Before writing more generally about the budget, I thought I’d express my thoughts on Social Security.
First, I think that there is no way other than a system like Social Security to ensure that Americans are not destitute in their old age. Any other plan bears some risk of loss which negates that. Furthermore, any plan that invests its trust fund in private investments will eventually come to own a substantial percentage of all assets, something I don’t believe those who propose such things want to happen.
Second, Social Security has become something quite different from what was imagined in 1935. In 1940 when the Social Security system began paying monthly benefits most could not expect to live to 65 and those who did could only expect to live into their mid-70s. There was no expectation that most Americans would retire in their 60s and collect benefits for the next 20-40 years. That’s a completely different system than was originally envisioned.
So here are the reforms I think should be made.
- All wage income should be subject to Social Security taxes. That will not realize as much income as some seem to think since the highest income earners can arrange things to minimize their wage income and take their income in other forms.
- The minimum Social Security Retirement Age should be gradually increased to 70 with the “full Social Security Retirement Age” gradually increased to 80.
- These ages should be indexed to life expectancy.
I also think we should stop importing workers with low lifetime earnings expectations but that’s another subject.
If Congress wishes to create a separate compulsory retirement savings system in which funds can be invested in private investments, I would not oppose it but I honestly can’t imagine such a system. The present 401K system is lousy.
The situation with Medicare is even worse. Not only does it have the same age issues that Social Security does, Congress has shown no willingness to economize on Medicare costs. Some hold the mystical belief that can be corrected if everyone is covered within the same plan. I do not believe that will be effective as long as Congress is not willing to economize.
Something really does need to be done and that’s not a “right-wing MAGA” fantasy. Many economists and financiers including Lawrence Summers, Jared Bernstein, Jerome Powell, and Jamie Dimon (hardly a catalog of “right-wing MAGA” fanatics) have said that what we are doing is not sustainable. Even Paul Krugman has implied as much if not saying so outright. His terse response to questions about his thoughts on Modern Monetary Theory was “things don’t work that way” which in turn implies that what we’re doing is not sustainable.