The REAL Reason For The Social Security Funding Shortfall

In the following post, Robert Reich tells us the real reason for Social Security's funding problem:

The trustees of the Social Security fund said Tuesday that the fund will be depleted by late 2032, a year earlier than the trustees’ projection last year of 2033. If nothing is done, benefits will automatically be cut six years from now.

The common understanding is that Social Security’s shortfall is due to the huge postwar baby boom, now retiring, and to America’s increasing life expectancy. The usual recommended fix is to reduce Social Security benefits or raise the age of eligibility. As Speaker of the House Mike Johnson, warned Monday, “entitlement programs” like Social Security “have to be adjusted and fixed.” He said Republicans will introduce a plan to do that. Brace yourselves. 

I used to be a Social Security trustee, and I call bullsh*t.

The baby boom can’t be blamed for Social Security’s shortfall. The Greenspan Commission, which in 1983 recommended the reforms that Congress then made — raising Social Security payroll taxes and also raising the eligibility age for collecting Social Security benefits — knew all about the baby boom and figured it into its calculations. (Early boomers like me can now start collecting full benefits at age 66; late boomers born after 1960 have to wait until they’re 67 to collect full benefits.)

Americans’ increasing life expectancy isn’t at fault, either. While wealthier Americans are living longer, that’s not the case for lower-income Americans. The Urban Institute estimates that life expectancy in the top 20 percent of income-earners is 91 years for people born in the 1990s, four years more than people born in the 1950s. Yet the life expectancy in the lowest 20 percent of income-earners is fewer than 80 years. 

So what’s the real cause of the Social Security shortfall? What did Greenspan’s commission fail to predict? Widening inequality.

Remember, the Social Security payroll tax applies only to earnings up to a certain cap. This year, that cap is $184,500. Earnings at or below this amount are taxed at 12.4 percent. The cap rises every year according to a formula roughly matching inflation.

Back in 1983, the cap was set so the Social Security payroll tax would hit 90 percent of total income in America. That 90 percent figure was built into the Greenspan Commission’s fixes. The Greenspan commission assumed that, as the cap rose with inflation, the Social Security payroll tax would continue to hit 90 percent of total income.

Today, though, the Social Security payroll tax hits only about 83 percent of total income in America. It went from 90 percent to 83 percent because a steadily larger portion of the nation’s total income has gone to the top.

In 1983, the richest 1 percent of Americans got 11.6 percent of total income. Today, the top 1 percent takes in more than 20 percent.

This year, someone earning $1 million in wages stopped paying any Social Security payroll tax at the beginning of March. Jeff Bezos probably stopped a few minutes past midnight on January 1. Elon Musk, a few seconds after midnight on January 1. (In point of fact, Bezos, Musk, and other robber barons of this Second Gilded Age get all the cash they need by borrowing against their fortunes, rather than bother with pesky wages, so they probably pay a pittance in Social Security taxes.)

Logically, then, to get back to 90 percent, the ceiling on income subject to the Social Security payroll tax has to be raised. 

If all income in excess of $400,000 were subject to the Social Security payroll tax, Social Security’s solvency would be guaranteed forever. We could also expand Social Security benefits. 

So there’s no reason even to consider reducing Social Security benefits or raising the age of eligibility. The logical and necessary response is simply to raise the cap, Mike Johnson and other Republican shills for the oligarchs to the contrary notwithstanding. 

Additional background:

Social Security is America’s most effective anti-poverty program. Last year, it lifted 23.5 million Americans out of poverty, including 16.5 million seniors. Before its creation, about half of our nation’s seniors were living in poverty. Today their poverty rate is just 10.3 percent. Without Social Security, nearly 4 in 10 seniors would have had incomes below the official poverty line.

Hollowing out of private pensions makes Social Security all the more important. One in 5 Americans 50 and older have zero retirement savings. Meanwhile, the average Social Security benefit at the start of last year was $1,975 a month ($23,700 annually).

Social Security is also the federal government’s biggest children’s benefit program through its disability and survivors’ benefits. In 2024, 1.7 million children received Social Security benefits, and the vast majority are eligible to receive survivors’ benefits if a parent were to pass away. Additionally, millions more children are part of a household where all or part of the household income comes from Social Security. Social Security is estimated to lift close to 1 million children out of poverty each year.

Other fixes that have been introduced in Congress:

1. The Social Security Expansion Act

Senators Bernie Sanders and Elizabeth Warren have introduced this plan for several Congresses. (It is cosponsored by Budget Committee Members Merkley, Whitehouse, Van Hollen, and Padilla.)

 

The bill imposes Social Security taxes on wages above $250,000 and applies the same 12.4 percent rate to capital gains and business income. That would boost benefits for almost all retirees by $200 per month, using a more generous measure of inflation to calculate the cost-of-living increase, and setting a minimum benefit at 125 percent of poverty. When estimated in 2023, it achieved 75-year Social Security solvency solely by increasing taxes on incomes above $250,000.

2. Medicare and Social Security Fair Share Act

Sen. Whitehouse and Rep. Boyle introduced this bill starting in the last Congress. Budget Committee Member Van Hollen is a co-sponsor. It adopts the tax increases of the Sanders bill, adjusted to start at $400,000. The bill has no benefit increases, so it significantly overshoots solvency, and there would be extra revenue. The bill achieves 75-year solvency for both Social Security and the Medicare Hospital Insurance trust fund.

Trump Wants $1.7 Billion Of Taxpayer Money To Pay Jan. 6th Criminals And Other Trump Allies

 It looks like a judge might toss out Donald Trump's $10 billion lawsuit against the IRS. To avoid that, Trump is now negotiating with the DOJ (which he controls) to reach a settlement. His terms are ridiculous. He's demanding an apology from the IRS, and promises to drop all audits of himself, his family, and his businesses. He also wants a $1.7 billion slush fund (of taxpayer money) to pay off the January 6th criminals and other Trump allies.

From ABC News:

Donald Trump is expected to drop his $10 billion lawsuit against the Internal Revenue Service in exchange for the creation of a $1.7 billion fund to compensate allies who claim they were wrongfully targeted by the Biden administration, sources familiar with the matter told ABC News.  

The commission overseeing the compensation fund would have the total authority to hand out approximately $1.7 billion in taxpayer funds to settle claims brought by anyone who alleges they were harmed by the Biden administration's "weaponization" of the legal system, including the nearly 1,600 individuals charged in connection with the Jan. 6 Capitol attack as well as potentially entities associated with President Trump himself. . . .

In addition to a public apology from the IRS, the compensation fund is believed to be the main condition for Trump to drop a series of legal actions he filed against the federal government, including the $10 billion lawsuit related to the 2019 leak of his tax returns as well as $230 million in legal claims related to the 2022 search of his Mar-a-Lago estate and the Russia collusion investigation he faced during his first term in office, sources familiar with the ongoing deliberations said. 

The settlement terms are expected to prohibit Trump from directly receiving payments related to those three legal claims; however, entities associated with Trump are not explicitly barred from filing additional claims, sources said. . . .

he proposed fund -- which could face significant legal hurdles -- would draw money from the Treasury Department's Judgment Fund, a permanent appropriation used by the federal government to pay court judgments and settlements, sources said. 

The arrangement would be an unprecedented use of taxpayer dollars with little oversight. Under the terms of the potential settlement agreement, President Trump would have the authority to remove members of the commission running the fund without cause, and the commission would be under no obligation to disclose its procedures or decision-making process for awarding more than a billion dollars, the sources said. 

The proposed creation of the compensation fund has led some administration officials to raise ethical concerns about the arrangement -- stemming not only from Trump suing his own government but also having control of an entity that can freely hand out $1.7 billion to his allies. . . .

Trump's proposed commission is expected to be composed of five members who would issue monetary awards based on a majority vote, and the process for awarding money and the identities of the recipient could be kept private, according to sources.

Republicans Holding Airport Security Hostage To Protect ICE's Thuggish Behavior

Our airports are currently a mess. It can take four or five hours (sometimes longer) just to get through the TSA checks. This means many people are missing their flights because they arrived at the airport only two or three hours early. 

Why is this happening? Because TSA agents are not being paid. Congressional Democrats refused to fund the Department of Homeland Security unless ICE agents were required to rein in their thuggish (and sometimes even illegal) behavior. That was reasonable, and supported by most of the public (who are upset by ICE actions).

The problem is that ICE is not the only part of the government funded under the Department of Homeland Security. Airport TSA, FEMA, and the Coast Guard are also funded by DHS money. This gave the Republicans the opening they needed to try and protect ICE from needed reforms. While ICE got extra money from the last funding bill (and can continue to operate), TSA, FEMA, and the Coast Guard did not. 

That means airport security agents are not being paid, the Coast Guard is not being paid, and disaster victims are not getting the help they need. The most immediate problem (the one making the national news) is the long lines at airport security. That is intentional - as Republicans want to use that to try and force Democrats into abandoning reforms to ICE. 

But those long lines at airports are not really the fault of Democrats. Democrats have repeatedly offered to separate and fully fund TSA, FEMA, and the Coast Guard. Congressional Republicans refused. They know the American people want the reforms to ICE, and refusing to fund TSA, FEMA, and the Coast Guard is the only pressure they have to protect ICE from the reforms.

Don't believe any Republican who tells you the long airport lines are the fault of Democrats. They are not. Those lines exist because the Republicans want them to exist - and they think the American public is stupid to believe their lies about it.
 

What Senate Dems Want Before Funding DHS

Senate Democrats are refusing to fund DHS through September unless some changes are made about how ICE is doing deportations. Here are the changes they want (from The Washington Post): 

Tighter rules on warrants

U.S. Immigration and Customs Enforcement has advised agents that they can enter homes to make arrests without a warrant from a judge, outraging Democrats, who say such arrests are unconstitutional. Democrats are seeking to bar federal immigration agents from entering private property without a judicial warrant. They also want agents to verify that people are not U.S. citizens before detaining them.

Bar agents from wearing masks and military-style uniforms

Democrats also want to bar federal immigration agents from wearing face masks. The idea is more controversial than requiring judicial warrants to enter homes but is broadly popular, with 55 percent of Americans in favor and 33 percent opposed, according to the Economist/YouGov poll.

Require agents to wear identification and body cameras

Homeland Security Secretary Kristi L. Noem announced Monday that agents would start wearing body cameras immediately in Minnesota, with plans to do the same across the country. But Democrats want legislation requiring agents to wear cameras, along with identification that includes their agency, ID number and last name.

Restrict where and how agents can operate

Democrats want to bar agents from operating near medical facilities, schools, child care facilities, churches, polling places and courts, among other places. They also want to stop agents from “conducting stops, questioning and searches based on an individual’s presence at certain locations, their job, their spoken language and accent or their race and ethnicity,” according to the letter.

Coordinate on investigations

Democrats are seeking provisions to make sure states and local jurisdictions can investigate and prosecute potential crimes committed by agents and excessive use of force. They also want to mandate that states and localities consent to “large-scale operations outside of targeted immigration enforcement.”

New rules on using force and detention

Democrats are pushing to force DHS to adopt “a reasonable use of force policy, expand training and require certification” of its agents.

Fire Noem and remove agents from Minnesota

Democrats did not demand that Trump fire Noem — who has come under criticism from Democrats as well as Republicans — and end the surge of agents in Minnesota. But they wrote that both moves would “show good faith.”

Return to menU.S. Immigration and Customs Enforcement has advised agents that they can enter homes to make arrests without a warrant from a judge, outraging Democrats, who say such arrests are unconstitutional. Democrats are seeking to bar federal immigration agents from entering private property without a judicial warrant. They also want agents to verify that people are not U.S. citizens before detaining themBar agents from wearing masks and military-style uniforms

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The Rational Way To Fix Social Security Funding

Sadly, Social Security has a funding problem. In about 10 years, the Social Security Trust Fund will not have enough money to fully pay the benefit earned by retired workers. It will only be able to pay about 80% of what workers now receive.

This must be fixed. Retirees deserve their full benefit checks - especially the millions who rely exclusively on their Social Security check to live. 

Republicans would have you believe the retirement age must be raised or benefits cut to fix the funding problem. That is unacceptable. Those doing physical labor for a living cannot wait extra years to retire. And those receiving minimal checks cannot afford to have their benefits cut.

There is another solution - one that does not require cutting benefits or raising the retirement age.

Consider the following.

A worker making $176,100 a year or less pays 6.2% of their income into the Social Security Trust Fund.

Someone making $500,000 a year pays only 2.18% of their income.

Someone making $1,000,000 a year pays only 1.09% of their income.

And someone making $1,000,000,000 a year pays only 0.00001% of their income.

Does that seem fair? Of course not!

Raising the cap on taxable income paid into the Social Security Trust Fund to $250,000 would fully fund Social Security for decades. And eliminating the cap completely would fully fund Social Security in perpetuity. 

Raising the cap on income is the rational and common sense way to fix Social Security funding. It would not hurt anyone receiving current benefits or punish laborers who need to retire at the current age - and it would not hurt anyone making less than $176,100 a year. It would just mean the wealthy would pay a little more (although still probably a smaller percentage that the working class and most of the middle class pay).

But this can't happen as long as Republicans control our government. They are the party of the rich, and would rather protect the rich while punishing workers. Remember that when you next go to vote!  

U.S. Public Overwhelmingly Opposes The GOP Cuts To Public Broadcasting

The chart above reflects the results of the Economist / YouGov Poll -- done between July 18th and 21st of a nationwide sample of 1,729 adults (including 1,551 registered voters). The margin of error is 3.4 points for adults and 3.1 points for registered voters. 

Is This A Reasonable Plan To "Save" Social Security?

The following is by Senators Bill Cassidy (Republican) and Tim Kaine (Democrat). They explain their "bipartisan" plan to save Social Security. I think there is a simpler solution (raising the cap on Social Security deductions), but their plan is interesting. What do you think? They write:

If Congress doesn’t act, the Social Security Trust Fund will be insolvent as soon as 2033, and millions of Americans who have been paying into the program will see a significant portion of their promised benefits cut. That’s why we’re working on a bipartisan proposal for a new investment fund that would infuse much-needed money into Social Security, while ensuring no one on Social Security or nearing retirement sees any change to the benefits whatsoever.

Social Security is currently funded through payroll taxes, which are not keeping pace with the amount needed to sustain the program. For now, the Social Security Trust Fund — which is invested exclusively in U.S. government bonds yielding low returns — is helping to fill the gap, but it can’t for long. The most recent Social Security Trustees Report showed that payroll tax revenue will fall more than $25 trillion short of owed benefits over the next 75 years, in today’s dollars, if the trust fund becomes insolvent. We propose creating an additional investment fund — in parallel to the trust fund, not replacing it — that would be invested in stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry.

We estimate that it would take a $1.5 trillion up-front investment into the fund to get it going, and we propose giving the fund 75 years to grow. The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund’s 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap.

The result? The consistent delivery of Social Security benefits for generations of Americans, and a reduction to the United States’ long-term indebtedness by up to 20 percent.

A substantial majority of Americans are concerned about the challenges facing Social Security. We understand if they also question whether politicians could use the proceeds of the new fund we propose for other objectives.

That risk can be effectively managed by putting in place guardrails modeled after those used by the Thrift Savings Plan, including a fiduciary duty to seek a maximal return on investments and deterrence measures to address concerns that a future Congress might want to raid the fund. As for transparency, the new fund should be subject to annual audits published online.

We know a program like this could work because it already has. In 2001, Congress created the National Railroad Retirement Investment Trust — a diversified investment fund designed to ensure retirement benefit payouts for railroad workers. The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule. Our proposal is also consistent with virtually every other pension plan — state and private — currently operating in our country, and it matches the strategy most nations use to fund their retirement programs.

There is a nationwide appetite to implement a bipartisan, commonsense plan like ours. Waiting until the Social Security Trust Fund is on the eve of crisis would have difficult and preventable consequences. Congress should seize the moment.

The GOP Bill Will Help Trump Establish His New Police State

The following is most of a post by former Labor Secretary Robert Reich:

Trump’s Big Ugly Bill delivers $170 billion for border and immigration enforcement. 

This is on the scale of supplemental budgets passed by the United States when we enter war. 

ICE will add 10,000 agents to the 20,000 already on the streets. 

Its annual budget for detentions will skyrocket from $3.4 billion in the current fiscal year to $45 billion until the end of the 2029 fiscal year. That’s a 365 percent increase.

Funding for ICE detentions will exceed funding for the entire federal prison system.

 

When government capacity is built out this way, there’s always political and bureaucratic pressure to utilize such capacity. Supply creates its own demand. 

“They pass that bill, we’re gonna have more money than we ever had to do immigration enforcement,” Trump’s border czar, Tom Homan, said recently, adding, “You think we’re arresting people now? You wait till we get the funding to do what we got to do.”

Which means that the number of people detained in ICE facilities — numbering 56,397 as of June 15 — will likely grow dramatically. A four-fold increase in the detention budget could mean a quarter of a million people locked up.

 

Don’t fall for the Trump regime’s lie that these people are criminals. As of now, 71.7 percent of ICE detainees have no criminal record. Some have been hardworking members of their communities for decades.

 

Even before the huge increase in funding, Trump aide Stephen Miller and Homeland Security Secretary Kristi Noem demanded that immigration agents arrest 3,000 people a day.

That’s triple the number of daily arrests that agents were making between February and April. 

Given that border-crossing numbers have plummeted, just meeting this 3,000-per-day target will require far more aggressive enforcement in non-border communities nationwide.

Big Democratic cities will be hit hardest. In a recent social media post, Trump calledon ICE officials to “expand efforts to detain and deport Illegal Aliens in America’s largest Cities, such as Los Angeles, Chicago, and New York, where Millions upon Millions of Illegal Aliens reside.”

How will ICE agents know whom to round up and detain? The crude reality is that they’ll focus on anyone looking Latino or with surnames ending in “z.”

There are 65.2 million Latinos in the United States, the vast majority of whom are citizens. Inevitably, some American citizens will be swept up, arrested, and detained. 

As the number of raids on workers and families escalates, ICE agents will engage in more warrantless knocks on doors, searches, and arrests. 

And more of these agents will mask themselves to avoid being held responsible for their actions — an abuse of power commonly associated with Eastern Bloc police states.

 

This giant federal police effort will be supported by a supercharged surveillance system, also financed by Trump’s Big Ugly Bill. The Department of Homeland Security is joining with the Department of Government Efficiency to create the federal government’s first national citizenship data bank. 

According to The New York Times, Palantir corporation’s software will be used to combine data gleaned from the Department of Homeland Security, the Department of Defense, the Department of Health and Human Services, the Social Security Administration, and the Internal Revenue Service. Meanwhile, the administration wants access to citizens’ and others’ bank account numbers and medical claims.

The regime will not limit the purpose of its growing internal police apparatus to deporting undocumented people. 

Trump is already attacking the citizenship of people born in the United States to parents who may or may not have been citizens at the time of their birth — so-called “birthright citizenship.”

The regime is also going after naturalized citizens (born outside the United States), using a McCarthy-era law that the Justice Department then used to sniff out former Nazis who lied their way into becoming American citizens — a law that allows the Department to “denaturalize,” or strip, someone’s citizenship. 

According to a memo issued to Department lawyers last month by Attorney General Pam Bondi, denaturalization should be aimed at anyone who may “pose a potential danger to national security” — a standard so vague as to allow the Department to expel people from the country based on unsubstantiated claims or even on their negative opinions about Trump. 

Trump has already publicly called for deporting “bad people … many of them [who] were born in our country.” 

Last week, Andy Ogles, a Republican congressman, asked Bondi to investigate whether New York City mayoral candidate Zohran Mamdani — who was born in Uganda and naturalized in 2018 — should be subject to denaturalization proceedings because he “publicly glorifies” people connected to Hamas in a rap song.

Bondi has not publicly responded to the letter.

The coming expansion of Trump’s police state under the Big Ugly Bill — featuring total surveillance, 10,000 ICE agents, and a network of detention facilities — will mark an escalation of Trump’s authoritarianism — using the pretext of an immigrant crime wave that does not exist.