I hope you understand that “the fund” is a spreadsheet. It has no real economic value.
The generations before the boomers did not “build up the fund”. In 1983, 46 years after SS taxes started, the trust fund had enough money to pay two months of benefits. Boomers paid higher tax rates over their careers than earlier generations.
The great “sin” of the boomers was having only 2 kids per couple instead of 3 like their parents did. The generations after the boomers didn’t go back to 3, they are planning to put the same burden on their kids.
If a society is going to allow old people to continue to consume economic goods after they stop producing economic goods, the burden will fall on the workers. This is true (for a closed economy) however they choose to arrange that transfer.
Yes, I understand. Its only a “notional” fund these days as there are no assets there. Its a Pay-as-you-go system now.
So, what really matters is:
Retirement age
Longevity post-retirement age
Contribution rates
Number of years contributing
Number of retired vs Number of people paying in (dependency ratio)
Boomers are effectively receiving an SS “windfall” because Points (1) - (5) have been hugely in their favour over their non-retired tax-paying liferimes.
Certainly I wish I had invested 100% in index equity funds my whole life. That is an easy decision to make in hindsight!
However if you look at CPP returns over the past 10 years they have outperformed almost every major public fund in the rest of the world. They have done well. Certainly much better than OASDI!
Yes it is. As I pointed out, over the first 46 years it was almost perfectly paygo. It wasn’t for the first few years, but any trust fund build up that occurred was wiped out by 1983.
The “trust fund” was created for general fund vs. social security “fairness”. But, we can also use it for rough generational views. The tf was basically zero in 1983 and is projected to get back there around 2035. The average boomer was about 28 in 1983 and will be 80 in 2035. So those years comprise most of the working and retirement years of the boomers. Over those years, taxes essentially match benefits because the 83 amendments raised tax rates on boomers above the amount needed for a pure paygo system in the 20th century.
Looking at your 5 factors:
Boomers had a higher retirement age then their predecessors and hence had to pay taxes longer.
Here’s a table of expectation of life at full retirement ages for some birth years where the FRA was a whole number. I don’t see boomers getting a huge advantage here because the 83 amendments increase their FRA.
Birth
FRA
Male
Female
1927
65
16.25
19.48
1937
65
17.63
20.26
1943
66
17.46
19.94
1954
66
18.19
20.65
1960
67
17.88
20.21
1970
67
18.50
20.77
Boomers paid higher tax rates than the generations before them and lower rates then the generations after them.
People born after 1920 essentially started SS taxes as soon as they started working. Boomers didn’t do anything different.
The only thing that really matters, everything else is just a way of dealing with this. Note that generations after the boomers aren’t doing anything to get this ratio back up.
I know for a number of years this was absolutely a true statement. But with how they’re verifying employment eligibility now I thought most employers of illegal workers were just totally under the table.
I am admittedly not up on all the trends of illegally hiring persons ineligible to work in the United States, so it is possible I am mistaken.
Eh, the tax rate has been the same since 1990. At that time baby boomers were age 25 - 43.
Most of them paid at the current rate for most or virtually all of their professional careers. The earliest baby boomers made real money for a few years at slightly lower rates. But it’s been over 5% (currently 6.2%) since 1978, so even those “low tax” years weren’t all that much lower. A little lower, yeah. And a lot of baby boomers paid a bit less from their McJobs when they were in school.
The actions of the baby boomers during their lifetimes have monumentally shafted the younger generations.
I see this all the time in the UK. The young have been put under such extreme financial repression that mental health problems in their cohort have exploded.
Something has to give here. And in my view, the boomers (who have most of the wealth now) need to start giving back to the younger generations.
We cannot simply ignore this either, because its actually getting worse due to sheer economic and social inertia.
I think it’s better than it was, but still a big issue in many states. Per equifax, here are the current states that require e-Verify vs those where it’s use is optional
It looks like the discussion has shifted from the specific “boomers broke Social Security” to a generic “boomers hate their children all over the world”.
As I’ve shown regarding the first, the only thing that the boomers did “wrong” with SS is to have fewer children than their parents. And, the generations after the boomers are making the same “wrong” decision.
Regarding the second, if we’re talking US politics, I fault the boomers for being more willing to push for deficit spending than their parents. But, again, the generations after them don’t get to complain because they vote the same way. Maybe you have some political “actions” that are unique to people born during a 19 year window that I’m missing.
Other than politics, I’m sure that plenty of children complain about their parents. I can’t say much about that.
So you are saying that SS should have been an advance funded program from the beginning, or that paygo made plenty of sense for the first 45 years but then didn’t make sense after that?
The decisions in 1983 weren’t made by boomers. They (the people advising Reagan and O’Neil) talked about using the increased taxes to buy private investments. The conclusion was that for a big economy like the US it doesn’t actually come out ahead. We’re not going to rely primarily on foreign investments (like Canada can).
The gov’t would have borrowed more money and bought private investments. That would not have added anything to the actual capital available so the economy would not grow. In order to make it work, they would have to entice private citizens who would have preferred stocks to buy Treasury bonds instead. That requires higher interest payments on all Treasuries and would have raised stock prices right when the gov’t was buying.
It would have been a windfall for people who already owned stocks and wanted to sell, and a loss to people who already owned Treasuries and wanted to sell. Then, when they got into the selling stage, a similar reversal. Just a dollar shuffle among Americans with no real economic gains.
