Edward Lotterman
Words like “ignorant,” “clueless,” “stupid,” “idiotic, “inane,” “moronic,” or “asinine” are harsh. They should not be used in reasoned argumentation, simply because they undermine the credibility of the person making the reasoned argument — the person who presumably is not any of those things.
But there are occasions when the ignorance professed is so enormous, and has such potential impact, that it has to be called out, even with an appeal to the emotions.
Such an occasion occurred this past week, when President Donald Trump’s Social Security Commissioner Frank Bisignano, speaking about the point in 2033 when the Old Age and Survivors trust fund runs out of money, said, “Eight years is a long time away.”
Sorry, but “asinine” or any of the other foregoing adjectives fits here. One need not apologize.
Social Security Commissioners usually are actuaries, statisticians or economists. (Search for “SSA Social Security Commissioners” to read bios of over 40 of them). But, as a highly paid CEO who, together with his wife, gave somewhere north of a million dollars to Trump’s 2024 campaign, following large amounts for the losing 2020 one, Bisignano meets Trump’s criteria to run an agency with a complex task — namely a rich white guy who likes and supports Donald Trump, especially with money.
Yet Bisignano’s ignorance of the job he was evidently qualified for was evident in remarks he made soon after being named:
“I’m like, ‘Well, what am I gonna do?’ So I’m Googling ‘Social Security.’ That’s one of my great skills, I’m one of the great Googlers on the East Coast. … I’m like, ‘What the heck’s the commissioner of Social Security?’ ”
So why is it “asinine” to say that eight years is ample time to fix the program? One, because it betrays a blithe ignorance of the scope and complex causes of the problem, which are generations in the making. And two, because waiting makes closing the gap harder every day, and makes the measures to do so increasingly unfair to those still working.
If this trust fund were to hit zero right now, we would suddenly need an additional $210 billion a year from payroll withholdings. This would be the opposite of a tax cut. And that would be only for old age and survivor’s benefits, not disability benefits nor Medicare. The increase in FICA paid by employer and employee combined, leaving Medicare aside, would need to rise from 12.4% of earnings to 14.8%. That would be a wrenching adjustment to household and business incomes if other changes to funding are not made — and such changes also will be hard. Fast-forward eight years from right now, and those percentages only go up; and the solutions only become harder.
If, in 2010, Bisignano had said, “23 years is a long time away” he still would have been unrealistically optimistic. Peter G. Peterson, the corporate CEO who served as Ronald Reagan’s Treasury secretary before heading Lehman Brothers and co-founding the Blackstone investment fund, started expounding on these issues 30 years ago.
Laurence Kotlikoff, a distinguished economist at Boston University, has devoted his career as a public finance expert to these intergenerational funding challenges. He produced a coherent array of possible policy responses that largely have been ignored for political reasons.
With these articulate voices unheard in the wilderness of partisan politics, we sail blithely toward a mega-crisis. To understand how we got in this jam, consider history.
First, the Social Security Act of 1935 has been among the most consequential government actions in U.S. history, on par with the Northwest Ordinance, the Homestead Act and the G.I. Bill. It shaped who we are as a country today. More specifically, it not only reduced poverty more than any other measure, but also made labor markets more efficient. Simply put, reducing the risks of abject poverty allows workers to make better career choices.
Secondly, it is not, as some uninformed people (in power) allege, a glorified Ponzi scheme that relies on younger age cohorts unfairly being duped into paying for the benefits of older ones. Yes, FICA paid in by current workers now does go to current retirees. However, that only mimics and simplifies what happens in any “real” economy without money. Working age people always have had to produce goods and services to meet the needs of both young and old. That has been true since prehistory.
Of course, the aged have to have some social, economic or legal claim on having their needs met. That may come from kinship, ownership of assets or government programs that effect such transfers. As long as each generation must support others at some point in their lives, the system can be just.
So it is entirely possible to have a social insurance system in which the value paid in by the average person while working equals the value of benefits received after retiring. While this is ideal if the population is constant or changing at a constant rate, it is more difficult when birth rates zig and zag. These fluctuations are the fundamental source of our current problems.
Everyone knows of the baby boom, the sharp post-World War II uptick in birth rates from 1946 through 1964. These drove a population of 170 million in the late 1950s to some 340 million today. These babies are now retiring, and have been for years, and are demanding benefits from a system they paid into while working. Post-boom generations haven’t kept pace, so new workers paying into the system not only can’t afford to continue funding the benefits, they’ll get shorted when it’s their turn.
There were additional factors. One was the dearth of births during the Great Depression and its collapse in immigration. We are correct in thinking of the 1930s as the period of hardship in question, but that is incomplete. Farming had already gone into a slump in the early 1920s at a time when over a third of the U.S. population lived on farms. So a dearth preceded the boom. And other low-birth rates have followed.
In the economically troubled period from 1973-1988, the number of children per woman fell below population replacement levels, although immigration did boost growth. But rates are falling sharply again. With 2.07 children per woman, 2007 was the last time we were above replacement levels. Now, after a dip to about 1.6 per mother in 2020, during COVID, we are at 1.8.
If this trend persists, it will shrink the population. But there is a kicker, and it’s specific to Trump administration policies. This national fertility average is as high as it is because immigrant women and their daughters born here have more children than women whose families have been here longer. If we deport these people, thus limiting the fertility rates to women whose families have been here two generations or more, the overall population would drop even more quickly. In this same vein, consider also the mass deportation of immigrant workers who also pay FICA. What happens when they aren’t here?
The funding retirements of 76 million retiring boomers has been a challenge for half a century and new trends make this also a challenge as younger workers retire, as they soon will be doing en masse.
A responsible administration and Congress saw that 40 years ago. An excellent blue-ribbon commission recommended sensible changes that were largely adopted in 1984. These included higher FICA rates and an increase in the full retirement age from age 65 to 67 phased in over years. Benefits for survivors were cut sharply, essentially covering them through high school instead of nearly through college.
Another initiative, for the trust fund to build up a substantial balance while baby boomers were still paying in, has largely failed. Ongoing irresponsibility by Congress, which used the fund to hide even larger deficits in the general Treasury accounts, has been the problem.
The rapid concentration of wealth to a relative few over the last 25 years now poses even greater challenges. Planners in 1984 worked with 85% of all household earnings being subject to FICA, and assumed this would continue. Soon, however, high proportions of increases in income went to the richest fraction of the population. Nearly all was not in the form of “earned income,” wages and salaries subject to FICA. More often it was investment income, subject to capital gains, but not funding Social Security. And almost all was over the limit subject to FICA anyway.
The fact that the richest 10% of households now enjoy 50% of total consumption expenditures illustrates this change. People who make money spend money; people who don’t pay taxes.
In the 44 years since I first taught econ, the U.S. has gone from a nation with the most equal income distribution among wealthy democracies to now being the one with the most unequal. So when we look at the Social Security trust fund and ask, “where did the money go?” this is partly the answer.
So this is a brief primer for Bisignano on the challenge he faces now, not eight years from now. So what will our ignorant commissioner do with the information? That must be left to another column.
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St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
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