No, the future benefits will be reduced to match the revenues. You're confusing the scheduled benefits on the current actuarial projections with how the money will actually flow.
You’re right that scheduled benefits under current projections exceed what can be paid after trust fund depletion.
But here’s the key distinction:
Actuarial shortfall = gap between scheduled benefits and dedicated revenues.
Cash deficit today = actual difference between current benefits and payroll tax income.
The cash deficit is already real, and under current law, Congress has not legislated benefit cuts to close the 75-year actuarial shortfall. Budget institutions therefore score current policy, not hypothetical future reforms.
If Congress passes reforms, projections change. But we can’t base fiscal accounting on assumed political action that hasn’t occurred.
The policy experts have many proposals for restoring the health of the FICA programs. The GOP and their libertarian backers hate them the most so block every sensible solution.
My point is it's misleading slopaganda to combine the two sets of books, and just an outright lie FICA contributes to the debt problem.
The approach taken by budgetary institutions like CBO is not misleading, its the proper accounting method.
In the coming 30 years, Social Security will receive roughly $80.6 trillion in FICA revenues, while spending about $106 trillion in benefits. This is a $25.4 trillion shortfall over 30-years. If we also account for the interest costs, the total shortfall is over $41 trillion.
It is certainly possible that policymakers will either raise FICA taxes on young workers, or cut benefits for retirees, or some combination of these among other potential structural reforms. But as things currently stand, Congress has proposed no such fix. Therefore, using current law, proper budgetary accounting involves assuming that this funding gap will be filled by borrowing. This isn't misleading. It is basing accounting on actual present policy.
I, among many others, have been offering up reform proposals for years to help close the funding gap, but we need to acknowledge that we're now just 6 years away from insolvency, and no serious proposals have emerged from Congress.
Thank you for the feedback. I appreciate the comment.
It we just focus on Social Security for a moment (Medicare has even bigger long-term funding problems), the shortfall is about 1.8% of GDP on a permanent basis. If we broadened the SS tax base to capture everyone (i.e. eliminate the cap), this would raise about 0.9% of GDP in additional taxes. In other words, this policy would close about half the funding gap, and the system would return to a deficit after 5 years.
So yes, removing the cap buys us time, but not much. Eventually, we’ll need to do some combination of: cut benefits, raise the retirement age, increase taxes on the middle class, and reform the benefits formula.
To your point about FICA programs and general revenues, the trust fund bonds are intra-governmental IOUs. They do not represent independent economic resources.
So while it’s technically correct that FICA programs are accounted for separately, it’s incorrect to say they “don’t add a nickel” to the deficit. When benefit payments exceed dedicated revenues, they increase borrowing from the public. Redeeming those bonds requires raising taxes, cutting spending elsewhere, or issuing new public debt.
Finally, bond markets do not distinguish between: “General fund deficits” and “Off-budget deficits”. They care about total federal borrowing from the public. If Social Security runs a cash deficit (which it already does), the Treasury must borrow more from capital markets. That increases debt held by the public, regardless of accounting labels.
That is a partisan (= FICA hating) way of spinning it.
The pension program is and has been since inception hands down the most popular government program. The Haves and their oligarch standard bearers have been trying to kill it the whole time.
Sure, raise the retirement age & benefit formulae, tax back more of the benefits from those who don't need them, get the base base (I prefer Net Worth surtaxes for the top 10% ... but let the works tinker with the model).
Don't garble the accounting. It's two sets of books, yes with general fund debt as a connector. But FICA is a creditor to the general fund when its books are balanced as the model intended. It has no authority to issue debt of its own.
Just ideological slop to combine the two sets of books.
But gotta give you libtarians the old h/t ... you're persistent.
Trying to match levels of social insurance benefits to arbirary revenues (and of an income tarx rather thana VAT)was never ging to work. Aggregae beneits are supposed to rise and fall according to the number of people moving into and out of life situations that social insurnce insures. Revenues should follow.
Technically, it worked for about 40 years, and by the early 1980's it faced bankruptcy. This required bipartisan action in 1983, including raising the retirement age, taxing social security benefits, and raising FICA taxes, among other reforms. This bought the program a few decades of breathing space, until demographics meant that costs have exceeded revenues since 2010.
Biden made the budget shortfall worse by folding 2.8 million additional federal workers into the retirement program, and Trump made it worse again with the Social Security deductions in the OBBBA. Together, these two changes have brought the insolvency date forward by about 18 months. We now have 6 years.
it is certainly possible, that policymakers act at the last minute as they did in 1983. But this time the fiscal burden is twice as bad as it was then. And, I don't have faith that either side will come to the table to make the changes needed to prevent drawing the excess from the treasury. They're more concerned with the next election campaign than the long term solvency of these programs.
Yeah, Reagan fixed the problem in the short term, and set it on a course of hitting a perpertual crisis over the longer term by letting the tax base erode. Because of course he would.
There’s some hope that once we’ve gotten through this crazy Trump insanity, the sausage makers will get back to putting their heads together on sensible policy solutions, like President Biden managed to do with Infrastructure.
Seems like the pattern we’re in is only every eight years or so is Washington able to take on the big ones that fundamentally divide this continent scale society.
FICA is a lot simpler than you reds like to paint it. Just a matter of restoring some balance after the orgy of greed that generated the Elephant Curve. Like Mitt Romney and Warren Buffett net it out: Tax the Rich
No, the future benefits will be reduced to match the revenues. You're confusing the scheduled benefits on the current actuarial projections with how the money will actually flow.
This is a sloppy argument.
You’re right that scheduled benefits under current projections exceed what can be paid after trust fund depletion.
But here’s the key distinction:
Actuarial shortfall = gap between scheduled benefits and dedicated revenues.
Cash deficit today = actual difference between current benefits and payroll tax income.
The cash deficit is already real, and under current law, Congress has not legislated benefit cuts to close the 75-year actuarial shortfall. Budget institutions therefore score current policy, not hypothetical future reforms.
If Congress passes reforms, projections change. But we can’t base fiscal accounting on assumed political action that hasn’t occurred.
The policy experts have many proposals for restoring the health of the FICA programs. The GOP and their libertarian backers hate them the most so block every sensible solution.
My point is it's misleading slopaganda to combine the two sets of books, and just an outright lie FICA contributes to the debt problem.
The approach taken by budgetary institutions like CBO is not misleading, its the proper accounting method.
In the coming 30 years, Social Security will receive roughly $80.6 trillion in FICA revenues, while spending about $106 trillion in benefits. This is a $25.4 trillion shortfall over 30-years. If we also account for the interest costs, the total shortfall is over $41 trillion.
It is certainly possible that policymakers will either raise FICA taxes on young workers, or cut benefits for retirees, or some combination of these among other potential structural reforms. But as things currently stand, Congress has proposed no such fix. Therefore, using current law, proper budgetary accounting involves assuming that this funding gap will be filled by borrowing. This isn't misleading. It is basing accounting on actual present policy.
I, among many others, have been offering up reform proposals for years to help close the funding gap, but we need to acknowledge that we're now just 6 years away from insolvency, and no serious proposals have emerged from Congress.
Lumping the FICA programs in with the general fund items is just propaganda.
Those could easily be returned to long term balance simply by returning the tax base to what it was before Reagan.
Medicare and SS don't add a nickel to the debt/deficit.
Thank you for the feedback. I appreciate the comment.
It we just focus on Social Security for a moment (Medicare has even bigger long-term funding problems), the shortfall is about 1.8% of GDP on a permanent basis. If we broadened the SS tax base to capture everyone (i.e. eliminate the cap), this would raise about 0.9% of GDP in additional taxes. In other words, this policy would close about half the funding gap, and the system would return to a deficit after 5 years.
So yes, removing the cap buys us time, but not much. Eventually, we’ll need to do some combination of: cut benefits, raise the retirement age, increase taxes on the middle class, and reform the benefits formula.
To your point about FICA programs and general revenues, the trust fund bonds are intra-governmental IOUs. They do not represent independent economic resources.
So while it’s technically correct that FICA programs are accounted for separately, it’s incorrect to say they “don’t add a nickel” to the deficit. When benefit payments exceed dedicated revenues, they increase borrowing from the public. Redeeming those bonds requires raising taxes, cutting spending elsewhere, or issuing new public debt.
Finally, bond markets do not distinguish between: “General fund deficits” and “Off-budget deficits”. They care about total federal borrowing from the public. If Social Security runs a cash deficit (which it already does), the Treasury must borrow more from capital markets. That increases debt held by the public, regardless of accounting labels.
That is a partisan (= FICA hating) way of spinning it.
The pension program is and has been since inception hands down the most popular government program. The Haves and their oligarch standard bearers have been trying to kill it the whole time.
Sure, raise the retirement age & benefit formulae, tax back more of the benefits from those who don't need them, get the base base (I prefer Net Worth surtaxes for the top 10% ... but let the works tinker with the model).
Don't garble the accounting. It's two sets of books, yes with general fund debt as a connector. But FICA is a creditor to the general fund when its books are balanced as the model intended. It has no authority to issue debt of its own.
Just ideological slop to combine the two sets of books.
But gotta give you libtarians the old h/t ... you're persistent.
Trying to match levels of social insurance benefits to arbirary revenues (and of an income tarx rather thana VAT)was never ging to work. Aggregae beneits are supposed to rise and fall according to the number of people moving into and out of life situations that social insurnce insures. Revenues should follow.
It worked for eighty years until demographics ran into ideological opposition.
The fixes are simple, but of course the party of the Haves doesn't want the electorate to turn its brain on.
Technically, it worked for about 40 years, and by the early 1980's it faced bankruptcy. This required bipartisan action in 1983, including raising the retirement age, taxing social security benefits, and raising FICA taxes, among other reforms. This bought the program a few decades of breathing space, until demographics meant that costs have exceeded revenues since 2010.
Biden made the budget shortfall worse by folding 2.8 million additional federal workers into the retirement program, and Trump made it worse again with the Social Security deductions in the OBBBA. Together, these two changes have brought the insolvency date forward by about 18 months. We now have 6 years.
it is certainly possible, that policymakers act at the last minute as they did in 1983. But this time the fiscal burden is twice as bad as it was then. And, I don't have faith that either side will come to the table to make the changes needed to prevent drawing the excess from the treasury. They're more concerned with the next election campaign than the long term solvency of these programs.
Yeah, Reagan fixed the problem in the short term, and set it on a course of hitting a perpertual crisis over the longer term by letting the tax base erode. Because of course he would.
There’s some hope that once we’ve gotten through this crazy Trump insanity, the sausage makers will get back to putting their heads together on sensible policy solutions, like President Biden managed to do with Infrastructure.
Seems like the pattern we’re in is only every eight years or so is Washington able to take on the big ones that fundamentally divide this continent scale society.
FICA is a lot simpler than you reds like to paint it. Just a matter of restoring some balance after the orgy of greed that generated the Elephant Curve. Like Mitt Romney and Warren Buffett net it out: Tax the Rich