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No matter how popular, Social Security is a terrible investment 

No matter how popular, Social Security is a terrible investment 

Social Security is often called “the third rail” of public policy. 

Any politician who suggests any criticism or change in SS – other than increasing benefits – is on the road to political oblivion. I am not a politician, so I have no need to pretend that Social Security is 1) actually a “trust fund” set aside for future payouts, 2) an efficiently run government program or 3) a good investment.

Trust Fund?

The folks in Washington often refer to the Social Security Trust Fund – implying that there is a set aside of money coming into the “Fund” sufficient to pay future recipients – that the “Fund” is self-perpetuating and sustainable.  In fact, there is no “Fund” – only an item in the overall federal budget.  That is why every member of Congress – and the folks in the White House – know that the outgo far exceeds the Social Security income.  The disparity is so large that Social Security – as a program – is unsustainable.  If left on its current course, Social Security will crash and eventually bring down the entire national economy.

Social Security is a kind of Ponzi Scheme in which more and more money is required to meet the promised payments to current recipients – and the growing demand for money is outpacing the taxpayer’s ability to pay.  In 1940 – three years after Social Security was started – there were 42 workers supporting each recipient. Today, there are only three workers supporting each Social Security recipient.  Like every Ponzi Scheme, there comes the point where it crashes.

So far, the ability of those in Washington to wring more and more money out of the taxpayers enables them to brag about the Social Security as the greatest government benefit program.  Of course, that is the same thing folks were led to believe when they invested with Bernie Madoff. (If you are not familiar with Madoff, look him up.)

With Social Security about to belly up in a few years, President Biden proposes to raise taxes to extend the viability of Social Security – essentially kicking the can down the road.  Eventually, there will be no more roads left.  No matter to Biden or the members of Congress, they will have been long gone before the disaster hits.

Yep!  There is no trust fund.  Social Security has to be paid out of current taxes and borrowing.

Social Security includes waste and corruption

Social Security has become such a “sacred cow” that it is politically perilous to even suggest cost cutting measures involving waste and corruption.  The word “cut” and “Social Security” can never be uttered in the same sentence. 

If a senator announced a plan to cut the waste or corruption out of Social Security, an opposition senator would accuse his colleague of taking bread and medicine away from those dear old senior citizens.  (I kept partisanship out of the previous sentence knowing that you could figure out the political affiliation of those senators.)

According to the Committee for a Responsible Federal Budget, the payment to undeserving or dead folks runs around $3 billion per year.  Others set the “corruption AND waste” figure at closer to $15 billion per year.  Corruption and waste in government programs is enormous because no one in government is effectively supervising expenditures – and that is because it is not their money. 

Politicians actually benefit by not being prudent in spending.  And keep in mind that those who cheat and steal are as supportive of government spending  – and the candidates who spend irresponsibly — as those who get legitimate payments.  They are all in on the take.

Social Security is a lousy investment

Two things are true.  Social Security income is important and often critical to senior citizens – and it is lousy in terms of the Return on Investment (ROI).  It is a losing investment.  Basically, the money you receive is worth a lot less than the money you put into Social Security.  Even worse.  It was a forced investment.  It was a bit like a stockbroker forcing you to invest in a stock that was a sure loser – even worse, since the stockbroker did not create the losing investment like the government did with Social Security.  

If you had put that money into safe blue-chip stocks, you would have been FAR better off.  If Social Security was a privatized investment – with safeguards – your Social Security payments today would be up to eight to ten times greater.  Imagine getting $18,000 per month instead of $1,800.

To put it simply, the dollar that Uncle Sam took from us was worth a LOT more in purchasing power than the dollar he is giving back decades later.   The dollar I gave to Uncle Sam back in 1965 to invest in my retirement was worth $8.55 in purchasing power when compared to the dollar Sam is sending me each month.  To make my investment in Social Security a breakeven point – no gain – I would have to receive 8.6 times the amount I receive today.

The Urban Institution estimates that the average person will pay $300,000 into Social Security over a lifetime – and will receive approximately $277,0000 in retirement benefits.  You lost $23,000 right off the top.  If you had put that money in a mattress – instead of giving it to subsidize Uncle Sam’s spending sprees — you might have been better off.  

One thing everyone on Social Security knows is that the return on the investment is not nearly enough to cover the costs in retirement.  It is not a livable income.  You cannot survive – meet basic needs — on Social Security alone, even if you cut costs to the bone. 

Some describe Social Security as a sort-of private investment program.  It is YOUR money – going in and coming out.  (Wait while I stop laughing.  It is not “your” money when you have no choice in spending it.)  It is not a welfare program.  That creates a problem.  As a long-term investment program, everyone who puts in can take out – no matter how rich they may be.  Social Security payments are not means tested.  If they were means tested, there would be more money for the seniors who really need the Social Security income – AND an overall reduction in the ever-increasing taxpayer cost of supporting the system.

Even though it is not officially a welfare program, it has the impact of one.  Seniors are grateful for the pittance they receive – and protective of the pittance by voting against those who would reform Social Security and make it a better investment.  They have been fearmongered and trapped into Social Security dependency, much like many poor folks have been fearmongered and trapped into generational welfare dependency.

Social Security needs responsible reform, but it will not happen as long as the irresponsible have the upper hand with the voters.

So, there ‘tis.

About The Author

Larry Horist

So,there‘tis… The opinions, perspectives and analyses of Larry Horist Larry Horist is a businessman, conservative writer and political strategist with an extensive background in economics and public policy. Clients of his consulting firm have included such conservative icons as Steve Forbes and Milton Friedman. He has served as a consultant to the Nixon White House and travelled the country as a spokesman for President Reagan’s economic reforms. He has testified as an expert witness before numerous legislative bodies, including the U. S. Congress. Horist has lectured and taught courses at numerous colleges and universities, including Harvard, Northwestern, DePaul universities, Hope College and his alma mater, Knox College. He has been a guest on hundreds of public affairs talk shows, and hosted his own program, “Chicago In Sight,” on WIND radio. Horist was a one-time candidate for mayor of Chicago and served as Executive Director of the City Club of Chicago, where he led a successful two-year campaign to save the historic Chicago Theatre from the wrecking ball. An award-winning debater, his insightful and sometimes controversial commentaries appear frequently on the editorial pages of newspapers across the nation. He is praised by readers for his style, substance and sense of humor. According to one reader, Horist is the “new Charles Krauthammer.” He is actively semi-retired in Boca Raton, Florida where he devotes his time to writing. So, there ‘tis is Horist’s signature sign off.


  1. Joe

    ANd Larry forgot to mention that it is about to become an even worse investment once the Demented Jerk in the White House forces ESG investing of the fiduciaries responsible for investing the proceeds.

    • larry Horist

      Joe … You are right. But there are soooooo many bad things to say about Social Security that you cannot get them in one commentary. Thanks for the add-on/

      • frank stetson

        Mr. Horist: by law this can not happen unless they change that law. I give it 0% chance. You are deluded, again.

  2. frank stetson

    Joe, not that it matters, but ESG investing or not can have the same returns. There’s no reason not. You are an idiot.

    MORE IMPORTANT: Social Security, by law, can never be invested in equities. Never has, never will. Who’s the demented jerk now? Well, maybe not a demented jerk, that’s a bit harsh. Let’s go with just plain ole stupid. Look in the mirror for your answer……

    People really should not open their big stupid mouths if they don’t have a clue. Joe is clueless on this one. Which is a good reason he should never be left to self-invest his retirement fund safety net. Guy would just shred it.

    • Tom

      I agree Frank. A survey was done and the conclusion was that most average Americans do not know enough about investing to privatize SS. If we want to go that route we need to teach it in the high schools and colleges, and then structure good safe funds that are very low risk. ESG may or may not affect investor returns, it all depends on the company. I have a mix of ESG and non-ESG companies and I seem to do fairly well overall. I do believe companies should have to say in their prospectus whether they fund ESG and which ESG they fund. Investors do have a right to know this. I wonder how many investors knew about all of the ESG being funded by SVB?

      • frank stetson

        Unless you are in to ESG or against ESG, why waste your time looking?

        I just don’t bother, there’s not enough pure ESG plays to be worth the research effort at this time, IMO.

        • Tom

          Well what is happening lately is that state pension systems are investing in ESG companies. The stink is that the pensioners do not know this. That was what Joe Manchin was pointing out a few months ago. Some banks are big time into ESG stuff like SVB was.

          • frank Stetson

            Unfortunately, Joe G’s site has lousy search engine, otherwise I would direct you to the story on this with my previous comments. If memory serves, all the hoopla was about a miniscule part of the pension since ESG in terms of the market is a meaningless part. IOW — they were upset about a truly minor part of their pension and the result would actually cost WV money. To stop all ESG investments, you have to hire folks to research, scrutinize, evaluate, and recommend. Then what you have left is less choice, meaning higher risk. It was a stupid plan that profited no one. Something like that, but hard to find old stuff (except Larry himself) around here.

  3. Tom

    Larry, great topic, fun to discuss. Believe it or not, all the way back in the FDR days when he got SS passed, it was predicted to run into problems by the mid 1980’s. So this is no shock, its been known by government for a very long time. It was a locked box back then, and up to our dear POTUS Johnson. Johnson needed more money for the Vietnam War and he wanted to get it from a place where tax payers would not see the impact to the federal budget, thus not paying more federal taxes. So around 1967 he created and got passed by Congress, the “unified budget” which married the normal federal budget and the social security kitty. This is how he opened the kitty that previous POTUSes could not open.

    When FDR got SS passed, his reason was to keep the elderly and disabled out of dire poverty. That in my view is a good thing. Over time, especially during Johnson, it was used as a cash reserve for his “Great Society” and any other pet POTUS project. Take a look at what all SS funds these days. You will see how far we have gotten away from “funding old age to keep elders out of poverty” at “” BUT, for some reason, they only ever seem to blame the eventual demise on baby boomers and those that paid in, which in my case is six figures of income!

    Places to start making SSI viable again:

    I am in favor of means testing for anyone above a certain level of income, savings, net worth. I just filled out my application this week. In three years and one month from this blog writing I will have received back all of my collective SSI taxes. After that, if I am still living, I am raking in money from all of those that worked, money that I never invested. So why not give me back my original investment over an optional number of years? And then if I ever spend all of my money, then give me the minimum SSI check as a bailout to keep me out of dire poverty.

    Notice in that list of social security programs at the link I provided it say railroad retirement fund. This fund has been horribly mismanaged by very corrupt people. Biden just gave them a big bailout. This fund has been a drag on our collective savings for decades! They should have restructured the fund instead of bailing out the fund. Sorry railroaders, your fund is a drag on all of us, restructure, bite the bullet!

    Social security full maturity has not kept pace with expected life span. This needs a serious adjustment. Raise the full maturity age in one year incremements every five years for twenty years.

    Create a Medicaid tax that everyone pays, even the very poor people need skin in the game, at least $5 per month. This program was never voted on like Medicare. Scrap it or make everyone pay. Or have one common medical system instead of Medicare, Medicaid, and VA Care. Everybody pays 5% of their gross income to the Medicare for all system that is bracketed every ten years to be more relevant to that age group.

    Average the dependent benefit so when a spouse dies and had a lower SSI amount, they get the average of their SSI and the deceased spouse SSI.

    Cut the assistance programs 5% per five years for the next twenty years. Raise the Minimum Wage to a livable wage to get people off of assistance programs.

    Lock the box again and stop calling it a pay as you go system, or keep the box open and fund it properly as a social system by raising taxes.

    Secure borders so that we do not have tremendous influxes of poor beyond what the system can handle.

    Create a Federal SS lottery, and vice taxes. Approve medical marijuana and put an SSI tax on it.

    Revise the rules on SNAP program to cut out fast food places, and cohabitation benefits.

    • frank stetson

      Here’s an interesting one: “Yep! There is no trust fund. Social Security has to be paid out of current taxes and borrowing.” This is kinda true, mostly wrong but totally wacky thinking. It’s fear-mongering based on a tax and spend scare, this time it’s tax and borrow which have absolutely nothing to do with SS funding.

      First, there is a trust fund. It even has an advisory board. It has a balance. It is managed by our Treasury.

      It has a big balance. A really big balance. A US debt affecting big balance. The Trust Fund exists and is invested in Treasury Bonds which currently offer around 4%. Most SS Treasury notes are worth under 2%. And before you go about whining about more profit — remember, good enough for banks, good enough for the richest of sovereign nations. Plus, what company should the US Treasury purchase equities, or should I say favor, with your funds? There’s a quagmire of conflicts of interest…. But you can bet big business has invested a lot in shaping Larry’s thoughts here. It would be a boon to the market, a bubble, what could go wrong with that?

      These are not regular bonds, but they are special, just for us. We basically get market rate but instead of waiting for maturity to redeem at full value, we can sell AT FULL VALUE at any time. Now you know how we pay for SS deficits.

      Bottom line: via SS, the American working public owns over $5T of the nation’s debt; we are the largest single share owner of our own destiny. That’s cool. Wish I could do that at home :>) Damnable sovereign nation financing…. Furners own over $6T but the biggest single couple of countries around $1T each. Private US investors, you know smart guys, own over $6.5T. WHY? Because we are the safest bet in the world. Smart guys all over the world park their money with us for a reason Larry. It’s a good deal that’s really safe.

      Larry, no current income tax dollars have ever been used to pay off Social Security recipients. We have never paid off Social Security recipients with any borrowing. Actually, WE, via Social Security fund our borrowing, not the other way around as Larry said.


      However, if you want to force your arcane point on paying by taxes — Social Security recipients do get paid from current year payroll taxes which, as you note, are not enough to cover the spread, so we dip into the SS special Treasury notes.

      For the working stiff not collecting, he gets taxed, it’s a tax. It’s forced. Someone has to fund the fund with funding from somewhere. If we didn’t do that, people would not fund it themselves, and then we have to cover them in their old age with no social security —– and that’s tax and borrowing for sure.

      For the person collecting, they only get taxed IF means testing for higher incomes. They get the working stiff’s tax dollars plus some t-bill deficit coverage. The t-bill part could be tax, interest, whatever, no one knows by the time it gets cashed in. So, in truth you get paid by someone else’s taxes, or by your own tax money given back, or by t-bill interest which would be revenue, not tax —- all depends what perspective you take. Sovereign financing is a hoot.

      So, yeah, we do force collect taxes to fund the account, if you have a fund, the fund needs to be funded from somewhere., but there has been no borrowing, the account is solvent, has been solvent, and will be solvent in the future if we fix it which is not rocket science. Just an annuity. Frankly, the only reason it’s a tax is that’s the “constitutional way” to get it by the SCOTUS, same deal with Medicare and ObamaCare. But the beauty of Social Security is FDR made it free standing, the Treasury Department administers it but they do not manage it — the law manages it. It’s a beautiful thing that makes pushing the hockey puck very difficult for Congress. There is no rug to sweep anything under as there is in LBJ’s Medicare design.

      How do you plan to fund your self-serve, self-managed version of Social Security? Voluntary so individual rights and freedoms are protected and respected? Tooth fairy?

      SS is covering our debt and provides a safety net to elders. If we make it self-serve, some people will go broke, some will loser money, some will be adequate, and some will profit. But, on average, like the 401Ks, there will invest worse that the current program. When they lose with Larry, they will become wards of the state and our tax burden.

      We “enjoy” the benefits of SS even before we retire. It is the largest component of our debt; without SS investment, we would be belly up, game over. So, of course, when you draw down those dollars, you need to replace them via either less debt or add tax revenues or additional debt from other sources. So, you are sort of right, mostly wrong, and totally wrong about the borrowing.

      Not that it matters on the tax; the freaking fund would need to be funded to be a fund or else it will be no fun at all.

      • Tom

        My issues with privatizing SS has always been two fold: 1) Many will lose their money and become wards of the state and it will make all of us worse off. 2) How does the government go about picking fund managers? That will be more government picking winners and losers in my book. I like the way it is set up now.

        • frank stetson

          1 is right
          2 — I am guessing he is probably thinking no fund managers — just roll your own. IF there are fund managers, then this is just pensions all over again and a limited selection of investment offers, overhead, bad estimates by fund managers who have no skin in the game, soso.

          Crap, that’s like the company savings plan which I roll over into my own account as soon as I can. Why be constrained by their fund managers and limited selection of funds. Hell, I beat Arthur Andresen fund managers and they even had “specialty” versions of major mutuals with better returns…… Beat em in one year after getting out of that one.

          FYI: If I wanted to use fund managers to select available funds to select from, I would look at all the pension plans, find out which is doing best, and then use their funds to invest. As in find the smart guys and copy them. I did that with State Pensions once, ended up in Maryland which was pretty good, and had a good year with them until I got bored. I do the same thing with Buffet investments, they are all online. But if you try it, remember, you are seeing like 1Q to 1H back and =-== might still be true — Warren couldn’t pick a tech stock for love or money, don’t follow him there.

  4. frank stetson

    Here we go again with math-challenged Larry playing with numbers. Numbers. Pitiful example of the shortcomings of American educational system. Once again the author stoops to pilfering a play from the ancient Republican book of financial fairy tales skipping over the chapter on Voodoo economics into the self-serve, self-managed finance section. It’s the same old stupid bullshit lines pitched since before Reagan. This article is full of the same privatization/self-managed investment funds voodoo economics as the 401/pension debate of the 80’s that predated the migration of pensions into self-service. Self-managed 401K (K for kooky) accounts that resulted in a total lowering our overall investment returns, on average. It was not a good deal for workers then, it is most certainly not a good idea for Social Security.

    Why? Hate to say it, but the biggest reason: Americans often do not invest at the same guaranteed consistent profit level that Social Security invests at. PLUS, Social Security is guaranteed payments — self-managed are not guaranteed to ever pay even one cent and often have lower or even negative returns. In words that even math-challenged Larry can understand, Social Security will never go bankrupt, you might. And we have proved this with 401k”s.

    Ask yourself this about low interest rates that are guaranteed: currently we pay about .5% to banks to hold excess reserves at Treasury. Half a point, why would anyone invest in that low rate. Well Captain Obvious: it’s fixed, guaranteed interest. And the smart guys do. There’s over $3T in excess reserves held by banks at the Federal Level. IOW – banks are taking .5% guaranteed interest in lieu of lending this $3T out at far high returns. But wait, there’s more my dear Captain: there’s $7.2 foreign dollars invested in US debt. Good enough for banks, good enough for other sovereign nations, but not good enough for me because Larry opines that individuals can do better?

    Fact is diversification is king. Social Security is a safety net, not a sustaining fund if you can avoid it. HEAR ME America, if you plan to retire on Social Security, you are a fool. Its a safety net, not a gold-plated Trump toilet. Want more reward for risk; well, don’t bet your safety net, get your risk-reward dollars somewhere else, diversification is just smart finance. And if you plan to only live off Social Security, either get another plan or I am sorry for your dilemma.

    Why not have what essentially is a fixed, guaranteed, annuity for life which, if you live longer, you will far outpace anything you can make on the market, probably, most likely. Oh yeah, you can even extend that guaranteed payment stream to your spouse upon your demise. Sounds like a pretty good deal to me. You pay extra for that feature in a real annuity. And certainly it’s a fair deal; as fair as investing in us —- the good ole US of A. Way to take one for the team. You are the proud largest owner of the nation’s debt. Larry does not want us to be team players though, he wants to cut us free at the cost of the community.

    First joke: Larry equates Social Security with Bernie Madoff. That’s so stupid it’s really not even funny. Bernie Madoff was a criminal that harmed many people. Social Security has never defrauded anyone Larry, and hinting that is does is a bogus yet obvious LIE, thank you Captain. Not even close enough the truth to be called spin.

    Let’s go where I agree with the Captain first: “Social Security needs responsible reform, but it will not happen as long as the irresponsible have the upper hand with the voters.” No duh once again. Of course, I agree. Being as frank as only Frank can be, Democrats, frankly, have their heads up their asses not to admit there must be change in Social Security. It’s malfeasance not to face that truth. There is no way around that truth. If you live longer, you will need more money. We all live longer. Why Democrats lie and Republicans cheat is beyond me. ITS JUST PLAIN OLD MATH. Even Larry almost understands it.

    It’s certainly a Captain Obvious moment that Social Security is not sustainable because outflows are higher than inflows and have been since about 2010. The good news is that our handling of covid assures that we will have far less outflows in coming years now that our covid response has killed off so many elders. Yea, covid response! Even our life expectancy has lowered during the Trump years which will be a boon to Social Security payouts. Upcoming year’s accounting should be tragically better, might even add a few years of coverage before we run out of funds. And yes, thanks to Biden and Trump on that — both could have done much better.

    “With Social Security about to belly up in a few years, “ Currently, at current estimates which WILL change, the fund is solvent into 2035 which is 12 years from now. Maybe that’s just a few years to folks pushing 90…. It’s tight but not “a few years” tight. That’s spin of a fear and loathing variety, it’s how Republicans get you to believe; scare you. Although on this ones the Dems are right with you in the fear and loathing rowboat. They may be pulling of different oars of fear, but they are pulling in the same direction of Republicans, fear and loathing for votes. Economic factors will determine any changes to how long the fund will last. This year’s report extended the interval by one year due to Biden’s hastening of the economic recovery (the fund’s words, not mine).

    At the current pace, we are running a 3.42% deficit, a percentage which is also down due to the Biden recovery.

    Not going to go through the rest of the financial manure being spread by “da author what b in charge,” it is clear we are running a deficit. Why? People are living longer is the main reason, less workers paying in is the other; the fact that SS did not account for this is the third, and Congress just yelling at each other over it is the last. This is not rocket science, this is a simple insurance or annuity sinking fund: you pay in, they invest, and then, if you live long enough, you collect. If you live long, you prosper, if you die young, thanks for your support contribution dollars. We have too much former, not enough of the latter :>). And the fund needs to estimate those factors and collect the necessary funds to sustain itself.

    The math answers are simple:
    1. Collect more (via payroll)
    2. Pay less (either across the board or means testing of various types)
    3. Pay later (older retirement age)

    NOTE that this does not change under Larry’s fractured fairy tale of finance. He smells a turn and his solution is to pass the turd from the Federal Government right into you pocket. One warm turd coming your way. Now you dumb fucks, Larry has made it your problem by lying to you about it being the solution and your savior.

    And on the three answers, feel free to mix, match, and merge. My recommendation is to use all three. And fuck France, bunch of pussies. Our illustrious leaders can hem and haw, they can try to use tax dollars to cover (I think they will need some impossible legislation for that), but if they try to privatize or move to self-funded accounts, I guarantee you, on average, will lose.
    FYI: at the same time, Medicare IS taken from the General Tax Fund, and it runs a deficit that’s 2 to 3 times that of Social Security. Fix that one first Larry. I know you already had this story in the can, probably use it once a year, but priorities man, priorities.
    Most of the rest of this article is utter bullshit, falling back on stupid Republican urban legends for the most part. I will cherry pick in a bit. Low hanging fruit, Larry should not run while holding numbers.

    I agree with Larry that Congress, both sides, are just using this for political fodder and not addressing this issue as our demise is over a decade away. It’s shameful from both sides. I, being a Democrat, am truly ashamed of my leaders on this one. Everyone of them I have heard thus far.

    Larry’s solution to transfer this pile of shit to your pocket is the worst solution ever imagined for this fund.

    I have listed the choices; our leaders just need to make some freaking decisions and every day they wait, the math just gets worse, and worse, and worse. Raise the retirement age while grandfathering folks close to it now, use means testing to lower benefit payouts to those less needy, and raise the tax using a graduated scale based on age.

    Problem solved given you estimated the future well and can do basic math (leave Larry out of that equation :>)

    Next story will be Larry explaining the math why waiting longer to collect Social Security will bring you profit. Yeah, right.

    • larry Horist

      Frank Stetson … Again you grossly misrepresent my position and completely and show ignorance of how a privatized system would work — especially the protections that keep it a safe investment with a much higher return on the investment. You claim that Social Security has a better profit record than theoretical private investors. If that was remotely true, we SS recipients would be getting monthly checks many times what we see today. SS us bit really an investment. It is a tax — and the check your receive is a budget item that operates essentially as a tax credit. You should spend more time looking more deeply at the actual privatization proposals instead of limiting your information to left-wing media reports.

      • Frank stetson

        How would you fund your scheme.

        • Tom

          Its been a long time since I dug into privatized SS schemes but I do remember not liking any of them. 1) People are not educated on investing and this has to happen before privatizing makes any sense. 2) Current SS recipients are paid from working folks. When you privatize, you take money out of SS. So what will make up the difference for those that are currently on SS and for which the government has made promises. Promises made must be promises kept if our government is to have any integrity. 3) Who will be picking the winners and losers? It was proposed that privatized funds would be set up and monitored by the government. Sounds like another chance for an SVB. Wasn’t the government supposed to be monitoring them? Government stinks at monitoring anything except election locations. 4) Critics say it would favor the rich at the expense of the poor, increase investment risks and costs, and require large additional expenditures on the transition. Who is going to pay those transition costs that will be in the $T??? This will involve increasing taxes, or cutting benefits, or increasing debt and a mix of the other two. Why not just allow the current system to invest in private assets? Here is a very good article on this topic at “”.

          • frank stetson

            Its been a long time since I dug into privatized SS schemes but I do remember not liking any of them. 1) spot on 2) they would grandfather. Don’t know how Larry would fund, but it will be math challenged, that’s for sure. The bigger problem is what happens to existing investments in Treasuries? That could really upset the balance of things. But only Larry can tell us what he is thinking, again. 3) this could be open market, or selected funds only. Again, without Larry’s input, we have not enough info. 4) All true. Except the government can never invest in business – too many conflicts to be workable. Government could not select funds either, again, too many conflicts.

      • frank stetson

        You are right, I am ignorant of any protections that you scheme provides. Please illuminate if you can. I looked, but did not see it, show me what I missed.

        ” If that was remotely true, we SS recipients would be getting monthly checks many times what we see today.” Social Security payments are not based on investment returns. Social Security decides the value of your checks, probably before you were born…… If there investment went up, you would not get more money. It’s an annuity with standard, consistent payments, not the lottery.

        I said “Americans often do not invest at the same guaranteed consistent profit level that Social Security invests at. PLUS, Social Security is guaranteed payments — self-managed are not guaranteed to ever pay even one cent and often have lower or even negative returns” You gobbledygooked something out of context, again again. Key words were consistent and guaranteed; your plan does not offer consistent or guarantied.

        In equities, we all know the magic 15% per year return if you play the entire market. If that we true, no one would invest in anything except the entire market; trust me that’s a coin toss, one I have tossed often. According to the experts, great investors get maybe 7%, a very good investor 5%. But none of that is guaranteed, none is an annuity for life, and IF you dare to do that, you can lose everything. Trust me, I have done that too.

        More important, no investor would solely do equities due to the risk; all good investors will diversify with all other investments, on average, having less returns than equities. For example, I am fairly conservative as an investor; my Mom was 100% CDs and that’s in my DNA. After doing close to 100 trades in 2021, I sold no stocks last year, and only bought a couple, mostly value stocks with 5% or better dividends. Bought a bunch of brokered stocks to skirt the FDIC cap; they have like 7% returns but harder to terminate early. I had diversified most out of equities into less risky things with less returns like CDs, muni’s and tax free instruments. Amazingly while equity investors are mostly down, I am puttering along at about 5% return because of diversification. Probably by the 3Q, I will diversify back to equities HOWEVER, no way am I getting that average DOW return of 15%, not even the great equity return of 7% , more like the good investor of 5%. That’s what I have seen as good enough for government work. FYI — within that are guaranteed returns on fixed assets as in I have my own personal safety net too.

        Most important is the point you missed: with a self-managed investment scheme loss is possible, but also total loss is possible. It is and never will be a safety net. And that’s the real difference. My investments can be lost, it’s survivable. My safety net can not be lost unless I lie to myself and it’s not a safety net.

        But the acid test is the 401Ks versus pensions. On average, pensions had a much better return that current 401Ks. Yes, that’s the average Joe against the Pro, but remember, you schmucks told us about defunding the pensions with the same crappolla your are spewing about investing yourself with your SS account, however you propose to fund it and protect it. Can’t wait to year that. When they do this, there will be losers who lose their safety net, and then what?

        “SS us bit really an investment. It is a tax — and the check your receive is a budget item that operates essentially as a tax credit. You should spend more time looking more deeply at the actual privatization proposals instead of limiting your information to left-wing media reports.” Can you try again. The first part of this looks like it was written by a drunk monkey. Not a clue how to decipher what you mean.

        Social Security starts as a payroll tax, not income tax, so yes it’s a tax. BUT, your employer also matches the tax, so is that still a tax to you? Not really. Then it goes into treasuries and for decades earns interest so when it comes out, it is some tax, some interest (revenue/profit). And unlike you said, there is no borrowing to pay SS checks — by law. cool one, thanks FDR. Again, how do you plan to fund your plan?

        But here’s the big one in all this: SS is a safety net: if you work, at retirement you have an annuity for life. Your plan is not a safety net until you explain the protections. IF citizens have your plan, it has to be funded by them — does it matter whether that’s a deposit or a tax? Money is money. OOOOOR are you hinting that the deposits are voluntary and thus it would not be a safety net.

    • Frank stetson

      Math challenged Stetson should have said $7.6T, not $7.6….

  5. frank stetson

    “ Social Security income is important and often critical to senior citizens – and it is lousy in terms of the Return on Investment (ROI). It is a losing investment.” Huckster Larry is pitching the same financial voodoo as Republicans touted about pensions versus 401Ks, again. It’s how Republicans convince you to take your own finances in your own hands toZZ do a better job than the government ever could. Same voodoo that convinced America to abandon pensions in lieu of self-managed 401K’s. Guess what, you lost money on that deal; pensions were, hands-down, the better financial answer for individuals, on average, in America.

    The bottom line: SS is a guarantied annuity with fixed payments to provide a safety net. Larry want to turn it into a self-managed investment fund that will not pay a consistent amount, in not guaranteed except for the fact that some people will lose everything. He is math-challenged to say differently.

    Social Security has three income sources, well really four.
    1. Tax receipts (ain’t enough to cover outflows, and thus the issue, it’s about 90% of receipts) at close to $1T
    2. Income taxes on benefits paid to higher-income beneficiaries, it’s about $40B a year or about 3.5%)
    3. Interest on investment (US government securities), it’s about $70B or 6.5%)

    And there’s a fourth revenue stream only mentioned in whispers — illegal alien payments… Within the tax receipts on income are those from illegal aliens who have a W2 filed, taxes withheld. Those little puppies go into the SS pound and are never adopted — illegals can’t get SS. We keep it, we keep it all. Estimated at about $7B in Social Security “profits” each year. Then there’s the interest on all that, we keep that too.

    You knew where this was going before Republican Larry opened his yap: “If you had put that money into safe blue-chip stocks, you would have been FAR better off. If Social Security was a privatized investment – with safeguards – your Social Security payments today would be up to eight to ten times greater. Imagine getting $18,000 per month instead of $1,800.” Again, the man can’t do math so he tosses a potential to garner TEN TIMES the amount you get today as red meat to your greed. OR if a deal looks too good to be true…..

    Yeah, you can do better, that’s the bait with Larry hoping you are as math challenged as he is. You will make TEN TIMES what you make today. Just like your 401Ks, how are they doing today? Wanna buy a bridge? This is the same unmitigated bullshit they tried to feed you on why you need the 401 instead of a pension. It was suck advice then, it is suck advice now from the team that manages finances so well that the last guy ran up 25% of our total national debt in just four years. One Republican guy, supported by all those other Republican guys, in four years, hits 25% of the total debt from 45 other guys, many who had eight years, not four. In four years, Team Republican, the financial spew of math challenged financial-farse Larry, borrowed 25% of our total of accumulated over 240 years. So, Republicans, Democrats and others ran up 75% of our debt in 235 years, Republican Trump who Larry endorses for these exact policies, did 25% in four years. Yeah, let’s trust his financial wherewithal.

    When it comes to performance between professionally managed pensions and self managed 401’s, pensions: “beat the pants off of 401(k) plans when it comes to performance.

    Towers Watson, the global human resources consultant, found that pension-style plans beat 401(k)-style offerings by nearly 3 percentage points in 2011, the latest study year. Pensions made investment returns of 2.74% while defined contribution plans lost money, banking -0.22%.

    It’s no fluke. Pension plans often beat 401(k) plans. Since 1995, Towers Watson found, defined benefit plans outperformed by 76 basis points annually (0.76%). The did so in nearly all of those years except years in which stocks boomed, such as 2009.

    Part of the reason is mutual fund fees. Mutual funds in the plans studied had weighted average expenses of 65 basis points in 2011, a drag which reduced overall returns by 31 basis points. Nearly half of the 401(k)-type plans were composed of mutual funds, compared to just 14% in the pension-style plans.

    “The spread between the two has been narrowing, and with many sponsors adjusting the asset allocation strategy of their DB plans to better match assets to liabilities, the disparity may diminish further in the future,” said Chris DeMeo, head of Investment, Americas, at Towers Watson.”

    Translation: Pension plans do a better job with less risk. The same is true for Social Security as proven, historically, again.

    • Tom

      I have been very happy with both my state pension plan and my DoD pension plan. And I must admit, I have done well with my 401K self-managed plan, but I have not done nearly “ten times”.

      You know, those 401K’s have been a target of interests rates. Seems like when they were initiated during Reagan, taxes on the withdrawals were around 4%. Not I think its much higher, somewhere around 15%. The theory was great to put money away pretax, long term, and not withdraw it until you are retired and your income is lower, thus you pay less taxes on the money. Very good idea. But they played with the tax rate so that its not the deal it used to be. And as you say, many Americans have their 401K plans loaded with mutual funds and associated fees. People like mutual funds because of diversification as well as being able to function daily life in cruise control mode and not watch your 401K. I must admit that I am a little like that but still have kept my 401K low on mutuals and higher on stocks.

      Unfortunately, I cannot comment on what Larry is thinking. I wish he would give us a link to one of those successful X10 plans so I can jump in! Here is where I as an Independent, may lean a bit on the liberal side. I think it is selfish for someone to know about these plans and know where they are but not tell us anything so we cannot hop in and enjoy those kind of benefits. Maybe Larry will share a couple of those X10 plans. I would like to read about them and maybe hop in!

      • frank stetson

        Not sure what you say about 401Ks; except for early withdrawals, I thought you were just taxed as income, whatever your income is at that time so like IRAs, the concept is you put the tax event to the future where it is estimated your rate will be naturally lower. Being over retirement age, hasn’t happened yet to me. With the Trump tax cut deductions cut, my rate is going up :>(

        I call mutuals where you let smart guys think for you, at least you hope they are smart. As far as expenses, I don’t care, I make my decision based on the bottom line. Most company plan 401ks are primarily mutuals I think; if they have a pure equity component, I have always found it more trouble than it’s worth. That’s one potential issue with Captain Obvious’ plan. One way to add protection and safety is to offer a set number of investment options managed by a fund administrator. This lowers risk but also potential rewards. Also adds cost. One issue I have with any fund administrator is that they have no skin in the game. If you go belly up, they go and find a new job. In the scenario I noted here, you would have the 401 team on top of mutual administrators — two levels of folks with zero responsibility for your success or failure.

        Financial markets are incredibly efficient and competitive. You pretty much get what you pay for even if the risk and reward appear magical, they really aren’t. They are efficient and, if not, someone will instantly offer one that is.

        Here’s the rub. SS designed to be a safety net, nothing more. It is not a multi-generation slush fund or even a single-generation one. It is a guaranteed payout for life. It never loses, and increases only for COLA. It’s survivable (I think you get the higher spouse amount, not an average). So, of course, the roi is low. As I said, it people are planning to live off SS, get a new plan. Otherwise plan to live off a safety net which is less than you want. That’s one math problem Larry manipulates you with. He keeps telling you: “look, you can make so much more if roll your safety net into higher risk, higher reward investments.” He’s right, you can, but you can also lose all of it. He has offered NO SAFETY NET except telling you there is one.

        My point is that if you have a diversified portfolio, and you should, SS is your safety net account. Most financial experts would tell you that makes perfect sense. Larry is finance challenged, so he won’t. Instead he advocates putting your safety net at higher risk for higher reward. I say, use the rest of your portfolio for that. IF all you have in your portfolio is SS; see discussion on safety net and how your retirement will not be grand if that’s all you got. Might need SNAP to get by……

        Anything else in your portfolio with probably have higher risk, higher reward, but all, including price, is adjusted by that. For example,

        CDs – lowest risk, lowest reward
        Brokered CDs, slighly more risk, and more reward
        Muni, tax free, lower risk, lower rward
        Bonds, adding risk and reward
        Mutuals, general more and more
        Value Stocks, more risk, more reward, but lower on both because dividends paid out
        Growth Stocks, highest risk, highest reward, little to no dividends.

        Yes, there are other options like treasuries, gold, real estate, —– but it all follows the same pattern. Point is that you basically get what you pay for in investments, risk and reward are pretty much adjusted in a highly competitive fashion because substitutes are so readily available. It’s an econ thing, I’m sure Larry get it: NOT :>)

        Larry is basically suggesting there is a free lunch, there isn’t. He acts like SS is your only investment element, it isn’t. He act like you can play the market and not lose, he is wrong. He says he has protection, if he does you will pay for it in less reward. He’s the one pitching the scam, the same ole story pitched by used car salesmen all the time.

        Here’s an interesting discussion with SS: the “system” tends to lean to the advice you should wait as long as you can before you file so you can make all that extra money. I say, chances are you will profit by taking SS ASAP unless you are 100% you can wait around ten years to realize extra dollars by waiting. This concept may yield a different response if you have a spouse, but as an individual, I would bet you would profit by taking it ASAP, mathematically and quality-of-life wise. There’s a SS discussion that might actually improve some lives.

        • Tom

          Yes I agree with your analysis. As far as advice on SS, I tell people to take it as soon as they are eligible. As a mathematician, I wrote equations for my situation at 62, 66&4months, and 70. The graphs of the equations all intersected at 83 years and 3 months which happens to be life expectancy pre-Covid.

  6. Tom

    Ok Larry, I just got done reading the article I referenced in my discussion on this blog. I have also read your discussion twice, and I have read all of Franks discussion as well.

    Let me start with a key statement from the “Conclusion” section of the document I wrote. “The debate over reforming or replacing Social Security should not begin with exaggerated claims about the imminent “bankruptcy” of the program, but with a rational assessment of the goals of a sensible retirement system and the success of Social Security in achieving them.

    1) The article points out that the current SS system is slanted towards the poor and needy, its a better deal for them than it is for middle and high wage earners. I would like it to stay this way, and it will not under privatization.

    2) In order for either private or public system to be successful, the key is to “raise investment” and at the same time “lower consumption”. This can be done by modest increase of say 1-2% tax increase while scrapping COLA adjustments for the next 20 years. And maybe split the tax increase with a modest increase in age to full maturity of maybe 1 year. So maybe 1% and 1 year and 20 years no COLA. Call it “Tom’s 1,1 & 20 plan”. Truthfully, I can easily give up 5% right now for 5 years, then give back another 5% starting 2028, and forget the COLA for me – they can save that too! We can do other forms of means testing as well, I am game. Present some sensible ones.

    3) SS system cost of administration is much less than if the total cost of administration for individual private plans were totaled. Truthfully I think this would become a hayday for financial investment firms, and some of those will be crooked! And then what will we do with those screwed by unsavory investment firms? At least now we have something we know we can count on, it just needs some adjustments.

    4) A person born like Larry, Tom, Frank, will have a ROI of about 2.1-2.7% Not the greatest and right now it will only be about 1.5 for next generations. But as in all investment, the lower the risk the lower the reward. But what are the goals for the system? Lift elderly poor! Safety and Reliability! Safety net. I like the very low risk system, and wish to pass it on in some form of being viable for the next 75 years. And lets get that job done now.

    5) My biggest fear is national debt to fund the transition. Any transition, even a partial transition is going to cause 2 to 3 decades of excessive government borrowing to maintain one system while establishing the other system, and will be accompanied by much sacrifice and lower standards of living for the poor and middle class. And this will erode average Joe American’s spending power and value of his or her or its money. This is not acceptable. But the wealthy and investment firms do not care as much about these classes of people.

    6) I followed the Bernie Madoff incident closely. He definitely got what he deserved except I do feel for all of those he screwed out of their livelihoods they should have been able to hang him naked and with a razor blade, give him one deep cut each. SS is not equal to a ponzi scheme in my mind. Ponzi’s rely on increased investors to feed the bottom (they are the originators and only ones that make money) and shield the losses from the view of the new investors at the top – and then it finally all crashes at once with big losses. That is not our public pension system – and referring our SS system to Madoff’s scheme is needless hyperbole and fear mongering. Our SS system relies on levels of savings via taxes and investments in bonds to exceed the level of expenditures so as too ensure a guaranteed income for all for life starting after age 62 currently. Right now, thanks to congressional needs to secure votes rather than secure the SS system we have a balance problem where there is not enough savings being taken in and there is too much expenditure side outflow. This can be very easily reversed and sustainability achieved once again!

    7) Frank is correct about your math skills. Try and stay away from the math dear friend. You say, “your Social Security payments today would be up to eight to ten times greater. Imagine getting $18,000 per month instead of $1,800.” This is patently false, but I do not blame you, the math may be a little hard to comprehend. Your figures indicate astronomical growth of “times 10” but the reality is the article talks about the ROI growth as being the difference between now retirees being 2.1% and future retirees in a privatized system being around 5-10% which is no where close to “times 10”.

    Maybe like our fathers who were known as the greatest generation for their volunteer service in WWII to defeat world tyranny, our generation can be known for its greatness by its ability to volunteer to sacrifice for future generations and pass off a great system to our children’s children and they will look at us with admiration for biting the bullet and saving it for all !!!!

    Larry, I hope you will read the article I referenced. Its very good. I think you will see where you have made quite a few errors, but millions of Americans are making the same errors in thinking – so you have much company. Unfortunately, Frank and I will not be among your company in this one.

    And this is the verdict from the Throne of Independence.

    • Frank stetson

      Nicely stated.

      I would add: and set up medicare the same way. Currently, it draws from grneral tax fund so we don’t even notice how out of whack it has become. It too should be a stand alone insurance account.

  7. frank stetson

    Let’s cut to the chase and simplify this.

    Even though he’s totally full of it, let’s give math-challenged, economically-brain-dead, Larry the benefit of the doubt and say: he nailed it. Social Security bad, Democrats bad.

    Or are they really that bad?

    First, were you better off without Social Security when you could invest your social security money ? According to statistics: no.

    Apparently, without being forced to save, without forcing business to pitch in and provide half your savings, you would spend it like a drunk sailor on shore leave, statistically speaking of course.

    Second, it might be invested better bringing in a better return, so here’s Larry’s plan: “If you had put that money into safe blue-chip stocks, you would have been FAR better off. If Social Security was a privatized investment – with safeguards – your Social Security payments today would be up to eight to ten times greater. Imagine getting $18,000 per month instead of $1,800.” His math-challenged words….

    Shit, who wouldn’t take some of that. Think I will buy even more than I currently have in SS……wowser whattttta deal.

    Except it’s the same dumbshit math-challenged, crapola they spewed about replacing your pension with a 401K and, as I have shown, the facts don’t bear that out. Historically now, pensions have better returns and far less risk than a 401K for the average American.

    What the hell is “privatized with safeguards?” One thing for sure — if there’s safeguards, the reward will be less. Guaranteed (except for the math-challenged who can’t compute that, but wouldn’t tell you anyways because it ruins Larry’s used car salesmen pitch).

    Larry proves it all when he commits: “Again you grossly misrepresent my position and completely and show ignorance of how a privatized system would work — especially the protections that keep it a safe investment with a much higher return on the investment.” You are right. I do not see how a “protected, safe” privatized system gives you a higher return. There is a cost to protected. There is a cost to “safe.” That’s why CD’s pay less than equities and your system, by your own definition, will pay less than the equities you use to say how much people will make.

    IOW — you are a math-challenged liar with little knowledge of how Social Security and the investment markets work. Here’s a clue: more safety, less return. More protection, less return. And since you can’t specify your offer, another secret of the used car salesman, you can’t say how much less. And therefore, you can’t say how much greater the ROI will be over Social Security.

    BUSTED for not adding up.

    • Tom

      Frank, I really think this whole SS sustainablity issue is taking the same course as so many congressional issue. Right now, there simply it is not the popular will of congress to do anything about it because there is at least ten years of time and nobody wants to blow their political career ten years early by suggesting changes to the system. I believe that when we get within a couple years of forced reductions, both parties in Congress will feel that the situation gives them adequate coverage to do what they know they should have done eight years earlier. But now they will have the political cover to do something without having to worry about voter retribution and they can say they saved it.

      Truth is they could start doing little things, incrementally now, that would total up to stabilizing the system in eight years, which is two years before the fund runs out. And, in ten years boomers will not be nearly as much of a problem. I study elderly trends. Right now, about 25% of the boomer generations is already six feet under – but nobody mentions this in all of the hype. In ten years from now, the youngest boomers (born in 1964) will be around 70 years of age. This means the oldest boomers will be 88 or so, which means only about 15% at most of them will be living, and most of their spouses will be gone too. Boomers like me born in the middle will be around 78-80, and many of us will be gone, about 25-35% of us remaining. All of this means if we can make minor adjustments to SS now to get the system past the boomer bulge, the system will gain strength. Behind us, the next gen behind us is small, only about 56 million, but the generation behind them is almost as big as the boomers, and they will all still be working!

      One of the issues I have is that the fear mongers always blame the problem on too many boomers living too long, but they never show the facts of how many boomers are actually still alive! In my high school class, middle boomers, almost exact middle, already 25% of us are six feet under! Just using my typical average American graduating boomer class, this means the number of us is not 76 million anymore, it is at best around 62 million or so. And in ten years we will be less than the generation behind us, and only around one-half of the generation behind them at best. And many of these generations will still be working for at least another year or two, so the 2.1 : 1 ratio of workers to retirees will increase to over 3 : 1 – but nobody wants to say anything about this. They just want to keep fear mongering to move us to privatization thus creating a hayday for big investment firms.

      So to me, this is all a lot of fear mongering being stimulated by investment / privatization friendly groups and politicians to scare us into thinking their way, when the truth is that a few minor modifications will get us past the boomers and secure the system for many years.

      Your thoughts on this thinking? Frank? Larry?

  8. frank stetson

    My thoughts are Larry is right on this one and both tribes are using this as a political wedge for election. Democrats are shamefully pitching Republicans as the devils that will privatize SS ending it’s usefulness. Republicans, according the Larry, if they gain all three branches, they will end it while letting you “roll your own” without adequate funding, safeguards, and protections. At least Larry can specify any of that besides saying “it will be there and you will make over ten times what you make today, trust me.”. Like Larry, the Republican tribes keeps saying it, we should take them at their words that if they set up their teepees in all three branched of government, they will make it so. A very compelling reason not to elect them so Democrats are saying it, Republicans are pushing back on it, and nothing gets done.

    I am pretty sure the fund administrators have included your math and statistics issues of aging in their estimates for the funds. At least they said they did. You can pull the annual report for 2022. As we have seen, these estimates are not perfect, things change, and the ten years will shift a little this way, a little that way, but is generally, directionally correct. We are running a deficit, the account is going down, and we need to stop the deficit and even rebuild the fund. As I noted, our life expectancy has just dropped a second year and I guarantee that will extend the fund. I am pretty sure they counted boomers, and their life expectancy, but did not include the covid effect, but are doing it as we speak. Matter of fact, they state they feel covid will have no effect, they focus on the economic recovery more than the death rate. However this year they have the second 1-year decrease to our life expectancy and I believe it will effect the estimates, in a good way for the fund. For people, not so much so. Think the next update is around July. Covid will save SS billions.

    One of the beautiful aspects of SS is it’s financial standalone nature that gives it it’s freestanding nature from other taxable items. By law, it’s hard for Congress to tweak it or beg, borrow or steal from it. It also allows math-midgets, financial-felons, and statistical stupidos like Larry to sound off thinking they understand it. Yet in his vast understanding of the nation’s finances, he completely misses that Social Security, as needing of help as it is, is not even close to the top priority, Medicare.

    Medicare, unlike SS, is not a freestanding fund, and is paid for from the General Tax Fund making it harder for the math challenged to investigate it. From last year’s administrator’s summary:

    “Social Security and Medicare both face long-term financing shortfalls under currently scheduled benefits and financing. Costs of both programs will grow faster than gross domestic product (GDP) through the mid2030s primarily due to the rapid aging of the U.S. population. Medicare costs will continue to grow faster than GDP through the late 2070s due to projected increases in the volume and intensity of services provided.”

    “The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled
    benefits on a timely basis until 2034, one year later than reported last year. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 77 percent of scheduled benefits.

    The Disability Insurance (DI) Trust Fund, which pays disability benefits, is no longer projected to be depleted within the 75-year projection period. By comparison, last year’s report projected that it would be able to pay scheduled benefits only until 2057.• The OASI and DI funds are separate entities under law. The report also presents information that combines the reserves of these two
    funds in order to illustrate the actuarial status of the Social Security program as a whole. The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2035, one year later than reported last year. At that time, the combined funds’ reserves will become depleted and continuing tax income will be sufficient to pay 80 percent of scheduled benefits.

    The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 90 percent of total scheduled benefits.

    The Supplementary Medical Insurance (SMI) Trust Fund is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs. Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries.

    For the sixth consecutive year, the Trustees are issuing a determination of projected excess general revenue Medicare funding, as is required by law whenever annual tax and premium revenues of the combined Medicare funds will be below 55 percent of projected combined annual outlays within the next 7 fiscal years. Under the law, two such consecutive determinations of projected excess general revenue constitute a “Medicare funding warning.” Under current law and the Trustees’ projections, such determinations and warnings will recur every year through the 75-year projection period.

    IOW — Social Security is in need of financial medical attention. This will not get better, without being addressed, in Larry’s dreamworld either. Medicare is in intensive care, it’s on the table, and we must operated ASAP or lose the patient. ALSO, we should set up Medicare Financing to be like Social Security, freestanding and standalone, if for no other reason, that math-challenged, economically stunted partisan hacks like Larry can more readily understand.

    Social Security is mostly a less-people working while living longer problem. Medicare is all that PLUS incredible medical market inflation, more lifesaving, and expensive treatments, and the ability to reach into the General Fund, take what you need, and never be seen like a financial thief in the night. Only wars are funded in an less scrutinized fashion. Even our largest budget item, Defense, has a harder time garnering extra, deficit, funding than Medicare.

    Between the two, Medicare is the top priority. Social Security has NEVER added to the nation’s deficit; Medicare does every year. Medicare’s deficit is over two times that of Social Security and it hits our budget every year. Social Security’s deficit is half that on Medicare and will NEVER hit our budget until 2034 at the current rate (which will change slightly, guaranteed). IOW — Larry’s priority is to fix the account that does not affect our budget and is running a deficit at 50% of the account that does affect our national budget because, financially, it is a freestanding account.

    Fixing Social Security will not effect our deficit but will cost us income, via increased taxes and, probably, benefits (retirement age and means testing). However, if we do what Larry wants, our debt will have to be financed either by private or foreign investors to replace the Social Security elements which will mean much higher and much riskier debt. It’s voodoo economics. The priority is to fix Medicare, and that will cost us both taxes and, potentially, benefits, but will actually lower our deficits meaning lower and less risky debt. Now there’s some financial math for you!

    • Tom

      I like your summary, well said! And I like teepees! And I always liked Reagan’s term “voodoo economics”. I agree that Medicare is the seriously troublesome program. Not sure how to control medical costs rising but I think a good start would be lowering prescription prices which Biden is attempting to do. VA already does this so I am pretty sure Biden can be successful on this one. But I also wonder if the issue is medical costs or legal costs within the medical system such as hospital and practitioner malpractice insurance, huge malpractice payouts, insurance company executive wages, etc. Seems like I remember years ago there was a push to limit awards for medical malpractice – but it failed. I also think going to block grants and provider incentives for HMOs and PPOs may help the kitty some. I still think a single payer system with an attached fund for malpractice insurance and limited payouts of successful cases is a better way to go. I think everyone should have to pay in to the system no matter what their income is, even the poor should have to pay at least $5 per month taken out of their SS or other benefits. And if we went to a single payer system we can unleash the medical insurance burden from industry which might make them more competitive. Businesses providing medical insurance is a legacy issue from FDR WWII era wage and price controls where industries siphoned talent from other companies by offering benefits, and medical insurance was the key benefit offered. Time to get rid of that whole legacy system (which was and still is adhoc) and do something that provides basic insurance for everyone, and a catastrophic fund for large medical problems. But we are always told by GOP folks that such a system is unsustainable, yet we always have money for big malpractice lawsuits, insurance fraud, and wars. Makes my head want to explode!

      • frank stetson

        One fix would be to make Medicare accounts free-standing like Social Security if for no other reason than to increase transparency of what’s happening. Then, since spending is larger than revenues, and since a spending fix is not readily apparent, you must raise taxes, lower benefits — at that level it’s simple math that even Larry can follow. The devil in the details on how to tax and how to adjust benefits. I would suggest just upping the taxes that exist today, but on the benefits side it’s age, means testing, and perhaps even coverages in terms of amounts and availability — that’s a sticky wicket to work through even if just one team.

        In terms of the medical markets, it’s not normal or rationale. There is no market-driven supply and demand, call it mostly “impulse” driven on the demand side and all sorts of fingers in the pot on the supply side from government to insurance because you even get to development and costs. What other market gives an entire demographic, the nonpaying, a free lunch at the expense of paying customers? Oh yeah, a free lunch at retail prices. And retail prices can be ten time or more what net prices are. I mean used car dealers have greater transparency in prices, and most certainly more price competition. The market is not only broken, but being not a normal supply and demand market, it can never be turned into one. When you are struck suddenly sick you go as close to home as you can and will pay any amount. Some diseases can be shopped, but often, it’s immediate car time.

        No matter how you go at it, attempting to fix the medical market will be complex, time consuming and frustrating.

        Give you a perfect example of how broken it is. I was on my business plan and paying through the nose. There were all sorts of restrictions including a $200 co-pay at ER which seems to make sense. Now Medicare pays all and I pay less for premiums, have very few copays, and for the first year, never saw a bill even though I was a frequent flyer with complications requiring a week in hospital for surgery. But I discovered something: you know how there comes a time to see the DR and you just know you will need blood work at another location, and maybe a scan at another location. I used to schedule, drive, get here done. But — with no copays, I just go to ER and can get blood and scans at one time, one place, the most expensive place on Earth but free to me, yippeeee! So that’s what I do. If I know there will be multiple tests required, often I just head to ER, suffer the wait, but get it all done at one place with a chap that will look at all results at one time too. That’s just totally broken to make that a better, low cost, solution to people like me — Medicare guys with supplemental insurance that STILL costs less than my old business plan. Totally broken.

        In terms of “the medical system,” I am, but did not want to be, with Bernie —- Medicare for all and let’s just be done with it. One payer means one power to fight them all. Perhaps that’s the only way.

        But Medicare is another issue from fixing the medical market . Actually an easier one. And once you set it up to be self-sustaining, free-standing, financial account for health insurance, believe me when I say that the cost elements of this terrible market will be brutally apparent rather than somewhat hidden as they are today. We don’t even really know how much deficit we hit every year, just hidden in all the federal tax stuff.

  9. Tom

    Hey Larry and Frank,

    I saw this on the SSA website today.

    The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security, but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits. You can see it at “”.

    • larry Horist

      Tom … So in the future to cover SS benefits, we will have to raise taxes incur debt — or cut benefits. And the benefits are not all that good in terms of ROI. And that is the analysis of the government which tends to make overly optimistic projections. Thanks for proving my point.

      • frank stetson

        Mr Horist, you would have claimed that anyway….and it didn’t.

        The SS guy did not prove your point.

    • frank stetson

      Tom, I don’t see anything new here. The date 2035 is the same, the funding level at that point, 75% is the same or close enough, people are aging and there’s not enough people paying in. The only strangeness is that he’s going out of his way to say it’s not because people are living longer. But living longer is a cause and many an actuarial will say that. This guy seems to be saying that the 1983 age-change covered that and now we need to cover the lack of incoming. Because he also claims “population aging” as an issue, but still discounts that they are aging LONGER too. That’s just a fact. And the actuarial change of 1983 may have muted it, but the reason is still there and will still be increasing once we gain the final solution with covid.

      Seems almost like spin, but perhaps in light of the fact that we are NOT LIVING LONGER after these past three years of covid, perhaps he’s spinning away from that recent factoid to retain pressure and focus on the 75% in 2035. Remember, these guys want to modify the system, they know every day we wait makes it worse, and he probably want to stop Rand Paul from screaming “but we are not living longer” based on what is an anomaly of the past three years due to covid.

      Matter of fact, as I have written, covid may be the biggest boon to the SS fund in recent years, even better than all the illegal alien dollars collected that will NEVER be paid out. I am surprised the covid effect has not already been noticed. Here’s a report on the dirty little secret Biden does not want you to know: Whatever was left of The Greatest Generation got polished off and we put a big boomer dent in too. And we cut two years off our life span, so far, which means two years of no funds needed for the earlier deaths.

      Doesn’t really matter, the fixes are the same in that we need to cover the 25%.

      His conclusion “Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits” may be true but he leaves out those important words: “and all it needs is an act of Congress.” To my way of thinking, funding by debt would defeat the financial beauty of the SS fund structure as standalone from the budget. Matter of fact, I say put on the big boy pants and set up Medicare the same way instead of auto-funding it via deficit from the general tax fund. That’s the patient on life support with no doctors attending.