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Don’t consider these Social Safety myths

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Speaking with household and associates, listening to cable information or following public debate about the way forward for Social Safety, you’ve doubtless heard a number of of the next feedback asserted as undeniable fact:

  • Social Safety goes bankrupt, going broke, in disaster; younger individuals won’t ever see a penny in advantages.

  • Social Safety’s belief funds are merely an accounting gimmick, nugatory IOUs.

  • Social Safety is unsustainable. There simply won’t be sufficient working-age individuals to help retired boomers.

  • Social Safety is unfair to youthful Individuals.

Here’s a point-by-point refutation of every of those assertions and the way these claims undermine confidence in the way forward for Social Safety and distract consideration from what is basically happening.

CLAIM: Social Safety goes bankrupt, going broke, in disaster; younger individuals won’t ever see a penny in advantages.

TRUTH: So long as there are Individuals who work, there may be merely no means that Social Safety can run out of cash. Social Safety has a devoted income stream that’s not going away. Its main supply of earnings — $948 billion in 2019 (89% of its revenues) — comes from the contributions of staff and employers.

So long as there are staff, Social Safety will proceed to gather billions of {dollars} in earnings, week in and week out, for the following 75 years and past.

Chapter is a meaningless idea when utilized to the federal authorities or any of its packages. Even when Congress have been to take no motion for a decade, Social Safety is projected to have adequate devoted income to pay 100% of promised advantages for greater than 10 years. After that, it’s projected to have sufficient earnings to pay round 75¢ on the greenback for the foreseeable future. Sufficient income needs to be introduced in to cowl that manageable shortfall.

Congress has by no means didn’t act to safe Social Safety’s funding. It by no means will.

Don’t miss: Americans have lost more than $1 trillion — yes, trillion — to old, forgotten 401(k) plans

CLAIM: Social Safety’s belief funds are merely an accounting gimmick. The $2.9 trillion in bonds that Social Safety holds are only a bunch of paper, nugatory IOUs. The federal authorities has already spent the cash, so it should increase everybody’s taxes or lower earned advantages to pay promised advantages.

TRUTH: These fees have been round since 1936. They weren’t true then, and they don’t seem to be at the moment. Right here’s why.

Since 1935, the cash that staff and their employers entrust to Social Safety has been invested prudently and conservatively. The trustees are required by legislation to take a position Social Safety’s belief funds in interest-bearing treasury obligations or in entities whose principal and curiosity are assured by the US, the most secure funding on the earth.

These usually are not informal guarantees to pay. They’re authorized devices backed by the complete religion and credit score of the US. The Treasury bonds held by Social Safety have the identical authorized standing as bonds purchased by you, a financial institution, a international authorities, or another individual or entity that invests in U.S. treasuries.

The cost that the cash has already been spent signifies both a misunderstanding of bonds or a want to deceive. All those that concern bonds, whether or not they’re firms or authorities entities, achieve this to lift funds to be spent. The truth that the funds are spent, and what they’re spent on, doesn’t alter the authorized obligation to repay.

CLAIM: Social Safety is unsustainable. Simply have a look at the numbers. As soon as, 16 staff supported every Social Safety beneficiary. At present, lower than three staff help every individual receiving these advantages. With 10,000 boomers turning 65 day by day from 2011 to 2029, there simply won’t be sufficient working-age individuals to help them.

TRUTH: The reality is that the worker-to-beneficiary ratio, which compares the variety of staff contributing to Social Safety to the variety of individuals drawing Social Safety advantages, reveals little or no in regards to the affordability of Social Safety. The truth is, the logic behind this declare falls aside with a little bit evaluation.

The 16-to-one ratio is a meaningless factoid, plucked from 1950, when Social Safety was nonetheless in its startup section. Not sudden, solely 5 years later, the worker-to-beneficiary ratio was nearly halved, dropping to eight.6-to-1 in 1955, after which to three.2-to-1 by 1975. Neither is it shocking that in 2013 as growing numbers of boomers started receiving their advantages, the ratio was right down to about 2.8-to-1, the place it has remained till at the moment. (Social Safety’s actuaries challenge additional decline to 2.3-to-1 in 2035 when all boomers are a minimum of 65.)

Additionally see: What will COVID-19 do to Social Security?

There’s nothing outstanding right here. Very excessive employee to beneficiary ratios have been skilled by all pension plans, at the beginning, when few staff have but certified for advantages. Furthermore, Social Safety was expanded in 1950 to cowl tens of millions of latest staff. All of those new staff have been paying into Social Safety, however none of them had labored lengthy sufficient to develop into insured and begin gathering advantages.

CLAIM: Social Safety is unfair to youthful Individuals.

TRUTH: This declare has a veneer of reasonableness and even some educational respectability. Outdated versus younger is catchy and will get on-line clicks. However it’s a flawed idea and relies on a really slim measure of what’s honest, one which implicitly raises a just about unmeasurable notion of equity between generations over extra measurable and visual issues of equity, resembling between the highest 1% and the opposite 99% between Black and white Individuals.

Elevating competitors and equity between generations as the first foundation for making public coverage additionally ignores that there’s a lot to be involved about on the subject of inequalities of income, wealth and political energy and well being disparities that construction and scar the lives of generations.

See: ‘Will Social Security be there when I retire?’ Confusion about this question is hindering saving for young people

Social Safety will not be merely a program for at the moment’s outdated. It is usually our largest youngsters’s program and crucial supply of life and incapacity insurance coverage that the majority households have. And the youngsters of at the moment would be the older adults of tomorrow, relying closely on their very own Social Safety.

Copyright ©2021 by Nancy J. Altman and Eric R. Kingson. This excerpt initially appeared in “Social Security Works for Everyone!” printed by The New Press. Reprinted right here with permission.

Nancy J. Altman is co-author of “Social Safety Works for Everybody!” and co-founder of the nonprofit Social Safety Works and the Strengthen Social Safety Coalition. 

Eric R. Kingson is co-author of “Social Safety Works for Everybody!” and co-founder of the nonprofit Social Safety Works and the Strengthen Social Safety Coalition.

This text is reprinted by permission from NextAvenue.org, © 2021 Twin Cities Public Tv, Inc. All rights reserved.

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