Latest / Words & Numbers / Episode 461: Social Insecurity

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Episode 461: Social Insecurity · Words & Numbers

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Today on words and numbers. Racism in Vegas.
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What we can learn from drowning rats.
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The unlikely collapse of the NFT market.
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And a fix for Social Security. All this and more today on words
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and numbers, a civil original production.
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Check us out at civil.com C ivl.com Hi, I'm James.
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And I'm Anthony. And this is words and numbers.
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It's new and exciting in your work this week.
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There's an experiment that you probably have heard of, although
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you may not know the name, the Richter experiment.
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This was back in the 1950s and they took more complicated than
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I'm going to go into, but the long and short of it is they
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took a bunch of rats and they put them in water such that they
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had to tread water otherwise they would drown.
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I absolutely know this experiment.
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This is. Fantastic.
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Basically 2 sets of rats and I just looked up the the numbers
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here. The first set, the control
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group, they put them in the in the water and watch to see how
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long they would tread water until finally they just would
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give up and and drown. I don't know if they actually
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let them drown, but that was the thing.
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They timed it. It took 40 to 60 hours.
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So these rats are there treading water for 40 to 60 hours.
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Then they did with another set. They had them in there and again
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treading water until they're about to drown.
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But then the experiment experimenters took them out and
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gave them a little time to rest. I don't know how long they gave
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them to rest and put them back in into they wanted to see now
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how long would they would go. And the long and short of it is
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total time treading water for the group that was just left
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there and you die was 40 to 60 hours.
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For the other group they were rats taking out, given a little
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bit of rest, put back in 60 to 80 hours.
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So of 50 to 100% increase in the time they spent treading water.
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And there are all sorts of controls on this experiment.
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But the conclusion is that what was going on is the
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experimenters were offering the rats hope that there was a
2:17
chance that they'll get saved at the end of it.
2:20
And, and so because of that, they're willing to push on
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further in that experiment came to my mind recently while I was
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having a conversation with some people about right to die laws.
2:33
And somebody said that in instances in in states in which
2:40
their right to die laws and you can request whatever the the
2:44
medications are and apparently under the law, you have to take
2:49
them yourself. So you can't just ask someone to
2:52
administer these things, but nonetheless, the, the, the pills
2:56
are there. And what happens is a vast
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majority of people don't use them, like 80% of the people
3:03
don't use them. And, and it, it reminded me of
3:07
this, this rat thing. Is it the case that having the
3:12
ability to end one's life and understand that we're talking
3:16
about people who are in tremendous pain, you know,
3:21
they're, they're going to die eventually anyway.
3:23
But is the ability, is it the case that when we give someone
3:29
the ability to end their life, it gives them agency?
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Maybe, I don't know if hope is the right word here, but it
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gives them gives them some control that causes them to to
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press on further. You know, I don't know.
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Do you know what I always say about hope?
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And hope stings eternal. Well.
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In there hope is deeply overrated.
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And hearing lies, something interesting because you and I
3:55
have talked before about Catholic doctrine and the
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Catholic Church frowns on right to die that no, you should not
4:04
understatement in. Yeah, it is a bit of an
4:08
understatement. But the reason they say this is
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because of, in the Church's words, the salvific effect of
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suffering. That is, suffering itself has
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salutary. Effect.
4:22
Has salutary, Yeah, right. Yeah.
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And you can, you can interpret that if you're a a religious
4:27
person, you can interpret that as as in a religious tone.
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If you're not, you can interpret it in a humanist tone, whatever
4:33
you want. But this is the church's
4:35
position. And it occurred to me, as we're
4:38
having this conversation about right to die, how can there be a
4:42
salvific effect if you don't have the ability to choose?
4:47
Let's not understate the obvious, right?
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Everybody, every day has the ability to choose.
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If you have a Walmart, a Walgreens, or a CVS anywhere
4:58
near you, you could be dead by this evening.
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Yeah, but the we're, we're talking about a particular
5:05
subset of the population now, people who are A, going to die
5:11
in the immediate future and B are in intense suffering.
5:15
Yeah, but they already have the ability to end their lives at at
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very little cost. Well, they did before, but now
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that they're in the hospital, not so much.
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But. Yeah, I mean.
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Look, depending what state you're in.
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You can make it easier, but to say that people don't have the
5:32
ability to end their own lives, it's just patently absurd,
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right? Everybody can do it at the drop
5:37
of a hat. We all just choose not to.
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Cause come to find out, even people who are in tremendous
5:43
pain place a premium on staying alive, even from when, from an
5:50
outsider's perspective, we may look at them and say, but why?
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And it's really none of our business.
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They do it, it I, I, I think this all chalks up to human
6:01
nature. But we we want to keep living.
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Let me go back to to the concept of hope.
6:10
Whether you're talking about a right to die situation or the
6:14
rats or what have you, I think this is something that from an
6:18
economic perspective, we don't pay nearly enough attention to.
6:23
And you and I touched on this a few episodes ago when when we
6:27
said, look, Americans probably would be willing to do what's
6:34
necessary to tighten their belts to get to a balanced budget if
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they knew that it was X years off.
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We're going to do this and we're going to be in a better place
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thereafter. That give you that idea of hope
6:48
is an incredible motivator. I'll give you a better example,
6:52
or at least what I think is a better example, when poor people
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in the United States are pulled, and I mean seriously pulled,
7:01
using serious scientific methods, right?
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This isn't an MSNBC bit of nonsense.
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This is real public opinion data.
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When poor people are pulled about whether they want complete
7:15
socialism or complete free market capitalism, the
7:20
overwhelming answer is free market capitalism, even even on
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the part of the people who would benefit the most in the most
7:30
immediate sense from a socialist regime.
7:34
And when you drill down into the questioning, into the questions
7:38
a bit deeper, it's because the vast majority of them think that
7:43
they can make it here. Yes, right.
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They have, they already have this inherent hope that I'm poor
7:51
now, but I'm not going to be forever.
7:55
Right, right. And that's an interesting thing,
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right? And I, I think you see that
8:00
dissipating a little bit in the current generation of young
8:04
people who at least publicly work with the assumption that
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I'm poor and I always will be in it ain't fair.
8:12
Yeah. And how much of that, I hate to
8:15
be an armchair psychologist here, but how much of that is
8:19
due to the fact that on average in underlying, on average,
8:25
younger people today have had easier lives than young people
8:30
in the past. There's something to be said for
8:32
overcoming adversity that you can, you can look back on your
8:36
life and say, hey, I got through that through my own wit or will
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or strength or what have you. And that sets you up for in a
8:45
mindset of success for the future.
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And for two years during my undergraduate and master's
8:52
degree period, I did not take out any student loans.
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I worked my ass off. I paid for everything as I went,
9:03
and I didn't eat anything other than ramen noodles and hot dogs
9:09
because that's all I could afford.
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And during the student loan debate, the forgiveness debate,
9:15
I remember bringing up the point that you brought up, not not in
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the detail that I just gave you, but I said, look, you took out
9:23
the loan, you have to pay it back.
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That's just good manners apart from anything else, right?
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And they said, well, you don't know how hard it is.
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I'm like, oh pumpkin, please. I, I work 60 hours a week, third
9:37
shift for 3 1/2 years to get through my undergraduate years.
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I, I know what hard is like. And then the answer became,
9:46
well, just because it was hard for you doesn't mean it has to
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be for the rest of us. Well, which is it?
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Is it that I don't know what hard is or that if I do, it
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shouldn't be hard for you too? And I and I think there there is
10:00
some benefit to grinding it out for a while.
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I don't know how far that benefit goes, but there is some
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benefit to it. Yeah, and I could see this with
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my kids as they grew up, you know, became teenagers and and
10:15
and older, the ones who went out and got jobs.
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Even if it was, you know, working the window at a
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McDonald's, you could see it. I could see a change in them
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that they they had a sense of agency that they didn't have
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before. They they have, they had the
10:32
ability to do something now. At least two of the Davies
10:35
children gave me coffee at the drive through at McDonald's in
10:38
Greensburg, PA. I think it might.
10:40
I think it might have been three, but they all look so
10:43
similar. It's hard to.
10:44
It's hard to. Tell the difference.
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10:48
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10:51
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to support our show and for access to member exclusive
10:59
content. Anyway, I want to bring us back
11:01
to Las Vegas in the 1960s. And this is a story that's
11:06
apparently pretty well known. And I I get it through Quincy
11:11
Jones, but it comes through a number of other people as well.
11:15
Apparently Harry Belafonte was playing the Sands, the the
11:19
casino, and Frank Sinatra had a minority interest in the sand,
11:24
so he was always hanging around there.
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And Belafonte was apparently in 1964.
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Maybe you can do some quick math for us making 17 grand a month
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there. Wow.
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That's. That's a lot of money.
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Yeah. How much, how much money is it?
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He asked. Oh good Lord, 17 probably.
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You said a month. Yeah, in in 1964.
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So regular background inflation prices double, let's say every
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20 years and that's roughly. 60. Years ago.
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Calculators. Oh, I got to do it in your head
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to show off. So 3500 and 10,000.
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Come on Rain Man, get it I get. Get me the answer. 19, 64 and
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$17,000 that is equivalent to today.
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Wow I was off 178,000. That's a lot of that's a lot of
12:23
cheddar every month right there by.
12:25
Per month? Per month?
12:27
Per month. By any estimation, Harry
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Belafonte was stinking rich and And yet he couldn't stay at the
12:36
Sands, and he couldn't get a meal in the restaurant because
12:40
of the color of his. Skin, of course, so they could.
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Hire him and pay him that much, but he couldn't stay there and
12:50
he couldn't have dinner. What a what a messed up world.
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Anyway, here's the interesting part.
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That's not interesting. We all know that that kind of
13:00
thing went on. Apparently Frank Sinatra had
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enough and he said no, no more, no more, and he assigned A
13:10
bodyguard to every black performer and had the bodyguard
13:15
walk up to the check in desk with him as he checked into the
13:18
hotel and the body. The bodyguards were known
13:21
colloquially at the time as goombas, a word that might have
13:27
been offensive to Italians at one point, but I don't care.
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And the goombas apparently were big and scary enough that the
13:36
racism went away immediately and all the time.
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I imagine that got to got to stay at the Sands and they got
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to have dinner in the restaurant where they were performing.
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And isn't it something that if you stop and think for just half
13:50
a second, what does this mean? It means that organized crime
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had a say in the disappearance of racism in the United States.
14:00
Yeah, yeah. And organized crime.
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Organized crime was after a buck.
14:07
And ultimately, you see this across time and across
14:10
countries. Countries that are more
14:12
economically free have far fewer problems like this because why?
14:16
If you're looking to make a buck, you don't want to make an
14:19
enemy out of a potential customer.
14:22
Yeah, or maybe Frank Sinatra was just horrified by how his
14:27
friends were being treated, which I think is actually a
14:30
pretty nice thing, all things considered.
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No matter how you slice it, it's a pretty cool story.
14:37
Yeah. And you know, that I, I think a
14:39
lot about how racism nearly disappeared in the United
14:44
States. It's not gone by any stretch,
14:46
but it's it's nearly gone. And the things that had the most
14:51
to do with it are all pop culture things.
14:56
It's it's never the Supreme Court of the United States,
15:00
right? Schools were already
15:00
desegregating by the time Brown was decided.
15:03
It's never the Congress. The Civil Rights Act of 1964
15:09
followed pop culture. It didn't lead pop culture.
15:12
Fascinating, right? People decide on their own what
15:16
they want, and then they do it. So there you go.
15:21
I wanted to talk today, and in the foolishness of the weak
15:26
portion of the program about NFTS.
15:30
Do you even remember? I haven't.
15:31
I have not heard that term in several years.
15:36
I wonder why. They were going to be the big.
15:38
They were going to be the big thing after cryptocurrency.
15:42
They were going to be the big thing and it after crypto and it
15:46
turns out they're not, not at all.
15:51
And people are losing their shirts on NFTS right now.
15:57
There was one especially that was given away for free.
16:03
If you were a member of a specific blockchain, you could
16:07
just claim it. And then these very things
16:12
started selling on the secondary market, if we can even call it
16:17
that, for seven, ten, $30 million.
16:24
Now they sell for $0.00. So every it, it was a game of
16:29
musical chairs and the boobs who got stuck standing up when the
16:35
music stopped ended up losing their shirts.
16:39
And I, I remember when they first came out, a couple of
16:43
people whose judgement I generally trust said, oh, this
16:48
is going to be huge. It's the next big thing.
16:51
And I thought, huh, people are going to want, let me get this
16:57
straight, art or sports memorabilia or whatever that
17:04
they can't hold in their hands, that doesn't exist in the real
17:07
world. That's just some digital
17:09
representation of a baseball card or a painting or whatever
17:16
it is that people like. And you know, there's things
17:20
hanging on your wall. I can see them as we speak.
17:25
Well, you value them or they wouldn't be hanging on your
17:27
wall. Would you value them the same if
17:30
they existed digitally only? Well, it depends if I could see
17:35
them, like make it my background on my on my computer screen,
17:40
yeah. Really, you would spend hundreds
17:43
of dollars for a background on computer?
17:45
Screen. I'm not saying I value it that
17:46
much. That's right, You would, you
17:48
would have some unknown value, but it you wouldn't pay money
17:52
for it. I, I have three screens open in
17:55
front of me now. I didn't pay for any of the
17:57
background things I'm looking at.
17:59
Why the hell would I? It's just a piece of digital
18:02
nonsense. And I remember thinking at the
18:05
time, there is no way that this is going to hold long term.
18:10
No way. And as I watched the prices go
18:12
up into the 10s of millions I thought to myself, could I have
18:16
possibly been wrong about this? And thankfully no, I was not and
18:21
and the world has decided to turn its back on NF TS.
18:25
I just can't believe people fell for it as long as they did.
18:28
What surprised me is that NFTS never seem to, they never seem
18:33
to, to figure themselves out. I, I remember talking to some
18:37
people who were into NFTS back in the day and I, I gave the
18:41
same complaints that you're giving.
18:43
And I said, look, the way to solve this problem is to find a
18:48
way legally to link the NFT to a real world object such that
18:55
whoever owns the NFT owns the object.
18:58
Then you could imagine all kinds of things.
19:01
But that defeats the purpose. Well, yes and no.
19:06
It it, it gives you a new use for NF TS.
19:09
So I want to sell you my car. We don't have to go through all
19:13
of the title nonsense. I just sell you the NFT.
19:18
Whoever holds the NFT owns that car.
19:22
No, I got to give you the car as well, but.
19:25
And. As far as it becomes proof of
19:27
ownership. Concerned you're, you're going
19:29
to have to go through all the titling anyway, yes, you know
19:32
what? And you know what?
19:33
And that's the problem. Do you know what it would work
19:37
for Acres on the moon Acres. I raised that issue, I said.
19:45
Moving right along. You can moving, right?
19:47
Create. No, no, Create a bunch of NFTS,
19:50
one for each acre on the moon, and start to give them away or
19:54
sell them or whatever. There's nobody else claiming the
19:57
thing, or at least over a long period of time, someone who's
20:02
held held this NFT or pass it on.
20:04
You can trace its lineage, you say?
20:07
Well, nobody else has claimed it, but this guy has a better
20:10
claim than anybody else. I do hereby claim the entire
20:13
moon for myself. Let's never talk about it again.
20:16
It's mine. Let us move on now.
20:17
Let's get it. Let's get into some real
20:19
foolishness now. Yeah, we put this off long
20:21
enough. It's time to talk about Social
20:24
Security. And we've talked about Social
20:27
Security many times on the podcast in in op eds.
20:31
And every time we've said, look, by Social Security's own words,
20:37
it's going to become insolvent. But the insolvency date was far
20:41
enough into the future that nobody paid attention to us.
20:44
We, we looked it up today, back 20 years ago, the insolvency
20:51
date or 15 years ago, I guess it was the insolvency date was.
20:56
What the hell? Was it 2037?
20:58
Yeah, but and now it would be 2033. 2033 it's moving in the
21:04
wrong direction. Right.
21:06
Yeah, in fact, right, in fact, earlier than that.
21:10
Moving forward, yeah, great. Staying still would be OK.
21:14
Moving backwards is a real problem.
21:18
Yeah. So 2033 and we're close enough
21:20
to 2033. I can't imagine it's going to
21:23
change that much more. Maybe the actual date is 20-30,
21:26
but at that point it doesn't matter.
21:29
The insolvency is is upon us. So we're talking now 1
21:36
presidential term, maybe 8 years, maybe 1 1/2.
21:41
Yeah, it's eight years. So what I want to talk about is,
21:47
is a plan that you and I proposed many years ago and I
21:52
went back and revisited all of the numbers, updated everything.
21:57
And the question is this, this plan that I'll will describe
22:02
here in a moment? Can it can it save us from
22:07
Social Security's demise? The short answer is yes, it can.
22:12
The longer answer is it's going to take a long time.
22:15
But the interesting footnote is actually everybody will be
22:19
better off the retiree, which is the people who are paying in and
22:23
the. Federal government, which which
22:26
is why Ant we already know that nobody's ever going to implement
22:31
this plan. No, the 100 years is going to be
22:34
a, a deal breaker. But here's the plan be before I
22:38
give you the plan, actually let me give you the background.
22:41
And I'm going to talk here about earnings and longevity.
22:44
And when I do, I'm always talking about the median
22:47
American, not the average, the median.
22:49
So think about the median 20 year old and how his earnings
22:54
change over time. And as his earnings change
22:57
course, he's he's earning more or less money and he retires and
23:01
he gets Social Security based on those earnings, you can
23:05
calculate how much, and I've done this, how much he'll pay
23:09
into Social Security and how much he'll receive back.
23:12
And the numbers go roughly like this.
23:15
And everything I'm going to talk about here, it's all adjusted
23:18
for inflation. So when I say numbers, I mean in
23:21
2025 purchasing power terms, the median 20 year old can expect to
23:27
pay somewhere between 350,000 and 370,000 into Social Security
23:36
and that's that's his half and his employers halves together
23:39
he'll receive back somewhere between 520,000 and 620,000.
23:47
I see. A problem.
23:48
Well, it, it sounds like, you know, a nice return, but if you
23:53
do the numbers, because the money you're paying out, you're
23:56
paying out now, the money you get back, you get back 4050
23:59
years into the future. It turns out that he's making,
24:02
in effect, about 1% above inflation.
24:06
That's. The problem?
24:08
Yeah, yeah, the rate of return on Social Security is abysmal.
24:12
It is so. Bad.
24:14
Yeah, well, it's not just, and this is the median American
24:17
we're talking about here. Rate.
24:18
Average rate return is 1 percent, 1% after inflation for
24:24
people with greater mortality rates.
24:27
I'm thinking specifically of black males.
24:29
Black men. Black men.
24:30
Yeah, Yeah. The rate of return is negative.
24:34
That's right, the the median black male will get less than
24:39
$0.00 back. Yeah, yeah, he'll pay him more.
24:43
He'll get less. He won't get less than $0.00
24:46
back. He'll get less.
24:48
Far less back than he paid it. Because black men die so far
24:53
before retirement, and I don't think people realize this, that
24:57
their mortality is such that there's no good reason to charge
25:01
them for Social Security at all. Right.
25:04
Yes, that's correct. Because it's not helping them in
25:07
the least. This is this is a transfer from
25:12
black people to white people. Yeah, not, not intended that way
25:15
by any means, but that's well. And I should say that the big
25:19
winners here when it comes to Social Security are Asian
25:22
females. Sure.
25:24
They live forever. Yeah, not only that, but they
25:28
also tend to have much higher incomes.
25:30
Did you know? I didn't know this as I was
25:32
looking up the other day. If you look at the at the
25:35
average earnings for workers broken down by gender and race,
25:40
the highest is not white males, it's Asian females.
25:46
That's amazing. Female, Asian female surprises
25:49
me. Asian does not.
25:51
Yeah. Yeah.
25:53
But I one of the things that we say repeatedly, I want to drive
25:58
it home again as I don't think people appreciate this.
26:01
The the part of the big reason that Social Security has such a
26:05
abysmal rate of return is because it comes with an
26:09
effective 100% death tax. You can pay into Social Security
26:14
from age 20 to age 67, and you can drop dead on your 67th
26:19
birthday. And all that money you paid in,
26:22
well, the government gets to keep it.
26:24
Now there's a footnote. If you have a spouse, some of it
26:27
goes to the spouse. You have dependent children,
26:28
some will go to dependent children.
26:30
But generally speaking, what you're getting back is not at
26:33
all what you put in. It comes with this, with this
26:36
death tax, which is very different than savings.
26:39
You put money into savings over your career.
26:40
You drop dead at day your 67th birthday.
26:44
Your heirs get whatever's in the pot.
26:47
They get all of it, Yeah, right. And it's been earning probably
26:51
very likely more than 1%. Yeah, and therein lies the key
26:57
to saving Social Security. We're going to leverage the fact
27:01
that the rate of return is so abysmal.
27:05
And I don't think people will understand.
27:09
They're going to think that you're exaggerating.
27:10
Oh yeah. So let me let me tell you how
27:13
this works. Here's our proposal starting
27:18
whenever, starting next year, workers, as they enter the
27:21
workforce at age 20, they pay Social Security just like
27:24
everybody else does. They continue to pay Social
27:27
Security just like everybody else does until they hit their
27:30
40th birthday. On their 40th birthday, two
27:34
things happen. First, they're no longer taxed
27:38
Social Security tax. So that 12.4% that used to go to
27:43
the federal government now go stays in their pockets. 2 when
27:48
they retire, they get no Social Security benefit, no retirement
27:52
benefits. So in effect, what we're doing.
27:54
Well, if if they opt out correct, you could you could
27:57
stay in if you want. Yeah, you could.
28:00
Yeah, we could talk about that twist in a moment.
28:02
I'm, I'm thinking right now what happens if we just put everybody
28:05
on this plan. The net result is you, you start
28:09
at age 20, you're paying in just like you do now at age 40.
28:13
You stop paying in, but you don't get Social Security
28:15
benefits either. People are going to start losing
28:18
their minds saying, yeah, but how am I going to retire if I'm
28:21
not going to get Social Security benefits?
28:23
And here's where the low rate of return comes in.
28:26
Very, very comfortably is going to be my guess.
28:29
Yeah, because if you take that 12.4% that previously was going
28:35
to the federal government and people are going to say, wait a
28:38
minute, only 6.2 percents coming out of my paycheck.
28:41
The employers paying the other 6.2.
28:44
No, the full 12.4 is coming out of your paycheck.
28:47
That's correct. What's happening is that the
28:51
employer, when he hires you, knowing that he has to pay 6.2%,
28:55
is going to offer you 6.2% less than what he would have offered
28:59
you otherwise. Because he's not out of his
29:02
mind. Right.
29:03
No, he said. This is a cost to employing the
29:06
guy. And you know, the employer is
29:08
getting someone's got to pay this.
29:09
The employer is not going to pay it.
29:11
So the the leveraging angle here is the interesting one, right?
29:15
Because if you're getting a 1% rate of return in this mandatory
29:21
government program, but any rational human being can expect
29:26
over time to average at least 8% a year in the market.
29:31
Oh, better than that, yeah. So Social Security is paying is
29:35
you're in effect, you're getting 1% better than inflation A a
29:40
portfolio that's diversified across stocks and bonds.
29:44
So picture, picture something very conservative, 50% stocks,
29:48
50% bonds. That kind of portfolio you can
29:52
expect to earn about 5 1/2% above inflation.
29:57
So if you got inflation of 3%, think 8.5%.
30:03
Now if you want 100% stocks, now you're talking 12 to 15%, right?
30:08
But of course it's but also. We're talking -10% in any given
30:12
year. Oh, yeah, yeah, yeah, yeah.
30:14
This is on average, right. So this is kind of why we would
30:16
talk about the the balanced portfolio, 50% stocks, 50%
30:20
bonds, so that when the stocks go down later on they come back
30:23
up. The long and short of it is you
30:25
can do 678 times as as good in in your own private endeavours
30:33
than you can on a government plan.
30:35
Right. This is, and this is precisely
30:37
why everybody has 401 KS. They all know.
30:40
This. Yes, Yeah, exactly.
30:43
Yeah, We know that we can do better than Social Security.
30:45
In fact, we have to do better than Social Security as the
30:47
things going bankrupt. You absolutely must.
30:49
Here's the number. Our median 20 year old, when he
30:54
retires, can expect to get in today's dollars from Social
30:59
Security, 30,000 a year, that's from Social Security and that's
31:03
in today's dollars. If this 20 year old did what I'm
31:09
suggesting, pay your Social Security tax until you hit age
31:14
40. At age 40, you no longer pay
31:16
Social Security tax. That all comes to you.
31:18
You put it in a mix of stocks and bonds.
31:22
By the time you retire, you will have built up around somewhere
31:29
±404 hundred, $500,000. The bottom line is you can pull
31:37
off from that $45,000 a year and by the time you reach age 100,
31:43
the thing will be gone. So you can actually.
31:46
With this, believe it or not. With this plan end up with 50%
31:50
more in retirement. I looked up almost exactly this
31:54
number a couple of days ago, not even realizing that we were
31:57
going to talk about this today. If you've got about $500,000,
32:02
you can pretty comfortably live between 17 and 40 years, yeah,
32:09
depending on your spending habits, right?
32:11
So yeah, you know, on average it's going to be 25 to 30 with
32:17
old people spending habits. And if you start taking it out
32:20
when you're almost 70, yes, it gets you to almost 100.
32:25
Yeah. And then now remember there's
32:28
people will be thinking about things like the 4% rule and the
32:32
4% rule says you could take out 4% of your retirement funds each
32:38
year. But that assumes that you want
32:41
to preserve the principal, right?
32:44
In effect, you're only living off the interest.
32:46
I'm assuming here that you're going to draw down the principle
32:49
so that by time you reach 100 it's all gone.
32:51
Yeah, and and that's a perfectly reasonable thing to think.
32:54
Yeah. And if you don't like that, you
32:55
know, tighten your belt a bit, you've got plenty of room
32:58
because you're making 50% more than you would have on Social
33:01
Security. And unless a miracle occurs and
33:04
our average lifespan goes to about 230, which is, hey, let's
33:10
face it, the kind of problem you want to have, if that happens,
33:14
we're going to need new answers. But that's probably not going to
33:17
happen anytime soon. So really what we're looking at
33:21
here is giving people a better answer, which will yield them
33:27
more money in their pockets at the end anyway.
33:32
And we'll also have the net effect of Sun setting Social
33:36
Security completely. Yes.
33:38
So this is this is one of the nice things about this.
33:41
If everybody as they hit age 20 comes on to this plan of you pay
33:47
in, you pay in until you're 40 and then you walk away.
33:50
We create a wave of Americans who aren't on Social Security
33:54
and after about whatever it is, 6070 years, maybe pushing 100
33:59
years, nobody's on Social Security.
34:01
You've sunsetted the thing. That's item number one.
34:05
It's even better than that, aunt, because not only is that
34:08
going to happen, but you can start saying, OK, we're at the
34:12
point now where it's 39 years old.
34:16
Now it's 38, now it's 37, right? So that the gap shrinks over
34:22
time. It's not just you pay until
34:25
you're 40, it's the first batch of people pay until they're 40.
34:29
And we're going to do that until we can lower it to 39 or even
34:33
35, whatever. You could imagine doing that,
34:38
but I got to get the politicians on board and they're not going
34:42
to like that because you have you will have shut off a huge
34:46
source of revenue, the federal government.
34:49
Up until about 10 years ago, the federal government was living
34:54
off of the Social Security surplus.
34:56
And I'm I got to take issue with your phraseology here.
35:01
I'm not shutting off a massive portion of a massive, massive
35:05
stream of revenue. I'm shutting down a massive
35:08
stream of debt. You're we're shutting down the
35:11
stream of debt if, if we let, if we have people come on, pay into
35:16
Social Security till age 40 and drop off.
35:19
If you start backing that age up, eventually nobody's paying
35:24
into Social Security and that's what's going to annoy the
35:27
politicians. Good.
35:30
Good. OK if.
35:30
There's nobody on Social. If there's nobody on Social
35:33
Security, there shouldn't be anybody paying into it.
35:37
Yeah, see, and, and therein lies the problem.
35:39
And I'm, I'm with you 100%. If nobody's, if nobody's on
35:42
Social Security, why is anybody paying into it?
35:45
Because the politicians have come to rely on the Social
35:49
Security surplus. This is revenue coming in that
35:52
they use for other things. And they're going to turn to us
35:54
and say, well, if nobody's paying into Social Security,
35:57
even though there are no retirees out there, we're going
36:01
to have to cut government programs because this money is
36:03
going over here to pay for these various other things.
36:06
As of 2033, it's insolvent anyway.
36:11
Yes, there as of 23 there's insolvent any.
36:14
Surplus. There will be no surplus from
36:17
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37:27
Let me hold this this dropout date at age 40 for the moment.
37:33
So imagine moving forward forevermore.
37:37
You hit the workforce age 20, you're paying your Social
37:40
Security tax. You hit age 40, no more tax, but
37:44
you don't get benefits either. After about 60 to 100 years,
37:48
everybody who was on Social Security dies off.
37:51
Nobody's on Social Security anymore.
37:53
Oh, and by the way, we just missed overlooked an important
37:56
thing. The people who are currently on
37:59
or near Social Security, they don't have to worry.
38:03
They're going to continue to be paid from all those 20 to 40
38:07
year olds who are coughing up money.
38:09
So nobody's losing here. People who are on Social
38:12
Security or even people who are younger.
38:13
Let's say you're 50 years old right now, you haven't had the
38:17
time to save up. It's OK, you can stay on Social
38:20
Security. This switch is only for people
38:23
who are current, who are going to be coming on as age 20.
38:26
Come on, at age 20, you pay in. At age 40, you stop paying and
38:30
you don't get benefits. OK, that's, that's one factor.
38:34
Here's the other interesting factor or two interesting
38:37
factors, I should say. This is going to create a huge
38:43
deficit currently under, as is Social Security.
38:47
Deficit is supposed to reach about 3/4 of a trillion dollars.
38:51
Maybe continue to increase a bit thereafter, but think 3/4 of a
38:55
trillion to a trillion dollars per year deficit.
38:58
This plan maxes out at a deficit of 1.5 trillion.
39:04
Now you say, Oh my God, this is costing us more than the current
39:07
problem. No, no, no, because it maxes
39:10
out. In fact, we'll show you the
39:11
graph. It maxes out in terms of
39:14
deficit, as the people who are currently on Social Security are
39:18
still there. They haven't died yet, but as
39:20
they start to die, all of a sudden we have people paying in
39:25
and fewer and fewer, and eventually nobody drawing out.
39:29
So that long term, this plan generates a $450 billion per
39:36
year surplus forevermore. You got to go through this
39:40
downturn as we make the transition.
39:43
And the whole transition is going to run you 50 to maybe 100
39:49
years. Maybe 100 is an overstatement.
39:51
50 to 75 years is going to take for this whole transition to
39:55
take place. We're going to have to borrow a
39:57
lot of money as the transition is going.
39:59
But once we're through the transition, Social Security
40:02
becomes a free gift to the government.
40:05
Here's 450. Five, $100 billion a year.
40:09
Do with it what you want. Politicians are for it, retirees
40:12
are for it, young people will be for it.
40:14
I don't see anybody who would be against.
40:16
It I'm against it, why are you against it?
40:18
Because the minute that nobody is on Social Security, nobody
40:24
should be paying a tax. Yeah.
40:26
So philosophically, I agree with you.
40:30
Practically, I'm going to speak practically from political
40:33
standpoint. That ain't going to happen.
40:34
Here we go, here we go. How did we get here?
40:39
And and look, I, I see you, you trying to dangle something in
40:44
front of politicians say looky here boys, I got half a billion,
40:49
half a trillion every year for you forever.
40:52
But the politicians will all be dead and gone, too.
40:56
They're worried about the next election cycle.
40:58
They are not worried about Social Security and they won't
41:02
be until 2033. When we have.
41:06
To either lower benefits in the form of lower cash payments or
41:11
higher retirement age, or borrow more money or borrow more money
41:16
or raise the tax on everybody and you know.
41:21
That that is really the Achilles heel of this plan.
41:25
It's not the mathematics, it's not the economics, it's the fact
41:28
that it requires the government to stick to a plan for 50 to 70
41:33
years. And to be resolute in doing so,
41:37
it, it's beyond patience. It's, it's it's resolve.
41:42
And yeah, I don't know that there's a politician in this
41:45
country, in these United States, who has that kind of resolve.
41:49
I I really don't. Even if there were, the the
41:52
politician will be dead long before we reach the 50 to 70
41:56
year mark. I'm I'm willing to stipulate
41:58
that this is literally the smartest idea there is for
42:04
addressing the Social Security fiasco.
42:07
And it's never going to happen because no one will ever address
42:11
the Social Security fiasco. It's called the third rail in
42:14
American politics for a reason. You don't touch it, but we've
42:19
gotten to the point now, and I think we said this on a recent
42:22
podcast, where the mandatory spending, which is Social
42:26
Security, Medicare, Medicaid, and a couple other little
42:28
things, is so profoundly huge at this point that you can't
42:33
address our budgetary problems without first addressing those.
42:38
Yeah, it the mandatory spending eats 100% of the tax revenue and
42:43
then eats more. So literally we have no money
42:45
left for anything else, right? Once we've paid out Social
42:49
Security and Medicare. You, you raise a good point
42:52
here, which is we lay out this plan and say, look, this is the
42:56
way you can do this. You can get out of Social
42:58
Security and nobody falls through the cracks and the
43:01
government ends up better off and retirees end up 50% better
43:04
off. All of that.
43:06
And it's not going to happen because politically it just
43:11
can't. And So what is going to happen,
43:15
what is going to happen is we're going to come right up to the
43:18
line of Social Security's insolvency.
43:20
They'll be a little bit of tweaks as we get closer to
43:24
extending the retirement age or raising the the payroll tax.
43:30
Those tweaks will probably by, I'd say, 10 years, just enough
43:37
time for the politicians who are promoting them to get out of
43:42
office and leave the problem to somebody else.
43:44
So then you've got an even bigger problem.
43:47
You're right back where you started, only it's larger than
43:49
it would have been otherwise. Yep, the only way this ends is
43:54
for Social Security, the amount paid out to individuals to
43:58
become meaningless. Yeah, and that's not going to
44:00
happen because it's automatically indexed for
44:02
inflation. You'd hope that overtime,
44:06
inflation would make it meaningless now.
44:08
Sooner, sooner or later, that's what's going to happen.
44:11
It'll, it'll be de indexed right.
44:12
There's there's no way, there's literally no way to continue on
44:17
the path that we're on. And, and people who are going to
44:21
jump up and say, well, what about the rich?
44:23
They don't need Social Security, granted, but the number of rich
44:28
people who don't need Social Security is relatively small.
44:32
And the Social Security they're getting is not based on how much
44:35
they're earning. It's based on the cap, which is
44:38
like 160 or $170,000. So from Social Security's
44:42
perspective, when they look at Elon Musk, they see somebody who
44:47
earned $170,000 and that's how his benefits will be based.
44:52
He's a vice president of a local bank.
44:55
Right. Yeah.
44:55
And so you can cut them out and maybe you can gain yourself
44:59
another five years, but in five years by at the end of that five
45:03
years, you're right back where you started.
45:05
This is a. The program has got to be ended.
45:09
That's the the more we extend its life, the worse the problem
45:12
becomes. That's right.
45:14
And and we rarely say things like have to, but we have to end
45:20
this program. And you know what, You could
45:22
bring me on board almost entirely if you said.
45:25
And once it once it was finally ended, we could take that half a
45:31
trillion dollars and apply it directly to the debt.
45:34
Yeah, yeah. Because not now you got
45:37
something. Now you've solved not one but 2
45:40
problems. Yeah.
45:41
The problem with that is you apply to the debt and the debt
45:44
gets better. And when the debt gets better,
45:46
there's less political pressure and the politicians start
45:48
spending more, and then you're right back where you started.
45:51
But frankly, aunt, the debt is literally out of control and
45:56
I've never heard a politician say, OK, this is the year we
45:59
spend less. Right.
46:02
So. Oh no.
46:05
Now, to be fair, they will say we're going to spend less.
46:09
But when a politician says they're going to spend less,
46:11
what they mean is, right. What?
46:13
No, what? But what they mean is they're
46:15
going to spend less. The increase that they're going
46:18
to, that they're going to institute, is less than the
46:21
increase that they'd like to institute.
46:23
It's not a reduction. It's a smaller increase.
46:27
That's that's exactly how I cut guitar spending around this
46:31
house. I, I wanted to spend $300
46:37
million on guitars. I spent $3000 on guitars that
46:43
that's like a well, I can't even figure out how big you.
46:46
Cut your spending by 99.9%. That's right, isn't it?
46:51
I cut my spending and and yet there are people who live in
46:55
this house with me who will not accept that math because it's a
46:59
bunch of nonsense. And if it's a bunch of nonsense
47:02
here, trust me, it's a bunch of nonsense there.
47:05
Let let me go back to things that they'll try.
47:09
So they'll try tweaking the, you know, increasing the payroll
47:12
tax. They'll try raising the
47:14
retirement age. They'll try means testing, which
47:18
basically means that the rich don't get Social Security.
47:21
And all of those things are going to they'll buy you some
47:25
time, but that's all they do. They buy you time.
47:27
And in this instance, buying time is a is not a good thing.
47:30
It's a bad thing because the more the longer Social Security
47:34
persist, the bigger a problem it becomes.
47:36
It's not like we're going to buy time because then we'll be able
47:39
to solve the problem. No, the problem actually gets
47:41
worse as you buy time. So where it where it ends up
47:45
ultimately? You're leaving out the most
47:49
draconian thing that the government is going to do.
47:52
Yeah. What it is going to do is, is a
47:55
2 step process. Step 1 is going to be simply
47:58
borrow. It's going to borrow more and
48:00
the the deficit's going to accelerate.
48:02
And as the government starts to run out, as it already is run
48:07
out of places where it can borrow more money, the Federal
48:10
Reserve's going to step in and it's going to start in effect
48:13
monetizing this. You can use the word print money
48:17
if you like, but it has the effect of creating inflation.
48:20
So all of us are going to end up, do you remember the
48:23
inflation of 2022 when we all paid via inflation for those
48:28
stimulus checks during COVID? We're all going to be paying via
48:32
inflation for an insolvent Social Security.
48:36
And still, you're leaving out the most draconian part.
48:39
The government is going to survey the landscape, and
48:43
they're already going to know the answer how much money you
48:46
have in your personal retirement accounts.
48:49
And then a bunch of people who have too much aren't going to
48:51
get Social Security at all. Yes, in fact.
48:56
They've done, they do that already with student loans.
48:59
If you are diligent and you save for your kid to go to college
49:02
and then you go to apply for financial aid, what do they do?
49:05
They say, oh, you saved $100,000 so you no longer are eligible
49:10
for financial aid. How about that?
49:13
Yep, the government will. Do this and and it's not going
49:17
to be quote UN quote the rich, it's going to be people with a
49:22
half decent nest egg who were also relying on getting the
49:28
return from Social Security to maintain a reasonable lifestyle.
49:32
So it's going to start with people who have a lot of money,
49:36
and everybody's going to say pay your fair share.
49:39
And it's going to quickly become everybody all the way down to
49:42
the working class. Yeah.
49:43
And notice something it doesn't. Matter at the high end.
49:47
Elon Musk doesn't care if you cut his Social Security.
49:50
He earns that much in interest probably every 20 minutes.
49:55
Who is going to care is the middle Class 2 income household
49:59
that scrimped and saved and managed to put away one maybe
50:02
$2,000,000, which is imminently possible on middle class incomes
50:06
if you're careful about what you're doing.
50:09
And all of a sudden the government's going to say, OK,
50:11
you don't get Social Security. Well, hang on, that's now a big
50:16
hit to their retirement income, but it's going to happen.
50:20
Yeah. Yep.
50:21
But you know we. We like at the end.
50:23
Typically to to say So what? And here it is.
50:27
So what? Well, all of this, every last
50:31
bit of it can be avoided. We're in a terrible position and
50:36
we've just given you a plan that will absolutely work.
50:41
There's literally no doubt that this would work.
50:45
And every single person. I mean, this is literally.
50:50
True everybody's. Better off if we do it.
50:53
So if we don't do it, that's because a bunch of politicians
50:56
would rather we had a problem. Yeah, or they'd rather sail
50:59
through and not deal with. It leaving it to the next guy,
51:02
Well, that definitionally that means they would rather.
51:05
That we have a problem. That is their revealed
51:08
preference, right? Pay attention.
51:10
Never pay attention to what people say.
51:12
Only pay attention to what they do.
51:15
And what do politicians do about Social Security?
51:18
They kick that can down the road, year after year after
51:21
year. That means, one, that they don't
51:23
care about it. One thing we can do?
51:26
As voters is stop asking politicians to fix Social
51:32
Security every every fix simply extends the inevitable.
51:38
We need to start asking them to shut it down.
51:41
And Social Security, Yeah. There's plenty of push behind
51:44
has been for. Years in the Fed OK I can I can
51:48
maybe get behind that but a much more pressing thing is end
51:51
Social Security yeah, it is a lot more pressing and it.
51:55
Has immediate effects on the vast majority of the people who
52:00
live in this country. And yet, here we are, shaking
52:04
our heads at one another, knowing full well that this is
52:07
very definition of an uphill climb.
52:11
Well, just. Think, just think, James, in 10
52:14
years people are going to be sending us hate mail saying why
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didn't you guys see this coming? And in 10.
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Years I'm going to be retired. Take that America, Words and
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numbers is a civil original. Podcast We work with Civil to
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advance their mission of upgrading civilization by
52:34
exploring ideas that promote civic equality and cooperation.
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We believe the most pressing issues humans face, war,
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poverty, debt, tribalism, arise from coercive institutions that
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bring out the worst in us. We at Civil look to voluntary
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solutions to these and other problems.
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We invite you to explore Civil's new platform at civil.com
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thatscivl.com.