Many people believe Social Security and Medicare are fully funded by payroll taxes. In reality, both programs are increasingly relying on regular tax revenue and ultimately more federal debt to stay afloat. Unless both programs are put on sustainable fiscal path, their ongoing expansion will crowd out all other government spending.
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Additional resources:
Read John Cogan's book The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs to learn more about the federal program; available here:
Listen as John Cogan talks with EconTalk host Russ Roberts about Cogan's book, The High Cost of Good Intentions, available here:
Read John Cochrane's blog on John Cogan's book, The High Cost of Good Intentions, available here:
Read John Cogan's chapter, "Entitlements and the Budget," in Blueprint for America, available here:
John Cogan discusses social programs on Area 45: Is Entitlement Reform Possible? Available here:
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I definitely believe this to be the most important economic reform needed for our country. Just isn’t sustainable as is.
The even dire problem is that the trust funds are held in treasury bonds. Meaning cashing them en mass devalues our currency. I believe the only real solution to nullify baby boomer complaints would be remove the cap the FICA is taxable upon cut the rates in half. Then offer everyone not a baby boomer reduced retirement benefits and show them how much more they will take home and investment scenario’s
Based upon a $20K income it would be $765 extra yearly, $63.70 monthly , $14.71 weekly, and $0.36 hourly. Over a 45 year period that’s $34,425 and if it were put into a 6% 401K starting at the age of 20 they would have $233K at age 65 paying out monthly $392. If you waited till you were forced to draw from 401K @ the age of 70 you’d have $326K with monthly payout being $560.
If by the age of 30 you are now making $35K with 50% company matching simply investing FICA cut savings would net you $409K with a $838 monthly payment @ age 65. If you delayed till the age of 70 you’d have $576K with a $1,206 monthly payment.
For amusement let’s say at the age of 40 you decide to match the FICA cut savings still making the same money you’d have $525K with a $1312 monthly payment @ age 65. If you delayed till the age of 70 you’d have $746K with a monthly payment of $1901.
Interestingly enough, with your 401K if you have accumulated up to $50K you can start a business tax free by starting a C corporation rolling over your 401K into your new company to purchase it’s stock using the funds as the business needs. That program is called roll over business startup (ROBS) which mandates the owner be actively working the business ruling out passive income businesses as in real estate and misc.
The trust funds don’t actually hold Treasury bonds. They’re non-marketable securities that can only be redeemed by the government. In other words, the only way to get paid for what’s in the trust funds is to pay ourselves out of tax revenue.
Tax cuts for the rich aren’t sustainable. The 1.9 trillion dollars Trump’s Tax Bill added to the deficit could a long way towards enabling the government to *repay its debts to its citizens*
We spend 94 billion dollars more on the military than any other department combined, have a military that dwarves the next 13 biggest militaries combined, and a good chunk of the cash is being pocketed by CEOs we contract to make outdated military tech we don’t need. I think a much more important change is to fix this. Take some of that money, and use it to fund things we actually need. Like free healthcare, which most other western countries pull off just fine but is a big political debate here because health insurance agencies want to scam us.
Watched the brief video about deterrence. I say we spend less money on being a “deterrent” for the world and invest more into social programs like Medicare and social security .
How about this we cut government spending to Lockheed Martin and other businesses that suck the U.S. economy dry. I get it we need these companies but seriously their budgets are out of control. Also anyone from the Hover institute doesn’t have Americans best interest at heart. Your policies have proven detrimental to the American people in the long term.
Alex B You mean to tell me that dumping $574 billion ($94.2 billion more than every other department combined) into the military is overkill? Nahh, then what rich people would be pocketing our tax dollars in exchange for garbage tech we don’t need?
If you actually care about the debt don’t support wars of aggression against countries in the Middle East who didn’t attack us. Iraq war gave us ISIS. There is literal slavery in Libya. The current rebels in Syria or salafists. Trump has killed as much innocent civilians with drone strikes in one year as Obama in 8, and Obama killed a lot of people. In fall of 2017, the Senate without forethought passed military spending increases equal to the amount necessary to fund universal college. Trump has been able to increase the deficit +80% to Obama’s last year.
Nonsense, you look what America spends Warmongering and you could easily fund SSI, SSDI and Medicare/caid by cutting military spending. If we weren’t out there starting crap with other nations and people and basically being bullies of the world, we wouldn’t need to spend so damn much money on Military in the first place….
Why is this? Yeah because all of the money was spent on nonsense and wasted. Now those who will depend on it soon will be screwed because of stories like this. Here’s an idea: cut spending, put all funds separate, reform SSI which is really draining it and put politicians in jail who have robbed the fund of trillions in the past knowing the cost to those who counted on it
Anyone with the attitude outlined in this video wants drastically higher taxes, they want to take your 401k/IRA and they want to tax you even more so they can continue to Rob it and give it to SSI recipients, which is the biggest scam. It’s millennial garbage.
I think the government should tax the rich so that it can *repay its debts to American citizens*
SSI recipients are GETTING THEIR OWN GODDAMN MONEY BACK.
This is insanely misleading. Social security owns half of the US debt. They buy bonds with their surplus money because all that money that is paid into needs to be invested in a sure thing and US bonds are guaranteed by the US government. The people making this video would rather not pay back the debt to social security in order to not raise taxes or balance the budget.
yep, social security and medicare are the problems with the budget. not the fact that corporations pay a historic low percentage of the tax burden. or the fact that we just gave a massive tax cut to rich people who don’t need it. or the fact that we spend hundreds of billions on the military for god knows why. couldn’t possibly be any of those things. its the poor and the old that are the problem.
“Reform” = cut
7-8 trillion borrowed from Social security fund was used for war!
but the world needs more spending on the military industrial complex no problem, right?
If you look at government spending, over fifty percent of government spending is either focused on medicare, medicaid, or social security. The pay as you go model is straining due to record amounts of baby boomers living older and older. The problem with cutting these spending is that old people also vote more than young people, so initiating reforms is essentially political suicide. Unfortunately, letting the problem sit will force the government to start cutting obligations and pay everyone less money as a result.
Psychiatry (billing up to $6,000 a day to damage people) and Medical Gaslighting US 200+ Billion tax dollars a year, Swiss Pharma robbing American Tax Dollars, add ignoring of Pathogen Outbreaks and Biofilm with the Dept. Of Health lying from the top down, don’t forget 33% kickbacks from specialist etc. to primary M.D.s, organ theft and not treating biofilm infections or reprimanding Corrupt Water Filtration Plants, there is something, satanic secret society related going on sabotaging America and the world from the inside?