Robert Reich: They don't want you to know the REAL reason Social Security is in trouble

[FakeNoose]

Link: https://robertreich.substack.com/p/they-dont-want-you-to-know-the-real

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....

- more at link -

Robert Reich is a brilliant economist and he explains this so clearly! Please read the rest on his substack at the OP link.

TLDR: Raise the salary cap and make it retroactive to 2016. Every Dem candidate needs to be on this message.

[eppur_se_muova]

1. Why should there be a cap at all ? What was the original justification ? "Too Socialist" ?

Anyone who collects billions in a year should pay his/her 12.4%. Of course, most of it will be magically labeled as something other than "income", so not eligible for SS tax.

Has anyone every projected how low the rate would be if even billionaires paid their fair share ?

[slightlv]

2. Thank you! I remember when those new rules came out,

but talking today to people about it they just shake their heads and say, basically, that I don't know anything. (grrr) Add to all that you've said Bush, Jr's constant dipping into the SS fund and it's no wonder. I've always yelled I want to know when and where Bush's dipping led (of course, to the Iraq war, no doubt).

This country has for decades made it harder and harder for married couples to actually have and raise families at a "replacement rate" (gods, I hate that phrase). They keep wages as low as they possibly can get away with, while raising money on anything necessary for life, and then scream that we're having too few babies! You can't convince me these people didn't know exactly what they were doing. They've been writing the outline for P2025 since the old PNAC days.

The goal is to completely demolish the country of the United States of America, and to remake it into one of their own design. They tried it in Iraq and it was a complete and utter failure. But the damage they did to Iraq is long lasting and one wonders if they'll ever get a functional country back again.

The US is now basically in the same boat... unless we can find a way to skunk all these repugs out of the government and take it over for the good of the very people for whom it was meant. And that means everyone... rich, poor, citizen, immigrant, and everyone in between. We used to have a delicate balance that created the most profitable years a country could ever see... but the advent of the rise of rich repugs during the 1950's (especially) spelled doomed to the entire idea that was "America."