefits can be paid. By the end of the projection horizon in 2099, the program would cover just 69% of promised benefits.

Under the baseline scenario, PWBM projects a 75-year actuarial balance of –4.20% of taxable payroll (a deficit).

The math sez we need more tax revenue.

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From the original article:

“In nominal dollars, the gap is even more dramatic. A median-wage worker retiring in 2027 can expect about $730,000 in lifetime Social Security benefits, compared with less than $200,000 paid in taxes by that worker and their employer combined, according to CRFB. Benefits outpace total taxes paid after just six years of collecting. They outpace the worker’s own direct contributions after only three.”

If these numbers are in nominal value, that means they don’t take inflation into account.

Which means the numbers in the article are not especially meaningful.

Designed to attract eyeballs?

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Two surprises — earnings inequality and the Great Recession — have prompted the projected depletion dates to move up sooner.

Those two factors caused the program to start drawing down its reserves around 2009, much sooner than had been projected in 2021 and 2022, according to Nuñez.

Income inequality has affected how much the program takes in from the FICA payroll tax, which is applied to earnings up to a certain cap that is adjusted each year. In 2026, that limit is $184,500. Earnings up to that amount are subject to a 6.2% payroll tax paid by workers and another 6.2% paid by their employers.

In 1983, 90% of earnings were below the Social Security FICA payroll tax cap.

Average real earnings grew as expected. Yet those gains were “unexpectedly unequal,” Nuñez said.

The top 6% of earners continued to have wages above the payroll tax cap. Yet their real earnings grew by an average of 62% from 1983 through 2000, exceeding expectations. Meanwhile, the remaining 94% of workers only saw a 17% increase in average real earnings.

The 1983 Reforms Worked As Intended—Until The Economy Changed

The last major Social Security reforms, enacted in 1983, were designed to secure roughly 75 years of fiscal stability. The projections behind those reforms correctly anticipated population aging and longevity, fertility trends, labor force growth, and average real earnings growth.

What they did not anticipate was a sharp and sustained shift in how income growth was distributed—and whether it was taxed to support Social Security.

As a new Roosevelt brief makes clear:

  • Benefit generosity did not drive the Trust Fund shortfall.
  • Demographic trends were anticipated and do not explain why the timeline accelerated.
  • The financing gap emerged because taxable payroll failed to keep pace with a more unequal economy.

Income inequality is not a side issue in Social Security financing. It sits at the center of the Trust Fund shortfall. A program weakened by rising inequality should not be stabilized by asking beneficiaries to give up benefits while high earners remain shielded from contributing more as the economy grows.

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There are other big problems with their analysis. Primarily that they look at average and extrapolate it across the entire population of social security recipients. And we know that because of the two “bend points”, higher income social security recipients receive LESS of what they put in than medium income social security recipients, and they in turn receive less than they put in than lower income SS recipients receive (literally how the arithmetic of the bend points works). And, of course, they completely ignore the taxation of large parts of social security benefits for higher income people. It’s just a bad analysis overall.

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