Tag: government
Yes, Social Security Is Fiscally Safe -- Unless Republicans Screw Us All

Yes, Social Security Is Fiscally Safe -- Unless Republicans Screw Us All

Last week’s release of the 2025 Social Security Trustees Report provoked a lot of teeth gnashing, hair pulling, and gasket blowing about the program facing insolvency. To those of you who are freaking out, please stay calm. While pundits can make a good living promoting scare stories about Social Security, their nightmare scenarios have little basis in reality.

To be clear, the most recent trustees report does show the program will face a shortfall, so nine years from now it will not be able to pay full scheduled benefits. But it is important to get a clear picture of what that means.

First, let’s look at the numbers. Under current law, the government cannot pay out benefits if the money is not in the Social Security trust fund. Projections show that in 2034, after the bonds held by the trust fund have been sold off, the program will have enough money to pay 82 percent of scheduled benefits.

While a benefit cut of 18 percent would be terrible for most beneficiaries, 82 percent is still very far from zero. So, the idea that the program will just go away is a complete invention. Of course, Congress could vote it out of existence, but that doesn’t seem very likely given the share of Americans who are current beneficiaries or expect to be in the near future.

Another argument that deserves to be attacked head-on is the charge that Social Security in its current form is a major cause of generational inequality. While baby boom retirements substantially reduced the ratio of workers to retirees, there is little change projected for later years in this century. The share of scheduled benefits that could be paid, absent any action from Congress, would fall only modestly in subsequent decades.

Going out to 2065, when today’s 25-year-olds will be turning 65, the program is projected to be able to pay 74 percent of scheduled benefits. This would mean that, if Congress never touches the program and the projections prove correct, a lifetime medium earner would get a benefit of $30,900 in 2065, more than 20 percent higher than the $25,200 a medium earner who retires today would get (all numbers are in 2025 dollars). Where’s the generational inequality?

The fuller picture is somewhat more complicated. We expect retirees’ benefits to bear some relationship to their income while working. The benefit the program would be able to pay in 2065, absent any changes, would be a lower share of lifetime earnings than what is the case today. But then again, why are workers over the next 40 years expected to have higher lifetime earnings? It’s because they have benefited from more capital stock and better infrastructure and technology than what boomers had when they entered the workforce.

We can have a serious debate about whether the rate of increase in real wages and living standards is as rapid as it should be, but there is no doubt that we are headed in the right direction, at least on average (an important point I will return to shortly). If we want to concern ourselves with generational inequality, we should consider the condition of the planet we are leaving our kids. If we don’t do more to address global warming, the planet will be a much less pleasant place in 30 or 40 years than it is today. That would pose a very real and serious threat to young people.

How big is the funding gap?

There are two important points to make about the projected funding gap. First, it is more of an accounting problem than an economic one. Second, it is not especially large relative to other expenses the country covers.

The first point is when the trust fund runs out of bonds, as is projected in 2033, it will not create a new economic burden for the country. The government will not be paying substantially more in benefits in 2034 than in 2033, it just won’t have bonds in the trust fund to cover part of the expense.

That’s an accounting issue. The increase in spending on Social Security from 2033 to 2034, measured as a share of gross domestic product (GDP), would be just 0.03 percentage points. That’s the full extent of the increased economic burden the year the trust fund faces depletion, amounting to less than one percent of the Pentagon’s budget.

If the goal is to completely cover the annual funding gap, the projections suggest that it would require increased revenue and/or a cut in spending of a bit more than one percent of GDP (one-third of the Pentagon budget). The reason for this gap is the program has been spending more than its income for more than a decade, with the annual gap growing continually larger over this period. The bonds accumulated in the trust fund was filling this gap.

There is nothing nefarious here. It was all by design and fully public. The last major adjustment to the program in 1982 structured it to build up a large trust fund while the baby boomers were in the workforce to be spent down when they retired.

If the point is to fill the gap by committing additional revenue to the program, the government could raise the cap on wages that are taxed for Social Security (currently $176,100), increase the tax rate, or transfer other government revenue to the program, which would literally be just accounting. If $300 billion a year of general revenue (roughly 1 percent of GDP) would go to the Social Security fund, it would reduce or eliminate the shortfall in the Social Security trust fund but have no effect on the federal budget deficit as it is usually reported. In short, the government could easily come up with the money to pay all scheduled benefits.

Tax the rich

If the government decides to raise additional tax revenue to cover the Social Security shortfall, it makes sense that the bulk of it would come from wealthiest households. They have been the big winners in the economy over the last half century.

But the logic for taxing the rich goes even further. The upward redistribution over the last 50 years was a major factor in causing the program’s shortfall. In 1982, the last time Congress made major changes to the program, only 10 percent of wage income was above the cap and thus escaped taxation. Currently close to 18 percent of wage income is above the cap.

In addition, since 2000 there has been a major shift from corporate wages to profits. In 2000, profits were 18.2 percent of corporate income. In 2024, they were 28.3 percent. If corporate profits had remained at their 2000 share, the average wage in the corporate sector would be more than 12 percent higher than it is today. The combination of the upward redistribution of wage income—from ordinary workers to highly paid professionals, Wall Street types, and corporate executives—and the shift from wages to profits, explains why the program is projected to run short. That makes a good argument for modifying Social Security so that the segment of the population that benefited from this upward redistribution pays more to support the program.

There is one other point worth making about the prospects for additional tax revenue. The government could raise the tax rate. While any additional payments to support the program should mainly come from the rich, it is not absurd to think that ordinary workers could pay a higher tax rate. After all, the program is designed to support a considerably longer retirement than was the case in 1990, the last time there was any tax rate increase.

From 1966 to 1990, the tax rate on wages rose from 5.8 percent to 12.4 percent, an increase of 6.6 percentage points over 24 years. By contrast, there has been no increase in the last 35 years. If the tax were to increase, say by two percentage points over the next two decades, it would hardly seem like a major crisis. The average real annual wage is projected to be 32 percent higher in 2045 than it is today. It would be difficult to make a case that workers in 2045 would be suffering a major hardship if the government took back 2 percentage points of that increase in the form of higher Social Security taxes. We do have to worry about inequality, but for the last decade, workers at the bottom have been roughly keeping pace with average wage growth.

It is understandable that politicians running for office don’t like to talk about tax increases, but in this respect, Donald Trump can perhaps offer a useful lesson. He is now imposing import taxes—tariffs—that could well reach $400 billion a year, equivalent to a four percentage point increase in the payroll tax. He is doing this even without getting congressional approval. To date, Trump’s tax hike has prompted only limited public complaint. It is hard to believe that a tax increase half this size, phased in over 20 years, to support the country’s most popular social program would be an impossible political lift.

Social Security is a great program

On this last point, it is worth reminding everyone how incredibly popular Social Security is. It enjoys overwhelming public support across the political spectrum. Even supermajorities of Republicans like it.

The reason is obvious. For more than 80 years, Social Security has provided the country’s workers and their families a substantial degree of economic security. It even provides security to high-income workers who may not think they need it, because even highly paid doctors and lawyers may find they are no longer wealthy after a serious illness or a car accident.

The program is also incredibly efficient. Administrative costs for the retirement program are less than 0.4 percent of the benefits paid each year. By all measures, the amount of fraud in the program is minimal. Elon Musk’s Department of Government Efficiency (DOGE) team confirmed that fact. While they went in with grand promises to root out waste and fraud, they essentially found nothing and instead promoted such wildly absurd lies as 20 million people over age 120 were getting benefits or 40 percent of the phone calls to the agency were from people trying to commit fraud. (The small grain of truth in DOGE’s 40 percent figure is 40 percent of the identified instances of fraud were initiated through phone calls, which means 60 percent were either initiated online or via in-person visits.)

In short, Social Security does what it is designed to do. As much as the program’s political enemies and the news media like to hype scare stories, there is no reason it will not be around long into the future, paying out full scheduled benefits.

Dean Baker is an economist, author, and co-founder of the Center for Economic Policy and Research. His writing has appeared in many major publications, including The Atlantic, The Washington Post, and The Financial Times. Please consider subscribing to his Substack Dean Baker.

Reprinted with permission from Substack.

Crypto Is A Criminal Enterprise That Now Controls Our Government

Crypto Is A Criminal Enterprise That Now Controls Our Government

I spent my very early years in Utica, New York. I was too young to know anything about the city’s reputation — I left when I was 8 — but I would later learn that it was known at the time as “Crime City,” because it was reportedly controlled by the Mob.

Stories of towns infiltrated by organized crime or ruled by blatantly corrupt politicians used to be fairly common. These days you hear tales of blatant personal corruption at the local level less often.

But who could have imagined raw corruption determining policy for the United States as a whole?

Unless there’s a sudden outbreak of conscience and rationality on Capitol Hill, Congress is about to pass, with (alas) wide bipartisan support, the GENIUS Act, which will legitimize and normalize “stablecoins” — cryptocurrency tokens that, unlike the original tokens such as Bitcoin and its imitators, are supposed to be protected against wild fluctuations in their purchasing power, because they’re backed by conventional assets like Treasury bills.

I’ll talk in a minute about why encouraging stablecoins is such a bad idea. But first let’s talk about crypto in general.

Crypto’s early enthusiasts may well have been idealists, imagining that they could create something that was better and safer than traditional money. But as the years have gone by — Bitcoin was introduced in 2009! — crypto keeps failing to find legitimate uses. There is, to a first approximation, nothing you can legally buy with crypto assets except other crypto assets.

The journalist Zeke Faux, who wrote “Number Go Up,” a portrait of the crypto industry, went around the world both studying cryptocurrencies and trying, when he could, to use them. In the end, he wrote, “Traveling around the world investigating crypto had given me a new appreciation for my Visa card.”

So why do ordinary people keep buying crypto? Part of the answer is intense marketing; as I mentioned in a recent post, my Venmo app (which is actually useful) is constantly trying to sell me crypto. But the most compelling explanation why people buy crypto is that there is a clear affinity between the psychology of buying crypto and the psychology of gambling. Retail crypto looks, in particular, a lot like the “numbers racket,” which siphoned millions of dollars from generations of working-class Americans until it was largely supplanted by state lotteries.

The numbers racket was illegal, but flourished anyway because the criminal organizations paid off police and politicians.

But they were pikers by today’s standards. According to Public Citizen, crypto companies accounted for almost half of all corporate spending during the 2024 election. Donald Trump and his family have made billions off the $Trump and $Melania “meme coins,” but I wouldn’t be surprised to learn that other politicians have also been the beneficiaries of crypto largesse.

And what the crypto industry wants out of today’s politicians, above all, is legislation that gives a veneer of legitimacy to stablecoins like Tether.

What is a stablecoin? It’s a digital token like Bitcoin — that is, an asset that “belongs” to whoever has the secret numerical key that unlocks it. But unlike Bitcoin, whose value in dollars fluctuates wildly day to day, a stablecoin is supposed to retain a fixed value in dollars. The stablecoin issuer maintains that stability by standing ready to buy its tokens back, holding reserves of conventional assets like Treasury bills for that purpose.

One way to think about this is that stablecoin issuers are like banks back in the days before the Civil War, when gold and silver coins were the only official forms of money. Many banks issued paper currency, which they promised to redeem for gold and silver coins on demand. Similarly, stablecoin firms issue tokens that they promise to redeem for dollars.

Antebellum banks that issued their own notes served a useful function, because the federal government wasn’t yet issuing its own paper currency. So bank notes played an important role in ordinary, legitimate commerce. For example, the $10 “Dixie” notes issued by the Citizens Bank of Louisiana (they were printed in French on one side) circulated widely across the lower Mississippi. Yet some of these early, unregulated banks were “wildcat banks”: banks that were specifically set up to defraud anyone foolish enough to accept their bank notes as payment.

So like antebellum bank notes, which were privately issued currencies supported by the claim that they were backed by gold and silver, stablecoins are privately issued tokens supported by the claim that they are backed by dollars. Unlike antebellum bank notes, however, stablecoins don’t serve any clearly useful function. They can’t be used to make ordinary purchases, and there’s nothing you can do with them that can’t be done more cheaply and more easily with debit cards, Venmo, Zelle, wire transfers etc. That is, why not just use dollars instead of tokens that are supposedly backed by dollars?

The answer to that question is that the ownership and disposition of stablecoins, unlike the ownership and distribution of bank deposits, is anonymous. This is a highly valuable feature for those who want to engage in money laundering, extortion, purchase of illegal drugs, and so on. In other words, the only economic reason for stablecoins is to facilitate criminal activity.

Do the politicians backing the GENIUS Act not understand this? Some of them probably do. As for the rest, well, it’s difficult to get someone to understand something when their campaign contributions and, in some cases, their personal wealth depends on their not understanding it.

But wait, there’s more. As I’ve already explained, stablecoin issuers are teched-up versions of antebellum banks, which were for the most part unregulated and, when they failed, provided no safety net for people who placed their money in their care (or accepted their notes.) As a result of this lack of regulation, the antebellum banking system repeatedly experienced “panics” — mass runs on banks perceived as risky.

Today, however, the federal government is deeply involved in banking, for very good reasons. After the devastating bank runs of the 1930s, in particular, officials realized that they needed to guarantee the value of deposits via the FDIC, while at the same time requiring banks to limit the kinds of risks they take. The goal was to limit the risk of financial crisis. While we did have a nasty crisis in 2008, that mostly involved “shadow banks” that evaded precautionary regulation. And stablecoins are, among other things, a new kind of shadow bank.

Recognizing that they could suffer the equivalent of self-fulfilling bank runs, the biggest stablecoin issuers are trying to reassure holders of their solvency by accumulating large reserves of U.S. government debt. But the flip side of this is that a run on stablecoins could turn into a run on U.S. government debt! That is, if the owners of stablecoins were to rush to convert their holdings into dollars, this would force stablecoin issuers into a fire sale of U.S. Treasury bills, driving up interest rates.

The fundamental point is that the growth and legitimation of stablecoins poses new risks to overall financial stability — all in the name of making it easier for criminals to do their business.

It's an amazing, depressing story, one that many readers may find hard to accept. But the truth is that when it comes to crypto (and other issues, but I’ll talk about them another day), Washington has become Utica on the Potomac: A town that, if not entirely controlled by the digital Mob, has at least been largely bought and paid for.

Paul Krugman is a Nobel Prize-winning economist and former professor at MIT and Princeton who now teaches at the City University of New York's Graduate Center. From 2000 to 2024, he wrote a column for The New York Times. Please consider subscribing to his Substack, where he now posts almost every day.

Reprinted with permission from Substack.

Deportation 'Error': When Judicial Pigs Fly -- In Formation!

Deportation 'Error': When Judicial Pigs Fly -- In Formation!

Our alleged Supreme Court last night upheld a district court’s order to return the Salvadoran migrant Kilmar Armando Abrego Garcia, whom the government had wrongfully deported to El Salvador, where he has been held in the notorious Terrorism Confinement Center prison for the last 26 days.

“The order properly requires the government to ‘facilitate’ Abrego Garcia’s release from custody in El Salvador and to ensure that his case is handled as it would have been had he not been improperly sent to El Salvador.” The Supreme Court's order, issued in response to an appeal by Garcia that he had been wrongfully seized and deported along with some 200 alleged Venezuelan gang members, cautioned District Court Judge Paula Xinis that she should define more precisely what she had meant by the word “effectuate” in her order to return Garcia, whom she said the government had deported by a “grievous error.”

The Trump administration had alleged without evidence that Garcia is a member of the violent street gang MS-13. Garcia has been a resident of the United States with protected status for 10 years, during which time he has never been arrested. He is married to a U.S. citizen. Judge Xinis found that the “evidence” against Garcia “consisted of nothing more than his Chicago Bulls hat and hoodie and a vague, uncorroborated allegation from a confidential informant claiming he belonged to MS-13’s ‘Western’ clique in New York — a place he has never lived.” Garcia has been a resident of Maryland and claimed never to have been to New York.

For its part, the Trump DOJ admitted in court that Garcia had been deported in an “administrative error” and claimed that there was nothing that could be done to return him to the U.S. because he was being held by a foreign nation, to which the U.S. government had turned him over. Garcia had been given no due process to challenge his deportation under the Alien Enemies Act. In a separate order earlier in the week, Chief Justice John Roberts had temporarily allowed the government to continue using the 200-plus year old law but said that future deportees had to be given due process notice of the proceedings against them and were entitled to challenge their deportation in court. Garcia had been given none of the due process now ordered for future use of the Alien Enemies Act by the Trump administration.

The Supreme Court’s three liberal justices, Sotomayor, Kagan, and Jackson, signed a “statement” as part of the court’s otherwise unsigned order. Justice Sotomayor wrote that the Trump DOJ had asserted that it could refuse to return Garcia to the U.S., against the order of a federal judge, “for no reason recognized by law,” and that the Trump administration position “implies that it could deport and incarcerate any person, including U. S. citizens, without legal consequence, so long as it does so before a court can intervene.” `We could get down in the weeds as to why the court’s order was issued without naming its author or giving even a hint of what the vote might have been, but the most likely reason is that Roberts, Alito, Thomas et. al. had no interest in putting their names on a legal ruling that is bound to draw fire from Donald Trump and his political and legal sycophants.

The Supreme Court’s order in the Garcia matter is a victory for the wrongfully deported Salvadoran migrant but does not address either the fate of the Venezuelans deported along with him or the use of the Alien Enemies act to justify their deportation. The Alien Enemies Act allows the government to deport persons in a “time of war” who are considered dangerous to the country’s national security. There has been no declaration of war against Venezuela or any other country. The deported Venezuelans, many of whom claim they are not gang members and were rounded up on the basis of their soccer team tattoos and nothing else, are not “enemies” under any definition of that word.

How much leeway the Supreme Court will end up giving the Trump administration to use the Alien Enemies Act is not yet known, but today’s order provides hope that at least some due process will be observed in the deportation of migrants from this country. Under today’s order, the Trump administration will be forced to return at least one wrongfully deported migrant, and the court ordered the government to “be prepared to share what it can concerning the steps it has taken and the prospect of further steps” with respect to the return of Garcia. That smells suspiciously like judicial oversight of the Trump DOJ and Department of State, which until this moment have acted in their enforcement of the laws and in judicial proceedings as if they are being run by a criminal gang.

Lucian K. Truscott IV, a graduate of West Point, has had a 50-year career as a journalist, novelist, and screenwriter. He has covered Watergate, the Stonewall riots, and wars in Lebanon, Iraq, and Afghanistan. He is also the author of five bestselling novels. He writes every day at luciantruscott.substack.com and you can follow him on Bluesky @lktiv.bsky.social and on Facebook at Lucian K. Truscott IV. Please consider subscribing to his Substack.

Reprinted with permission from Lucian Truscott Newsletter.

Elon Musk

Musk Wins $5.9B Spacex Contract As He Torches Social Security Agency

Tech billionaire Elon Musk’s space company was recently handed a $5.9 billion contract subsidized by taxpayers, even as his so-called Department of Government Efficiency continues to take a wrecking ball to key government agencies.

The U.S. Space Force announced on April 4 that Musk’s SpaceX was among three companies awarded government contracts for the National Security Space Launch Phase 3 Lane 2 program. Space X will receive more than $5.9 billion of the $13.7 billion in spending that was announced.

Musk is the CEO of SpaceX and owns approximately 42 percent of the company.

While SpaceX is newly flush with government money, Musk’s DOGE has been laying off critical federal workers at multiple agencies. Federal judges have ruled that some of those firings are illegal.

At the Social Security Administration, DOGE has cut 7,000 jobs even though millions of Americans rely on their Social Security payments for day-to-day living. The Washington Post reports that the agency’s website, which citizens use to access information on their benefits, has had repeated outages in recent weeks.

The Post noted that “many of the network outages appear to be caused by an expanded fraud check system imposed by the DOGE team,” according to current and former officials that they consulted. Those sources told the outlet that Social Security’s tech staff didn’t test new software installed by Musk’s group and the computer servers have been unable to handle the traffic.

The revelations come as DOGE has repeatedly lied to the public about how much the rogue agency’s actions have purportedly saved taxpayers. Musk, who is the richest person in the world, has benefited enormously from public spending while attacking and gutting agencies that provide vital services to middle-class families.

Despite Musk continuing to siphon money from the government while attacking it via DOGE, President Donald Trump has made it clear that his crony and biggest political benefactor will not be subject to any guardrails or oversight for corruption.

The arrangement has led to Musk and Trump becoming a major target of grassroots protests. Over the weekend, hundreds of thousands of people across the U.S. took part in “Hands Off” demonstrations, pushing for Trump and Musk to stop their harmful actions and encouraging other lawmakers to stop them.

Musk isn’t the only high-profile billionaire in the MAGA movement making money from the Space Force announcement. Blue Origin, owned by Amazon’s Jeff Bezos, will receive over $2.3 billion from the arrangement.

Trump recently offered praise for Bezos, who also owns The Washington Post, after the paper’s pivot in recent weeks to be more MAGA-friendly.

The stock price and revenue for Musk’s other major company, Tesla, have been sinking as he marched in lockstep with Trump. The public has expressed its revulsion and anger at DOGE’s actions even as Republican leaders continue to back the effort. [Musk has lately expressed alarm over Trump's tariff policies.]

But even while Trump’s closest billionaire allies are losing money due to his chaotic and catastrophic tariff policies, they are raking in billions from the government he now leads.

Reprinted with permission from Daily Kos.

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