| Speaker | Time | Text |
|---|---|---|
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unidentified
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| This is Charles Blauhaus joining us with George Mason University's Mercatus Center. | ||
| He's a senior research strategist. | ||
| However, before, in his public life, former public trustee of the Social Security and Medicare Trust Funds from 2010 to 2015. | ||
| Good morning. | ||
|
unidentified
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Good morning. | |
| Describe the trustee job. | ||
| What does it involve? | ||
|
unidentified
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Well, the short summary is that the trustees are responsible for issuing an annual report, which does a number of things, but one of the most important is to report to lawmakers on the financial condition of the Social Security and Medicare trust funds. | |
| So that's the short summary. | ||
| I think it's always important to step back and remind ourselves why that matters. | ||
| These aren't just dry accounting abstract exercises. | ||
| Basically, it's a report to Congress on the size of the changes that have to be made in order to continue to have the type of Social Security system in the future that we have had to date. | ||
| So it's very important from the standpoint of can we continue to have this type of program. | ||
| Some of the data points for the latest report read as such. | ||
| You've probably seen these, I'm sure, but the Old Age and Survivors Insurance Trust Fund, able to pay 100% of the total scheduled benefits until 2033. | ||
| That's unchanged. | ||
| The Disability Insurance Trust Fund projected to pay 100% of the total scheduled benefits through 2098. | ||
| If you combine those, the resulting projected fund would be able to pay 100% of the total scheduled benefits until 2035. | ||
| Those are the dry numbers, as you say, but put some context to them. | ||
| What do those mean to you in the current day? | ||
|
unidentified
|
Well, I think that more important than the dates is what is the size of the shortfall that we have to fix. | |
| And unfortunately, it has already grown to a very substantial size. | ||
| It's very late in the game from the standpoint of how realistic is it to make the changes necessary to keep the program solvent. | ||
| One bit of data that I often put out to make that point is right now about 21% of all scheduled benefits going forward are completely unfunded. | ||
| They have no financing behind them. | ||
| Now, it's actually worse than that because that's 21% of all scheduled benefits, including benefits for people who are already on the rolls. | ||
| Now, historically, we haven't done that to people. | ||
| We haven't gone to people who've been collecting for 30 years and said, all right, we're going to cut your benefits 21%. | ||
| So the more relevant question is, what is the amount of savings we have to get as a percentage of future benefit claims? | ||
| That's about 25%. | ||
| Now, again, it's worse than that because ask yourself, what's the likelihood of lawmakers enacting legislation that would cut benefits across the board 25% effective tomorrow for everybody, rich or poor? | ||
| That's not going to happen, right? | ||
| So any changes that are made legislatively, they're going to be more gradual. | ||
| They're going to be a lot less than 25% at first, which means if they're going to average 25%, they have to be a lot more than that down the line. | ||
| So we're talking 40, 50% of the benefits of people who are likely to be affected. | ||
| So it's a very big problem, and we're going to have to make changes probably in system revenues and the growth of benefits and eligibility ages if we're going to be able to solve it. | ||
| To what degree do you think Congress has the appetite to balance the books to that measure? | ||
|
unidentified
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Well, they haven't shown that appetite. | |
| And that's very concerning. | ||
| It's very concerning. | ||
| Had we done this 20 years ago, it could have been done pretty painlessly. | ||
| All we had to do then was to make a slight incremental, somewhat technical change in the rate of indexation of the growth of benefits, and then it would have been fixed. | ||
| But we didn't do that. | ||
| And now we're in a situation where just to maintain the current level of benefits in real terms, you have to have additional tax revenues in this system. | ||
| And again, the size of the shortfall is so large that it would require legislators on undoubtedly a bipartisan basis to embrace changes that are larger than they've ever legislated before. | ||
| So not only do we need to improve upon the current level of sort of partisan polarization, but we actually have to do better than we've ever done before. | ||
| So Social Security's fate is very uncertain at this time. | ||
| As far as a timeline is concerned, you talked about the current conditions, but what's the date that these things have to really kick in in order to be effective? | ||
|
unidentified
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Right. | |
| Well, at the risk of that. | ||
| That sounds very alarmist. | ||
| Yeah, it's urgent and difficult if we do it now. | ||
| If I were speaking, and actually I do speak to people on the Hill and they asked me point blank, can we wait another presidential term to deal with this? | ||
| I would say no. | ||
| If you look at the data in the 2030s and the illustration that I just gave you about what is the amount of savings you have to find as a percentage of future benefit claims, if you wait till the 2030s to deal with this, you literally cannot keep the system solvent, even if you completely eliminated all new benefit claims. | ||
| The system would still go insolvent. | ||
| So by then it's far too late. | ||
| So the window of opportunity to maintain this type of system, now we could abandon it and have a completely different type of system, one that would be, I think, a lot less secure, a lot less reliable, just have a fundamentally different design. | ||
| But if we want to have this type of system, we're running out of time to fix it. | ||
| Our guest with us, and if you want to ask him questions about Social Security and aspects, they are 202-748-8000 for Democrats, Republicans, 202748, 8001, and Independents, 202-748-8002. | ||
| 202-748-8003 is the number for Social Security recipients. | ||
| If you want to ask questions, you can use that number also to text us your questions or comments if you wish. | ||
| One of the first efforts of the Trump administration, and particularly Doge, was Social Security. | ||
| What does that mean to you? | ||
|
unidentified
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Wow. | |
| I've thought a lot about what I would say to Doge if Elon Musk were sitting here or the other higher-ups at Doge. | ||
| And I would say the following. | ||
| I would say you actually are quite right to look at Social Security from the standpoint of overall government efficiency, right? | ||
| Because costs in Social Security, Medicare, and Medicaid are all growing faster than a sustainable rate. | ||
| So something has to be done to slow down the growth of those costs. | ||
| Well, if you are going to slow down the growth of those costs without hurting the people on the programs, you have to become more efficient, right? | ||
| So that makes all the sense in the world. | ||
| And I credit them for including Social Security in their purview. | ||
| Now that said, I don't think the answer lies in the direction of administrative bloat or improper payments or payments to dead people or any of the things that have been talked about. | ||
| I mean, again, consider what I was telling you before. | ||
| About 25% of all future benefit claims are unfunded. | ||
| The total administrative costs of this program are well less than 1%, right? | ||
| So you could eliminate anyone and everything associated with administering benefits, which I wouldn't recommend doing. | ||
| Even if you did, you'd still have over 96% of the financing problem to deal with. | ||
| So the answers don't really lie in that direction. | ||
| The answers basically lie in the direction of looking at where the program spends money, how it spends money. | ||
| Can we spend it, better target the system's resources on the people who are intended to benefit from it? | ||
| And the answer to that, I think it's going to require some pretty significant reforms. | ||
| But those reforms will need to be legislated. | ||
| They aren't something that Doge can make happen simply by executive authority. | ||
| Show you some headlines. | ||
| This is one of the recent ones. | ||
| Social Security Administration could cut up to 50% of its workforce. | ||
| That's the headline, but what's the impact? | ||
|
unidentified
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Well, that's a concern. | |
| It's a great concern. | ||
| Social Security, it's different from a lot of departments. | ||
| It's not really a policy-making department. | ||
| It's not like the Department of Treasury or, right? | ||
| It's more of a customer service department. | ||
| Their job is to get the payments out, to do it accurately, to do it efficiently, to not have people waiting, have people be able to have a response from someone at the administration. | ||
| That's their job. | ||
| Now, as it happens, the incoming commissioner, and right now there's just a commissioner designate, we don't have a new commissioner confirmed. | ||
| They're already going to have the problem of making the system more efficient because you've got baby boomers still coming onto the rolls. | ||
| You have big backlogs in the disability determinations system. | ||
| You have the constant problem facing every incoming commissioner, which is how to update Social Security Administration's information systems. | ||
| All those things have to be done to make the system more efficient even before you start letting staff go. | ||
| So if you are losing a lot of staff, if you are consolidating regions, if you are losing a lot of the regional commissioners who have been historically a repository of institutional knowledge, you're making the job of the incoming commissioner a lot harder, right out of the gate. | ||
| I try to avoid editorializing, but I think it was very imprudent to be pursuing these sorts of changes even before there was a new commissioner on board. | ||
| And if the new commissioner comes in and says, all right, we've got too many staff or whatever, we can do this with fewer, so be it. | ||
| But to make those sorts of sweeping changes right out of the gate before we really see what's what, I think that was somewhat reckless. | ||
| One of the other news bits that came out last week, the administration, the Social Security Administration saying they would delay a planned cut to phone service for certain people looking for information, though you still have to come in in person to do some other things. | ||
| When you factor that in, if that happens, what happens to the recipient? | ||
| What happens to the person who gets these? | ||
|
unidentified
|
Well, exactly. | |
| Something has to give here, right? | ||
| The agency, they were already dealing with some attrition in their workforce. | ||
| Their workforce has tended to be older than the typical federal department. | ||
| So they were losing people to retirement as it was. | ||
| And you've got this increase in benefit claims, and you've got the backlogs at disability. | ||
| Something has to give, right? | ||
| And I don't know how it's going to give. | ||
| Either you have delays in people getting answers or people getting benefits or you have less ability to catch improper payments and actual fraud and things like that. | ||
| But something has to give. | ||
| And so, again, I think that until we know how Social Security administration can be made more efficient, losing these numbers of staff, it does risk causing interruptions in customer service. | ||
| Charles Blauhaus, our guest from George Mason, also the former public trustee of Social Security and the Medicare Trust Funds. | ||
| Dan is up first. | ||
| He's from New York, a recipient of Social Security. | ||
| You're on with our guest. | ||
| Good morning. | ||
|
unidentified
|
Good morning. | |
| Your guest is spot on, I think. | ||
| And as he most notably said that this problem has been going on for decades and we failed to come to bat on it, I think you need a multi-focused approach, you know, increasing the retirement age, removing the cap on Social Security entirely, and perhaps maybe even taking out, | ||
| let's say, a certain minor percentage of all other departmental budgets to help fund Social Security. | ||
| As I understand it, your contributions to Social Security go to the General Treasury for paying the bills of the government. | ||
| We didn't have a lockbox effort. | ||
| I worked for the New York State government, and their contributions were put into their fund, and it's doing very, very well. | ||
|
unidentified
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And we didn't do that for Social Security. | |
| I think we would have avoided all this if we had taken the contributions from all the Social Security workers over the decades and put it into one fund that could not be touched by government. | ||
| But unfortunately, that's not going to help us now. | ||
| But I do agree that we need a multi-focused approach, and it's going to be painful. | ||
| I would even take a slight reduction, let's say, in my Social Security benefits, let's say for certain individuals who have an adjusTedros income above an adequate amount that could be negotiated. | ||
| But there's going to be a little bit of pain here involved. | ||
| Thank you. | ||
| Dan, thank you. | ||
|
unidentified
|
Well, I'd return the compliment back to the caller. | |
| I think he's spot on in saying that we have to do a little of everything. | ||
| If you look at the magnitude of the shortfall and you say, I'm going to try to deal with this with tax revenues alone or eligibility age changes alone or benefit growth rate changes alone, the size of the changes you have to make is so large that, I mean, it's tough enough as it is, but trying to do the whole job with one of those levers, it's just not going to be possible. | ||
| And he listed eligibility age changes. | ||
| He listed a need for new revenues. | ||
| He listed possibly lifting the cap. | ||
| My guess is that if we were, hopefully, to get any sort of bipartisan solution, we would need all those mechanisms. | ||
| And he even expressed a willingness on behalf of himself and other people who might be less in need to deal with some lessening of the rate of growth on the high income end. | ||
| I think we're going to need something like that, too. | ||
| The one thing I would say, though, on the other side of it is I don't think the problem is that lawmakers spent and wasted the trust fund. | ||
| Unfortunately, the problem is that it exists because we're promising a lot more in benefits than workers' tax contributions could finance. | ||
| The Social Security Administration has been credited, yes, the caller is right, that economically the past surplus tax has effectively financed government consumption. | ||
| But the Social Security Trust Fund was given Treasury securities representing those surpluses, and those have earned interest, and the program is drawing on that now in order to pay full benefits. | ||
| So the program actually is being paid back with interest everything that workers put into the system. | ||
| So unfortunately, the problem is just that the amount that workers are being taxed and the amount that the system is promising to pay beneficiaries is just very far apart. | ||
| Republican line, we'll hear from Jeff in Oregon. | ||
| Hello. | ||
|
unidentified
|
Hi, this is Jeff. | |
| Hey, thank you for taking my call. | ||
| I had a question in regards to one, there was a study done several years ago in regards to Medicare by the IG indicating the fact there's about a $300 billion fraud going into the IG. | ||
| And so how do we explain that? | ||
| And also on the Social Security side, what are we doing with raising or lifting the cap on Social Security and just getting rid of the cap entirely? | ||
| Would that make Social Security solvent? | ||
| Jeff in Oregon, thanks. | ||
|
unidentified
|
Two questions. | |
| The first question of payment fraud. | ||
| He referenced Medicare. | ||
| The way I like to talk about improper payments and fraud, it's very different Social Security, Medicare, Medicaid. | ||
| Social Security, this has been looked at a lot of different ways, and the improper payment rate in Social Security is just very, very low. | ||
| I mean, to the extent that there's ever, you know, that there really is any significant fraud in Social Security, it tends to be on the disability side rather than the retirement side. | ||
| And even there, it's quite small. | ||
| Medicaid is the opposite. | ||
| Medicaid, there's a real big improper payment rate. | ||
| There's misclassification of participants so as to trigger higher reimbursement rates from the federal government. | ||
| You have more of an issue with people claiming enrolling in Medicaid who aren't eligible. | ||
| It's a bigger issue with Medicaid. | ||
| Medicare, it's somewhere in the middle. | ||
| Obviously, improper payments in Medicare, something the Inspector General always looks at. | ||
| You know, it's a concern. | ||
| It's something that needs to be policed. | ||
| You also have to remember, though, Medicare is a massive program. | ||
| So when you categorize and sum improper payments over a long period of time, the numbers start to look really, really large, but are still a quite small percentage of the overall expenditures of the program. | ||
| As for lifting the cap, the short answer is my guess is that any bipartisan solution that includes a revenue increase would probably involve a change in the cap. | ||
| Unfortunately, it doesn't get you all that far. | ||
| Even if you completely eliminate the cap on taxable wages and tax every penny of earnings in America, you don't eliminate more than one-third of the long-term shortfall. | ||
| So the vast majority of the problem still has to be fixed by other means, even if we were to completely eliminate the cap. | ||
| And my guess is we probably wouldn't completely eliminate the cap, because that would be a massive tax increase, an increase of nearly 20% over how much the program is currently taking in. | ||
| And it wouldn't fix more than a small fraction of the problem. | ||
| President Trump has floated the idea of lifting the tax on Social Security benefits. | ||
| What do you think of that as a prospect? | ||
|
unidentified
|
Yeah, that is, I think it's important to have some context here. | |
| Why do we tax these benefits, right? | ||
| The reason they are taxed was to create a closer parity between Social Security benefits and other forms of income. | ||
| And so back in 1983, 1993, we made changes to the taxation of benefits so that you weren't treated better if you were in one system than the other. | ||
| Now, technically, up to 85% of your Social Security benefit is taxed if you're above a certain income threshold. | ||
| Why 85%? | ||
| There's a reason. | ||
| Basically, when you, your employer pays payroll taxes on your behalf into the system, it's not subject to income taxes. | ||
| When you pay payroll taxes into the system, you are paying income taxes on that. | ||
| And then you also have the sort of the buildup of your benefit, which substantially exceeds the amount that you or your employer put in. | ||
| So what the actuaries did back then is they did a calculation of what's the percentage of each type of individual's benefit that hasn't already been subjected to the income tax. | ||
| And they came up with a range of numbers depending on your gender, your life expectancy, your marital status, your income level, all that stuff. | ||
| The lowest number they came up with was 85% for certain males. | ||
| So they said, okay, for pretty much everybody, at least 85% of their benefit hasn't already been subject to the income tax. | ||
| So to achieve rough parity with how private pensions are taxed, we'll tax 85% of it. | ||
| So getting back to your question about President Trump, yeah, you could eliminate that taxation, but that would mean giving a tax preference to income in the form of Social Security benefits relative to all other types of income, and it would also worsen the system's solvency predicament. | ||
| Let's hear from Tracy. | ||
| Tracy's in New York. | ||
| Democrats line for Charles Blauhaus. | ||
| Good morning, Tracy. | ||
|
unidentified
|
Good morning. | |
| Thank you for this subject matter. | ||
| It's very important. | ||
| I heard your guest mention the year 2035 as a possible year for Social Security ending. | ||
| So if I was to take my delayed payment, that would be 2035. | ||
| I would like to know, is it better for me to take my payments before 2035 and not take the delayed amount since it may end in 2035? | ||
| Well, I would say a couple of things. | ||
| One is obviously when you should take benefits is something that's very personal and specific to you, and I'm not in a position to advise you on that. | ||
| I would say, generally speaking, if you're a woman and you have, therefore, longer life expectancy than a man, it's usually in your interest to delay and take the delayed retirement credit because you're going to live longer, right? | ||
| So rather than retire, claim too early and get a lower benefit for a lot of years, if you expect to live at least as long as the average American, you should delay the claim. | ||
| Now, as to the question of 2035, I want to be precise as to our terms here. | ||
| I would not imagine that the system is going to end in 2035, right? | ||
| We might have to have a very different type of system. | ||
| It's not going to disappear. | ||
| So I think there is a risk that we would have to go to a new type of system where benefits were more changeable and variable and a little less secure than they currently are when we have this self-financing trust fund system that we currently have. | ||
| And I worry about that. | ||
| But you would be subject to exactly the same risk whether you took your benefits early or late. | ||
| And so I think you just need to make the decision that makes most sense for you from the standpoint of your own health, your own perception of your life expectancy, which usually means delaying the claim if you're a woman. | ||
| If you saw the changes that you advocated for at the beginning, who would be most affected as far as would it be the young ones coming into the system who would see the most drastic change? | ||
| Would it be those who are like the woman just about to get her benefits, say, or those who already said you said that isn't likely for those who already are getting benefits, but who would be most affected? | ||
|
unidentified
|
Well, this is, thank you for asking this question because this is really important, okay? | |
| I think too seldom do people ask this. | ||
| And sometimes people come up with answers, let's do this to Social Security, let's do that to Social Security, without considering, okay, who is it going to affect and how. | ||
| Very importantly, Under the current system, how you are treated is related to when you were born. | ||
| So depending on when you were born, you have had a better mix of tax burdens and benefit promises or a worse one. | ||
| So as it happens, the people who are getting treated the worst under current law are young workers coming right into this, you know, just coming into the system now. | ||
| Baby boomers, Gen Xers are taken more out of the system than they put in. | ||
| It's really hard to get a solvency solution to work and be fair if certain generations are totally exempted from contributing to it. | ||
| So this is one reason why I would not advocate doing most of this on the tax side. | ||
| Because if you do most of it on the tax side, you're basically loading up the burden of change on the youngest generations that are already getting treated the worst, right? | ||
| The wealthiest boomers, the wealthiest Gen Xers, are much more likely to be beneficiaries over the next couple of decades than they are taxpaying workers. | ||
| So it's really important that we do a good portion of this on the cost containment side if we don't want the plight of younger workers to be even worse than it currently is. | ||
| This is from Linda. | ||
| Linda joins us from Ohio Independent Line. | ||
| Good morning, Linda. | ||
|
unidentified
|
Good morning. | |
| Thank you for taking my call. | ||
| I had very similar questions to those that you've already answered. | ||
| I thank you very much. | ||
| Goodbye. | ||
| Well, let's hear from Fred. | ||
| Fred is a Social Security recipient from Virginia. | ||
|
unidentified
|
Hi. | |
| Hi. | ||
| I have a two-part question for your guests. | ||
| One, I believe that Social Security taxes, the tax on Social Security is put back into the fund, but I'm not sure about that. | ||
| And I'm wondering what would happen if you started to claw back Social Security payments at say income of over $150,000 or some other percentage, some other number, and claw that back and put it back in the Social Security Fund. | ||
| Can you tell me what might happen then? | ||
| Yeah, two questions there. | ||
| First one, you're correct. |