Why Medicare and Social Security Funding Puts Young Workers At Risk

Policy expert Marc Goldwein reveals how the federal budget is hurting the financial future of tens of millions of Americans

Ric Edelman: It's Friday, November 3rd. Coming up on today's show, you know that the Social Security Trust Fund is going broke. But did you also know that the Medicare trust fund is going broke? And there's another trust fund, a third one that's also going broke, not only sooner, but worse. We're going to talk about all three of these on today's show.

I've been warning you about Alzheimer's disease. It's the world's number one health care crisis in the US. About 10% of adults who are over 65 have some form of dementia. Another 22% have MCI - Mild Cognitive Impairment. Alzheimer's disease is the most common form of dementia, and I bet you know someone who has it, or someone who's died from it because it's 100% fatal. And you know the symptoms. People with Alzheimer's disease are disoriented. They have memory loss. They struggle to find the right words in conversation. They often wander. They just walk out the front door that leads to a frantic search before they get hurt. Some patients become impulsive, or they get tremors, or they suffer changes in their sleep patterns. They often hallucinate. They don't even recognize their spouse or their children.

In some counties, social workers won't enter a house where Alzheimer's patients reside because these patients are known to be violent or threatening. Alzheimer's patients can turn on a stove. They can drive a car. They can pick up a firearm. As a society, we're still struggling to deal with all of this. 

If you have a family member with Alzheimer's, you know the incredible challenges. Most care is provided by family members. And the emotional, physical, financial cost is often devastating. And that's not the worst of it. And a lot of cases, a person with Alzheimer's loses awareness about the world. They no longer feel shame or guilt about violating social rules.

So what happens when somebody with Alzheimer's commits a crime, and they do a lot, everything from public urination to traffic violations, sexual advances, trespassing to more serious stuff like shoplifting or assault. The FBI says a tiny 2/10 of 1% of the people over 65 commit crime. But for people with dementia, 9% of them commit crimes. And when the police arrest somebody who they think has Alzheimer's, all they can do is either take him to jail or the emergency room. There's nowhere else to take them. And either of those choices can be dangerous to the patient, because they're finding themselves alone in a strange place, with their caregiver nowhere in sight.

When somebody with Alzheimer's is convicted of a crime, they go to prison. By 2030, a third of the national prison population will be people over the age of 55. Is that how we're going to define long-term care facilities of the future for Alzheimer's prison cells? And if you are the victim of a crime committed by somebody with Alzheimer's, are you going to want to prosecute? And what happens if you don't?

These are big questions. I don't have any answers. 

But to find these answers, we've got to start asking these questions. And now you know one reason why Jean and I are so heavily engaged in the fight against Alzheimer's disease, the number one health care crisis in the world. We've got to defeat it. Until then, you need to prepare yourself and your family as best you can.

And as a financial advisor, you need to make sure you're talking to your clients about this so they can protect themselves and their families as best they can, starting with long-term care insurance. The money that these policies provide can make all the difference in their families future financial security.

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ETFs and Year-end Tax Planning

This is a show about your future, and usually I'm talking about your long-term future, like Alzheimer's. But today I want to talk with you about your short-term future because the end of the year is coming up. If you act now or soon anyway, you're going to have some opportunities to lower your taxes this year. We don't always get these opportunities, so I wanted to take a minute, well, a couple of minutes, to tell you about them.

There are two things here. First, capital gains distributions. Second tax loss harvesting. If you handle both of these the right way, you can save a lot of money in taxes for your clients. A lot of financial advisors are new to this. So let me explain what these are and how they work.

It's all about mutual funds. You own them. Lots of advisors recommend them to clients. There is $16 trillion in mutual funds. They are the most popular investment vehicles in the world. They're simple and easy to use. They're affordable. It's easy to build a diversified portfolio with them. That's why they're so popular.

But there's a detail here you might not know. When you buy shares of a fund, the fund manager takes your money and buys whatever they're supposed to buy; stocks for a stock fund, bonds for a bond fund. During the year, the fund manager might sell some of those stocks or bonds they hold and use the money to buy different stocks or bonds.

Now, when the fund sells some of what they owned, they're selling for either a profit or a loss, right? They either made money or they lost money on that deal. If they're selling for a profit, they're creating a capital gain for tax purposes. And by the end of the year, they have to distribute those capital gains to the owners of the fund, the shareholders. That means your clients have to pay taxes on their capital gain distributions.

So even if your clients didn't sell any of their shares of their mutual funds during the year, they could end up owing taxes to the IRS anyway. Last year, six out of ten US stock funds made capital gain distributions to their shareholders. Some of them paid out as much as 30% of the value of the fund. That's a whopping tax bill. The average distribution is about 5%, and this happens every year in December. It's going to happen again this December.

So what you need to do is stop recommending to clients that they buy mutual funds, because mutual funds spit out capital gain distributions every year.

Instead, you ought to be using ETFs, exchange traded funds. These are a different version of a fund world and they are simply more tax efficient. At Invesco, for example, they've got 193 ETFs that haven't paid any capital gain distributions in the last five years. And some of them, like the Invesco Nasdaq 100 ETF or the Invesco S&P 500 Equal Weight ETF, or the Invesco S&P 500 Pure Value ETF. They have never paid a capital gain distribution, ever.

Think about it. How can you explain to a client why you've recommended to them a mutual fund that forces them to pay taxes every year, when they can own a similar investment that doesn't force them to pay taxes. Look, I know now that you were in those funds. You don't want to tell your clients to sell them, because that would force them to pay taxes on all their capital gains.

But here's a way you can get to that goal. And it's thanks to our second topic, tax-loss harvesting. 2023 -let's be obvious here, it's proving to be a bummer of a year for investors. The stock market is flat. Lots of mutual funds and ETFs have posted losses for the year. So here's what you do. 

You sell the shares of your funds that have losses in them, and you use the losses to offset the gains that they have in other investments. They can even use the losses to offset ordinary income. This is called tax-loss harvesting. All you need to do is identify which shares have gone down in value and sell them. You can use losses to offset gains so you don't pay taxes on those gains. And if you have more losses than gains, you can use up to $3,000 in net losses to offset taxes on your ordinary income. And if you have more than three grand in losses, you can use them in future years to offset future taxes.

But you're not done yet. Here's the good part. When you sell shares of an investment, you're not allowed to rebuy them for 30 days. If you do, you can't take the loss on your tax return. So instead of rebuying the shares you just sold, you buy new shares of a different investment. And here's the cool thing, the new investment can be very similar to the old investment. It just can't be identical. So this is your opportunity to get rid of mutual fund shares that have a loss, that are paying capital gains distributions every year. And you can replace them with ETF shares that don't pay capital gain distributions annually.

At Invesco, for example, they've got more than 200 ETF strategies across all asset classes that you can use, and 99% of them have not made a capital gain distribution in the last five years. 

Invesco has written two really good articles on tax-loss harvesting and capital gains distributions. The links to them both are in the show notes. Read them now and start talking with your clients about these  topics right now. You can save them a lot of money when they're invested in a down year.

And if you're an investor, talk with your financial advisor now about year-end tax saving strategies, because the holiday season is fast approaching and everybody always gets busy with year-end. So do it now before the holiday season starts. Before you get distracted, read the two articles from Invesco at invesco.com. Like I said, the link is in the show notes.

The Hamas war against Israel is not an abstract headline. It's about real people fighting for their lives and Israel's very existence. It's not just about Israelis. This is a deeply personal fight for Americans, too. One such story comes from JB, a financial advisor with Edelman Financial who has disrupted his own life to make a difference in Israel's fight for survival. On Monday, in a special episode of my podcast, I'll be sharing JB's story, a moving testament to courage and commitment. Join me in support for JB and our support for Israel.

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Why Medicare and Social Security Funding Puts Young Workers At Risk

Exclusive Interview: Policy expert Marc Goldwein reveals how the federal budget is hurting the financial future of tens of millions of Americans

Ric Edelman: You know, we're aware of the challenges that Social Security is facing. I've talked about it often here on this program for years, frankly, to try to raise awareness of the fact that the Social Security Trust Fund is going broke. We're going to talk a little bit about that. But that's not the only problem that we have in this area. And I want to make sure you're really aware of what's going on with the federal budget and the nature of our federal debt, and to help us go through that conversation. I'm very happy to bring on to the program. Marc Goldwein. He is the senior policy director at the Committee for a Responsible Federal Budget. Marc, welcome to the program. 

Marc Goldwein: Well, thank you so much for having me. 

Ric Edelman: Marc is a former senior budget analyst for the Joint Select Committee on Deficit Reduction. He's conducted research for the GAO, the World Bank and the Social Security Administration, and he's currently teaching economics at Johns Hopkins University, where, Marc, I'm told you received the Excellence in Teaching Award. 

Marc Goldwein: Yeah, about a decade ago, but I did. 

Ric Edelman: Well, I'm excited that we're going to have you here to chat with us, because I think people need some excellent teaching in this area. We're going to begin by talking about the Social Security Trust Fund. I've talked about this a lot on the program, but it is still scaring me at how many folks are not aware of what's going on. So give us a summary of the status of the Social Security Trust Fund and what we're facing roughly ten years from now. 

Marc Goldwein: As you said, we have about a decade. The way Social Security works is people pay their payroll taxes. That goes to pay current benefits. And if there's extra money that goes in the trust fund right now, those benefit payments are more than the payroll taxes coming in. And so we're taking money out of the trust fund. By 2033, The old age trust fund will have been completely depleted. At that point, we can still pay benefits, but we can only pay based on revenue coming in, which means that every single person on the program. It doesn't matter if you're 62 or 92, doesn't matter if you're low-income or high-income. Every single person will get an across the board 23% benefit cut. 

Ric Edelman: And this problem has developed because we have retirees who, quite frankly, refuse to die. They're living longer and longer, and there's therefore more of them than ever. And we don't have enough workers paying taxes into the trust fund to be able to meet the demand that those workers are expecting from their Social Security benefits. 

Marc Goldwein: That's right. Our working age population is pretty much staying flat, and that mainly has to do with the fertility side of things. Each couple of adults is only having a couple of kids, but at the same time, previous generations much more, much larger, are entering retirement. The baby boomer population is mostly in retirement now, and so costs are going up and they are not going to come back down. 

Ric Edelman: So my generation is creating a problem for your generation. 

Marc Goldwein: Yeah. We don't appreciate it. And my daughter's generation as well. 

Ric Edelman: Now this is a train wreck we all see coming. And normally people don't get hit by trains they see coming. They get out of the way; they do something about it. So we see this as coming. We know that we aren't putting enough money into the trust fund relative to the requirements needed by today's retirees, so that gives Congress plenty of opportunity to fix it. They know the problem is coming. So is Congress working on fixing it, and if so, how are they proposing to solve the problem? 

Marc Goldwein: Yeah. Not really. Look, in the real world you get off the train tracks just from the idea the train is coming, right? Maybe when you see it in the distance in Washington world, you jump right as the train is about to hit you, you jump out of the way. And I think that's the most likely scenario. But the problem is, sometimes your foot gets stuck, to take this metaphor a little bit too far. What we saw last time there was real financial troubles in 1983. We took this to the edge. In fact, we took it past to the edge. We were borrowing from Medicare for a bit. If we do that again in 2033, the size of the adjustment might have to be so large that Congress can't agree to it. And in that case, I think we really could see this 23% cut, or alternatively, some massive borrowing from general revenue that would totally undermine the current structure of Social Security. 

Ric Edelman: And it's worth elaborating on why Congress waits until the train is imminently upon them. It's because of political expediency. The only way Congress can fix the problem, tell me if I'm wrong, Marc, is to either raise the taxes that workers are paying, nobody likes to pay more taxes, or reduce the benefits that retirees are receiving, and nobody likes to receive less. So they have to come up with a combination of one of those two, right? 

Marc Goldwein: That's right. And look, it's always hard to tell people your benefits are going to be lower  than we said or your taxes are going to be higher. But the partisan politics, the special interest politics has made it even harder because they've turned they've demagogued this program to such a degree that a slight. Change in the growth rate going forward is the equivalent of putting grandma, you know, on a cat food diet. 

Ric Edelman: Goodness gracious. And so this is why Congress isn't really excited about the idea of fixing the problem, because nobody gets elected by raising taxes or cutting benefits. So they'd rather defer, delay, ignore the issue until they have no choice. And that's your metaphor of jumping off the tracks just as the train's about to arrive. And that's kind of the problem. And it's kind of unfortunate, because if Congress is the engineer operating that train and they were to act now to fix it, they could slowly put the brakes on. In other words, you could have a small tax increase annually over the next decade as opposed to a massive tax increase in a decade. So if they were to act today, it would be a lot easier to solve. But their failure or unwillingness to do so means it's going to be a pretty significant pain point in a decade, right? 

Marc Goldwein: That's right. Let me give you sort of an example. In 2010, I worked on the Simpson-Bowles fiscal commission, and we proposed, I think, a very reasonable mix of tax and benefit changes that we phased in between 2010 and 2050. So over a 40-year period, that gives people plenty of time to plan and adjust. If we were to enact the same plan today. You'd have to phase it in over about eight years. If we were to wait until 2033, even immediate implementation of that plan would not be enough to avoid insolvency. You'd have to go further than that plan because there just isn't the running room. 

Ric Edelman: So are you suggesting that from a practical, realistic expectation, massive pain is unavoidable in 2033?

Marc Goldwein: I don't think it's unavoidable, but I think it's unavoidable without doing some games. I think the way they'll avoid the massive pain if they can is by borrowing from general revenue, hopefully temporarily, but possibly permanently. 

Ric Edelman: And if they borrow from general revenue, that means that money is not available for other government spending that it otherwise would have been used for. Which means you're either going to have to cut those other government programs or increase taxes and revenues to be able to sustain those programs. If you're robbing Peter to pay Paul, you've got to reimburse Peter, right? 

Marc Goldwein: That's right. This is not a free lunch. It's a shell game. But that shell game may prove easier than the type of super abrupt tax increases or benefit reductions that we'd need. In fact, I wouldn't be surprised if we see both very painful and abrupt tax increases and benefit cuts and some of the shell game just to get us through the period. 

Ric Edelman: Okay, so if everybody isn't freaking out enough over what's going to happen over the next decade to Social Security specifically and the broader federal budget as a result of this overall, let's move on now to Medicare, because Medicare is facing a very similar problem and it's actually going to occur faster. So talk to us about what's happening to the Medicare Hospital Insurance Trust Fund. 

Marc Goldwein: Right. So I think it's important to understand there are a few different parts of Medicare, most of Medicare Part B and D, which covers your drugs and your doctor's appointments and things like that is not covered through a standard trust fund. It's part of the general federal budget, and it is growing way too fast, and it's leading to very high deficits, but it doesn't have a solvency issue. Then there's Medicare Part A, that's hospital insurance that does look a lot like Social Security. And that Hospital Insurance Trust Fund is projected to run out of money around 2030, maybe 2031, maybe 2028, maybe 2032 depends on health care costs. But within eight years or so, that's going to be out of money. At that point, the law says spending has to be cut across the board about 11%. But it's not like a Social Security check that you can just slice it, because these aren't payments to beneficiaries, they're payments to hospitals. And if we discontinue those payments, hospitals aren't going to want to serve Medicare patients. And so what we could see is huge disruptions in access to care. 

Ric Edelman: And the amount of the cut you're projecting. You mentioned in Social Security, the cut there is projected to be 23%. What's the projected cut in Medicare? 

Marc Goldwein: Yeah. So the projected cut is about half that, about 11%. But as I said, you can't just slice that cut from the beneficiary. And so likely the practical result will be of reduced access to health care. 

Ric Edelman: Now you at the Committee for a Responsible Federal Budget have come up with a list of ten ways that we can solve this problem. Give me an idea of some of those potential solutions. 

Marc Goldwein: Sure. So as with Social Security, you have your revenue options and you have your spending options. But unlike Social Security, there's actually ways that we can save money that don't really much. Affects the beneficiary. For example, we currently overpay skilled nursing facilities and other post-acute care like nursing home type facilities. We pay them more than their value. Medpac, which is the official expert on recommending payment policy, has said this. Year after year. So just cutting back that payment a little bit to where it's supposed to be would save some money. As another example, there's this private alternative to Medicare called Medicare Advantage. In many ways, it's more efficient than Medicare. It's more advantageous for a lot of beneficiaries than Medicare, but it costs the federal government far more money because basically, because of the way that they're coding their beneficiaries, they're sort of cheating the federal government out of more money. So. If a program is more efficient than Medicare, it should be saving us money, not costing us money. And just by cutting back on some of that excess, we can save money for the trust fund. On the revenue side, Medicare is funded through a payroll tax. One idea I think makes sense is health insurance costs should not be deductible from that Medicare payroll tax, at least not on the employer side. And if you got rid of that deduction on the employer side, not only would it raise money for the trust fund, it would put a tiny bit of downward pressure on overall health care cost growth, which would be good for our long-term budget and household budgets as well. 

Ric Edelman: So clearly, there's a lot of thought going into this. Are we finding, however, any different attitude in Congress about their willingness to deal with the Medicare Trust Fund problem? We know they're not dealing with the Social Security Trust Fund problem, but are they a little more willing to work on Medicare? 

Marc Goldwein: I do think there's more interest in in Medicare. Look, they still want to demagogue it wherever they can beat each other on the head. But if you look back at the Trump budgets and the Obama budgets, there's actually a ton of overlap in the types of policies they support. Some of those policies were in Elizabeth Warren's “Medicare for all” plan, and then they were in an Op-ed put forward by [former House Speaker] Newt Gingrich and [former Louisiana Governor] Bobby Jindal. So I think there actually is much more bipartisan interest on getting Medicare costs under control. The problem is, even though there's bipartisan interest, the parties don't seem to want to work together yet, and they will have to work together to actually pass these into law. 

Ric Edelman: Well, it sounds at least a little more hopeful from the way you're describing it. So far, Marc, we've talked about the Social Security Trust Fund going broke in ten years, the Medicare Trust Fund going broke and perhaps as little as eight years. So we've got retirement, we've got health care, and we've got one more to talk about with Marc Goldwein. He is the senior policy director at the Committee for a Responsible Federal Budget. In addition to retirement and health care, we've got highways. There is a Highway Trust Fund, and you're projecting that this is going to be insolvent in the next five years. Talk about what's going on there. 

Marc Goldwein: Right. So the Highway Trust Fund is generally funded out of the gasoline tax. There are two problems with that, maybe three problems. The first is we haven't raised the gas tax in nominal dollars since 1990. And so inflation has eroded away the value of the gas tax. Meanwhile, we have continued to grow in highway spending with inflation. The second problem is in recent infrastructure bill. And other times we've actually increased highway spending well above inflation and without any revenue increase to accompany it. And then the third problem, which is good for the environment but bad for the trust fund, is we're moving towards electric cars and towards more fuel-efficient cars. And so that means that gas tax revenue is probably going to start declining, maybe declining pretty substantially.

Ric Edelman: Think about that. Because people aren't driving as many miles and they're getting more miles per gallon, which means they're not buying as much gas. And if you buy less gas, you pay less in gas taxes. So that's a really interesting conundrum, that because we're doing such a good job in improving the environment, we're actually harming the revenue stream of the trust fund for highways. 

Marc Goldwein: That's right. And the recent Inflation Reduction Act has these huge tax credits for electric vehicles. Electric vehicles don't use any gasoline. Right, so they're not paying any gas tax. So it's a problem. And look, I think that experts have studied this and they kind of all agree the most sensible solution would be to move from the gas tax to some kind of vehicle mileage fee. I understand, like the politics of that is hard for individuals. You could focus it on the shipping companies because so much of the highway wear and tear isn't from your sedan. It's from these huge trucks. And so having a vehicle mileage fee focused on freight could make a big difference. But again, there's the problem with the political will. 

Ric Edelman: Understandably so, because again, nobody likes the idea of raising taxes, let alone use fees, which is what a highway tax specifically is. But you mentioned that the current rate of spending of the Highway Trust Fund, it's going to be insolvent by 2028. And when that happens, if Congress does not intervene, how much of spending on highways is going to have to be reduced? You said it was a 23% cut for Social Security and 11% cut for Medicare. What's the cut going to be for highway funding? 

Marc Goldwein: So the highway is the most underfunded of the three. It would be about a 50% cut. And as a practical matter, what would have to happen is you'd have to stop all projects, wait for money to come in, and then once they were finally able to restart projects, they'd only be able to restart them at about half of the rate that they would be going prior to 2028. So there's no way that can happen. We're either going to borrow from general revenue or do something smart, like add in this vehicle mileage fee. 

Ric Edelman: But if Congress does nothing for these three issues but borrow from the general revenue, that simply means they're going to have to cut the funding for other areas, education, defense, you name it. That's not going to really solve any problem. That's again, Peter and Paul. And so that doesn't really solve a thing does it? 

Marc Goldwein: No, that's exactly right. Now we’re seeing the consequences of huge amounts of borrowing at once with this high inflation. But even as that inflation abates, debt is projected to hit a record level within five years, higher than even after World War Two. And it keep rising unsustainably. That's going to lead to record high interest costs, highest in our history. It's going to slow the growth of the economy over time. And it's going to, as you said, leave less room for things that we might want to care about for the future, whether it's investing in kids, whether it's welfare programs to support needy and hungry families, whether it's lower taxes, whether it's a strong national defense, every dollar that's going to interest is a dollar that can't be spent on all of those other important priorities. 

Ric Edelman: Regarding the Highway Trust Fund, you have potential solutions that you think could solve this problem. Talk about a few of those. 

Marc Goldwein: Yeah. So look, in the near term we can raise the gas tax. I think that was a sensible thing to do ten years ago, indexed to inflation At this point, at the speed that I think we're moving towards electric vehicles, that really can only be a Band-Aid. At the end of the day, we're going have to solve this mostly by finding a new revenue source. I think the best idea is that vehicle mileage fee, but we could look to a broader carbon tax, for example. That would bias a lot of time. We also should spend carefully. I mean, look, infrastructure is good for the economy, but not all infrastructure is worth the cost benefit analysis. And we increased highway spending a lot in the recent bill. So taking a careful look at how we're spending, where we can cut back, where we can ask the states to contribute more. The states, by the way, are all running huge surpluses at this point. That all makes sense too. 

Ric Edelman: Let me go back and ask you about the federal gas tax itself. Correct me if I'm wrong. The federal gas tax is a dollar amount. You pay a certain number of pennies per gallon, as opposed to it being a percentage of the price of gas. Is that correct? 

Marc Goldwein: That's exactly right. So one thing you could do, like we talk about indexing it to inflation. So at least it keeps up with inflation. One way you could do that without saying you're doing that is to make it a percent of the total gas costs. The problem with that is gas so volatile that it wouldn't give you a steady stream of money into the trust fund. You could do that if you had a big cushion. But unfortunately, we don't have a big cushion right now. 

Ric Edelman: And this is why the Highway Trust Fund has such a different situation than, say, the Social Security Trust Fund, because that tax revenue is a percentage of income. And therefore, as incomes rise, so does theoretically the tax up to the cap, but with the highway tax, because it is a flat dollar amount or a certain pennies per gallon, as you said, it hasn't been increased in 30 years. And so it's inflation has severely eroded it. That's a key reason why we're in this dilemma. 

Marc Goldwein: That's right. Look, $0.18 is worth a lot less now than it was in 1990. In fact, it's worth a lot less now than it was in 2019. 

Ric Edelman: You spend a lot of time, Marc, and the overall organization, the Committee for a Responsible Federal Budget, you spend a lot of time interacting with members of Congress. What is their reaction when you go talking with them and when you do, are you generally telling them that due to these problems, they've got to cut spending? Or do you tell them that they've got to increase taxes? What is it you're telling them, and what's their reaction when they talk with you? 

Marc Goldwein: I think these problems are large enough that we have to do both. We're going to have to cut spending or cut spending growth, and we're going to increase taxes. And in private, I think most members of Congress actually understand that. You'd be surprised in public as well, how many Republicans that have taken this no new taxes pledge view, the gas tax or the Social Security tax is different because these are contributions into a trust fund. They're not taxes to pay for new spending. And so I do think there's a broad understanding taxes are going to be part of the solution. I think among Democrats there's a broad but sadly waning understanding that benefit changes are going to be part of the solution. I think that understanding was stronger ten years ago than it is today. I think a lot of them fool themselves into this idea that we can actually expand benefits even though their preferred tax, you know, raising the tax max above $400,000 wouldn't even get a solvency, let alone money to expand benefits. But I do think that among the serious ones, there's an understanding that there's going to have to be a compromise here. 

And I think everybody understands health care costs are too high and that there are win-wins where we can lower cost overall through efficiencies. But then the politics comes into play. And look, it's certainly better near-term electoral politics to just beat each other over the head over and over again by saying, this guy's going to cut Social Security, that guy's going to cut Social Security. In fact, you know, the current president and the last president have both said they're not going to touch Social Security, which is a complete abdication of leadership, by the way, from both Presidents Biden and President Trump, to say, we're not going to touch Social Security when it's only ten years from insolvency. But they think that's good politics. I think they probably are right in the very near term. But I'll tell you something. Nobody that voted for the 1983 reforms, which included higher taxes and lower benefits, lost their election as a result. I think when you can actually show that you're solving a problem, the electorate, the electric appreciates it. 

Ric Edelman: Yeah, I think we're all more rational, more understanding, more realistic than sometimes politicians give us credit for. And I think you're right. I'm also very encouraged by your comments that we have a three-step process, and we seem to be two steps along the way. First is awareness. There seems to be very clear awareness on Capitol Hill of these problems. That's good. You can't fix a problem you don't know about. So at least the members of Congress are aware of these issues. Second, privately, at least, they're willing to shrug their shoulders and acknowledge or concede that they're going to have to do things they'd rather not do. They're going to have to concede that increased taxes reduce benefits are an inevitability if we're going to, in fact, solve the problem. They may not be willing to say that publicly. They may not yet be willing to vote that way, but at least they are privately acknowledging that that's the handwriting on the wall. So I'm encouraged by those two steps. The third key step, of course, is getting them to vote that way so that we can, in fact, solve the problem. And the only way that that's going to occur is if the politicians know that the voters have their backs. And so I guess that's the message that I would like to convey to this audience, is that we need to engage in a very high level of outreach to our elected representatives, telling them that we want them to take action. We rely on them to provide the leadership. We need them to act now, because the sooner they act, the easier it is to solve the problems and to tell them that we're not going to throw them out of office for saving these programs. That's about as far as I can take it. I'm not going to go further by saying, here's what you need to tell them to do. Each voter will make up their minds on that on their own. But the key has to be we've got to tell them we're not going to throw them out of office for fixing these problems. 

Marc Goldwein: And I think go further, because a pledge to do nothing is implicit, if not explicit, support for a 23% across the board benefit cut. So we need to be demanding for them that they have a solution to avoid this 23% benefit cut for Social Security, this 11% cut for Medicare. 

Ric Edelman: And a 50% cut for the Highway Trust fund... 

Marc Goldwein: A 50% cut for the Highway Trust Fund. 

Ric Edelman: So I guess that's the proper way to phrase it, is that when a member of Congress says, you know, and look at Biden's State of the Union Address, where he cajoled the entire Congress into agreeing when he said, we're not going to touch Social Security, that, in essence, means they're all agreeing to a 23% benefit cut. 

Marc Goldwein: Exactly right. And that's, I think, how we need to need to frame this, because it's the reality. Ric I'll tell you a quick story. When I worked on the Simpson-Bowles Commission in 2010, before we came up with the recommendations, we got hate mail all the time. And then we actually came out with our plan and we started getting fan mail. And there's one that I'll never forget, because it was from an older woman who was on Social Security. And she said, “I need to tell you, I hate that you have to raise the age, and I hate that you're reducing the benefits. But I understand that it's absolutely necessary to save this program for my kids and my grandkids. And thank you so much for what you're doing.” And that's the kind of attitude we need. We're not going to love every part of the solution here. It's going to be tough medicine. But without taking that tough medicine, you can't cure the disease. 

Ric Edelman: And I get, you know, a goosebumps hearing you share that story, because I really do believe that's where the psyche is for the overwhelming majority of Americans. We aren't extremists. The vast majority of us, we recognize the pragmatic, realistic situation that we're in, and we're willing to do what is necessary, not just to preserve the system for ourselves, but, as she said, for our children and grandchildren. So I'm hopeful that Washington will come to realize that, that it isn't as scary to their careers as they fear, and that they do have the ability to not only fix these issues, but in the course of doing so, they won't lose their jobs. Marc, I really appreciate the conversation today. We've been talking with Marc Goldwein. He's the senior policy director at the Committee for a Responsible Federal Budget, and you can learn more about their work and the solutions they have proposed for the Social Security Trust Fund, the Medicare Trust Fund, and the Highway Trust Fund by going to their website, CRFB.Org, that link is in our show notes today. Marc, thanks for joining us on the program. 

Marc Goldwein: Thanks for having me. 

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Crypto Explainer: Airdrops

Ric Edelman: Hey, let me give you the definition of a term you might encounter in the world of crypto airdrop. What on earth is that? Well, we talked earlier about tax issues with Invesco and their ETF solutions. Let me share with you the crypto issue of an airdrop and taxes. Let's say that you own a digital asset. Fine. You own it. You're holding on to it. You bought it over a year ago. You didn't do any transaction this year. There's therefore no tax liability. But suddenly you might discover that the coin you own sent you a new coin. Why would they do that? Why would they send you a new coin or token that you didn't ask for, that you didn't pay for? And why would they do it for free?

It's called an airdrop. And crypto companies sometimes do this when they are trying to engage in a marketing campaign. They're trying to get attention for a new product or a new service, or a new coin or a new token. And so to get the word out, they give away essentially free samples. And when you get them, this is called an airdrop. It's also called helicopter money. You know, throwing money out of a helicopter, down to the crowd. So that's what an airdrop is. It's literally free money.

That's it for today. A reminder that the latest episode of Jean’s podcast came out yesterday. It may just make a healthy difference in your life. You can listen to Jean’s show wherever you get your podcasts.

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