The Social Security Debate Has Officially Begun

Republicans lay down the gauntlet

Ric Edelman: It's Wednesday, April 17th. On today's show, do we actually have a proposal for solving the Social Security crisis? You know, there is a social security crisis. You've been listening to my radio show or this podcast for years. I've been warning about this for decades and not a whole lot of people have been paying a whole lot of attention, sadly. Here's the situation. We collect every year from people who work in America, a Social Security tax. This tax is distributed to retirees. So, you as a worker pay into Social Security so they can pay that money out to retirees. The problem is we don't have enough people paying into Social Security compared to the number of people who are taking money out. 

There's a shortfall, a difference, a delta between the money going in and the money coming out. Where do they find the differential? If there's more money going out than is coming in, where do they get the difference? From the Social Security trust fund. This trust fund has been built up over the past half a century by the fact that in the old days we used to have plenty of money going into the system; we had more workers than retirees – that built up an excess, a surplus, which was put into the trust fund.  

But now the situation has reversed. We instead of having more workers than retirees, we now have more retirees than workers and that means we're dipping into the trust fund to make up the shortfall. The Social Security Administration says that by 2032 the trust fund will be depleted. And that means when that happens in about eight years, the only money the Social Security Administration will have to pay benefits to retirees is the money they're collecting from workers. 

And that is 24% less than they need for benefit payouts. You heard it right. Starting in 2032. All Social Security beneficiaries are going to get a 24% reduction in their Social Security checks, because that's all the money that will be available to pay them out. That's current law – under current law, the Social Security Administration is not allowed to borrow money. Under current law, it cannot raise the taxes. Under current law, it cannot reduce or delay benefits. This is the way it is, which makes it kind of ironic when President Biden said in the State of the Union address this year, as well as last year, that he's not going to touch Social Security. 

What he meant by that is he doesn't want to cut anybody's benefits, but what he in effect actually is saying by not touching Social Security, he's guaranteeing a 24% benefit cut. I don't think that's what he meant or had in mind, but that's the way that it is. One of my gripes is that nobody in Congress or in the White House, and I'm not just talking about the current president, I mean the current president as well as every prior president going all the way back to Reagan, he's the last guy who dealt with this... nobody, lately, in Congress or the White House has offered any solution to this problem. And who can blame them? You don't get elected by promising to cut benefits or raise taxes.  

But maybe I'm wrong about this, because now suddenly we do have some action. I have to admit I'm surprised by it, because after all, this is an election year. So kudos to the Republican Study Committee. That committee consists of 80% of all the Republican members of the House of Representatives. It's the largest caucus in Congress, and the Republican Study Committee has just called for an increase in the Social Security retirement age, they are proposing that the eligibility age for you to get benefits, that it be tied to your life expectancy. 

They're also calling for reduced benefits for top earners who aren't near retirement, and a phase out of benefits for the country's highest earners. This is going to become an election issue, and there's going to be a fight with President Biden over it. Remember, in his State of the Union, he said, quote, “If anyone here tries to cut Social Security, Medicare, or raise the retirement age, I will stop you.” 

Yikes. It's worth noting that Donald Trump has not offered any declarative position on this issue. Bottom line, the Republican Study Committee wants to cut spending on Social Security by one and a half trillion dollars over the next decade. They say this isn't really cuts because it won't affect anybody who is in or near retirement. 

So, the fight is officially on. I fully support the concept of increasing the age for when you can become eligible for Social Security retirement benefits for people who are right now far from retirement. You know, people in their twenties, thirties, forties. Let's not upend the expectations that people near retirement have about when they're going to be eligible to start. 

And let's not harm anybody already retired. But if you're 10, 20, 30, 40 years away from age 62, clearly we need to make some changes. The system was never designed to pay benefits to so many people for so many years or of so much money. Remember when they created the system back in 1935, you were supposed to retire at 62 and be dead at 65. Not retire at 65 and be alive at 105. The system was never designed to pay so much money, and so strong a level of benefit to so many people for so many years, it's simply unaffordable. And if we don't fix it, then there won't be any money for anybody at all. So, we clearly have to make some changes. Higher taxes, as well as delays in benefits. And reduction in benefits for the wealthiest people, so that the poorest can get the benefits they need. I mean, Does Warren Buffett really need his Social Security check? I don't think so. And we need to recognize that fixing Social Security is both essential and unavoidable. 

Like I said, if we do nothing, then all benefits for all retirees, including the current ones, those benefits are going to get cut 24% starting in about eight years. We cannot be in denial about this. You might not want to watch as you see the truck barreling down the highway straight at you. But just because you're not looking doesn't mean it's not going to smash right into you. 

So, kudos to the Republican Study Committee for getting this debate started. I've been begging Congress and the White House to start these conversations for years, and I'm thrilled that now, finally, those conversations are going to happen. The fight's going to be ugly, but it will, in the end, lead to a compromise. That's how politics is supposed to work.  

On tomorrow's show, you think older Americans are unhappy with their money? Wait ‘til do you hear of an affliction among young adults – money dysmorphia. 

----- 

Subscribe to podcast updates: https://form.jotform.com/223614751580152 

Ask Ric: https://www.thetayf.com/pages/ask-ric 

----- 

Links from today’s show: 

Why Bitcoin Will Rise to $420,000 (FREE Webinar!) - REGISTER HERE: https://dacfp.com/webinar-why-bitcoin-will-rise-to-420000/  

----- 

Follow Ric on social media: 

Facebook: https://www.facebook.com/RicEdelman 

Instagram: https://www.instagram.com/ric_edelman/ 

LinkedIn: https://www.linkedin.com/in/ricedelman/ 

X: https://twitter.com/ricedelman 

YouTube: https://www.youtube.com/@RicEdelman 

----- 

Brought to you by: 

Invesco QQQ: https://www.invesco.com/qqq-etf/en/home.html 

Schwab: https://www.schwab.com/ 

Disclosure page: https://www.thetayf.com/pages/sponsorship-disclosure-fee 

-----