Latest / Conversations: Special Guests with Preston Scott / The Undeniable Facts and Truth About Social Security

Transcript

The Undeniable Facts and Truth About Social Security · Conversations: Special Guests with Preston Scott

• 0:12
  Third hour of the morning show. Good Morning. It is a program five
• 0:16
  thousand, one hundred and fourteen. If you're new to the show, yeah,
• 0:21
  we've been at it a while and we are grateful that you are sharing
• 0:25
  time with us, whether you are in the terrestrial broadcast area or listening across
• 0:31
  the country around the world on iHeartRadio. Thank you very much for making time.
• 0:36
  I promise it will be worth it. I came across some misinformation,
• 0:44
  some disinformation on social security, and I knew that I needed somebody better than
• 0:49
  me to explain where social security is how we got where we are, and
• 0:56
  so I reached out to our friends at Heritage Foundation. I said, I
• 1:00
  need an expert. I need Rachel Gressler with us, and she is here.
• 1:04
  She is senior Research Fellow Workplace and Public Finance and the Row Institute.
• 1:11
  And Rachel, thank you for making time for us this morning. How are
• 1:14
  you. I'm doing great things. I need to give people an overview of
• 1:21
  the history. Where did social securities start and why? Thank you for wanting
• 1:29
  to talk about this and to start at the beginning, because I do think
• 1:32
  that that's important. So social security started in the wake of the Great Depression,
• 1:37
  when many Americans had lost their entire life savings. So it started as
• 1:42
  part of President FDR's Economic Security Council, and they recommended that there'd be some
• 1:46
  form of retirement program so that younger generations would not be financially responsible for older
• 1:53
  generations if they lived long enough that they had outlived their savings and were no
• 1:59
  longer able to work. So it was intended to be a relatively small anti
• 2:04
  poverty program. People would pay into it, they'd get a benefit out in
• 2:07
  the future, but it has grown massively over time. The benefits now are
• 2:13
  about three and a half times what they were to begin with. Life expectancy
• 2:15
  is also about three and a half times what it was, and so over
• 2:19
  time, instead of it actually being a program that people contribute into and then
• 2:23
  the money waits there and earns a rate of return from treasuries and is there
• 2:28
  for them a retirement, what's actually happened is that Congress has spent all those
• 2:34
  contributions, those payroll taxes that we all pay, and they've essentially borrowed them.
• 2:39
  Now we're at a point that go ahead, go ahead, go ahead.
• 2:44
  We're at a point now and for the past thirteen years that the program
• 2:46
  is actually paying out more than it's taking in every year, So we're already
• 2:50
  starting to have to pay back those amounts, and starting in twenty thirty three,
• 2:54
  the program trust fund will be insolvent and we'll only be able to get
• 2:59
  the benefits that coming in each year. Trure or false? Did FDR intend
• 3:05
  on this being a program in perpetuity or was it designed initially to have an
• 3:10
  end date? I believe it was designed to be in perpetuity, but it
• 3:17
  was designed so that at one point the first generation of recipients would get more
• 3:23
  than they had paid in, but that that would be made up over time,
• 3:25
  so that it would not be as it is today, a pay as
• 3:29
  ego system where every dollar in goes immediately out to pay current benefits. That
• 3:32
  was not intended. Yeah, I remember the day that I told my mom.
• 3:38
  It was the nineteen eighties. My mom has since passed away, but
• 3:40
  I said, Mom, all your Social Security money is gone. It's been
• 3:46
  spent, and she looked at me like I had just shot her best friend.
• 3:53
  She didn't believe it, and that's something that I think most people that
• 3:58
  are older don't fully un stand. They thought it was a savings account.
• 4:02
  It is anything but that exactly, and that's really important to start there,
• 4:09
  because that's why reform is so difficult, because everybody feels like you're taking something
• 4:13
  away from me that I put into this account and it's there, and that's
• 4:16
  just not the reality. And that's why we want to kind of shift out
• 4:20
  of Social Security being such a big program because the fact that it didn't go
• 4:26
  into an account that actually earned a positive rate of return is what has stripped
• 4:30
  people of having hiring incomes in retirement because today, ten years from now,
• 4:36
  our benefits are a percent on what policymakers in Washington are willing to take out
• 4:42
  of retirees kids and grandkids' paychecks. It's not like rate of return, it's
• 4:46
  earning. That's simply howre you willing to take from workers to pay to current
• 4:50
  retire Rachel Gressler with us. She's with the Heritage Foundation. She's a senior
• 4:56
  research fellow. Rachel's stand by your phone's breaking up on us a little.
• 5:00
  I'm hoping the cell towers will cooperate. Then again, it could just be
• 5:03
  a plot to keep the truth from being spoken. I don't know. I'm
• 5:06
  just saying we'll be back more with Rachel next two decades of doing morning drive
• 5:12
  radio differently doing it his way like old Blue Eyes, except he has a
• 5:17
  little more hair. The Morning Show with Preston Scott just about twelve minutes past
• 5:27
  the hour, the Truth about Social Security this morning, and we are just
• 5:31
  this is sixty thousand foot view stuff. This is you know, getting outside
• 5:36
  the trees, taking peak at the forest in the time we have with Rachel
• 5:40
  Gresler with the Heritage Foundation. Rachel, I'm gonna make the statement that I've
• 5:44
  made at nauseam for the twenty two years I've done this program, and people
• 5:47
  don't believe me. But I feel that it's incumbent upon folks to understand this,
• 5:55
  despite the fact that it might be political suicide. The fact of the
• 5:59
  matter is social Security is not a guaranteed benefit. Congress, if they wanted
• 6:04
  to, could stop paying it. They're not obligated to pay it. Correct,
• 6:11
  That is correct. There we have no true entitlement to Social Security and
• 6:15
  that was actually a decision of a Supreme Court case. I when I heard
• 6:19
  Nancy Pelosi years ago say it's a guaranteed benefit. No it's not. And
• 6:26
  even the Social Security website uses the word guaranteed. And that is a lie.
• 6:33
  It is a lie. And that's the problem with a lot of Social
• 6:36
  Security and some other predominantly one define benefit pensions. We talk about these paying
• 6:43
  a guarantee, but the guarantee is really just whatever is left there. And
• 6:48
  today we can count seventy five percent of what Social Security today pays to actually
• 6:55
  be there for anybody who is fifty six or younger when they retire. All
• 6:59
  right, let's let's set the actual lay of the land here. What is
• 7:04
  the status of the account? What's in it? What are the unfunded portions
• 7:10
  of this? Where we what are we looking at? So Social Security is
• 7:15
  notional trust fund. There is actually no money in it, but it will
• 7:20
  be insolvent, there will be nothing left, no right to even reclaim past
• 7:25
  borrowing, beginning in twenty thirty three. At that point, benefits would be
• 7:30
  cut across the board by twenty three percent. That's the status quo. Congress
• 7:33
  does nothing, So that's about a five three hundred dollars cut per year.
• 7:38
  If we want to avoid that, what do we need to do? Well?
• 7:41
  Social Security has promised about twenty two point four trillion dollars in unfunded obligations.
• 7:47
  So if you think twenty true trillion. What does that mean? But
• 7:50
  break that down to per household level, that's one hundred and seventy two thousand
• 7:55
  dollars for every household in America. That is essentially the cost of keeping the
• 8:00
  program as it is today, no increases and benefits, just maintaining current benefits.
• 8:05
  In terms of taxes, the tax today is twelve point four percent.
• 8:11
  Depending on whether you use Social Security or the CBO, that tax needs to
• 8:16
  rise to about fifteen point eight to seventeen point five percent. So that's an
• 8:20
  extra roughly thirty eight hundred dollars per year potentially for every household to have to
• 8:26
  pay in Social Security taxes if we want to keep the program as it is
• 8:30
  today and have no benefits cut. That's staggering. And I think people listening
• 8:35
  right now are either they're turning off their radio because they can't believe it,
• 8:39
  they don't want to hear anymore, or they're vomiting. I mean, there
• 8:45
  is no bright side of this story. There's not. And that's a difficult
• 8:48
  problem. When I'll start to talk about reform and they get criticized saying you're
• 8:54
  going to cut Social Security and you want to throw gram off the cliff well,
• 8:56
  the reality of the program today is that everybody gets a significant benefit cut
• 9:03
  if something's not done to reform the program, And so talking about reform is
• 9:07
  actually preventing those much larger benefit cuts from happening. Are those much larger tax
• 9:11
  increases? The longer that we wait, the bigger that the consequences are that
• 9:16
  twenty two point four trillion dollars back in twenty ten, it was only five
• 9:20
  point four trillion. Had policymakers taken action, then the cost of reform would
• 9:26
  have been so much smaller. Rachel's standby, We're going to pick up there.
• 9:28
  We're going to look at possible reforms, what makes sense. I know
• 9:35
  what I recommended years ago, which, of course no one's going to listen
• 9:39
  to. I mean, who am I I I don't nobody, but Rachel
• 9:41
  Gressler's smart and so she's going to bring some ideas to the table. Next,
• 9:46
  we're just chatting away the break, Rachel Gressler with me from the Heritage
• 9:52
  Foundation. We're talking social security. All right, We've we've broken the bad
• 9:56
  news, we've bust the bubbles, we've we've depressed everybo Now, what are
• 10:01
  some realistic reforms that could take place if there was the political nerve to do
• 10:09
  it, Rachel, Yes, And social Security is actually relatively simple and straightforward
• 10:16
  to solve. It's a lot easier than Medicare. And so you just kind
• 10:18
  of go back to the basics of the program and what were its intense and
• 10:22
  try to get back to those original purposes, and that includes protecting people from
• 10:26
  being in poverty and old age when they're no longer able to work. So
• 10:31
  you start with shifting the benefits. I would move towards a universal benefit based
• 10:35
  on the number of years that you have worked and contributed to the system,
• 10:39
  because when you think about it, it doesn't make sense for a social insurance
• 10:43
  program to pay the highest benefits to the people who have the highest earnings,
• 10:48
  and then we'll end up with the system in which the lowest income earners might
• 10:52
  still be living in poverty while getting that Social Security benefit. So if you
• 10:56
  gradually shift down benefits at the top and you actually increase them at the bottom,
• 11:01
  in you know, three four decades from now, everybody who's worked the
• 11:05
  same number of years earns the same benefit, and it's something that keeps you
• 11:07
  out of poverty if you have a full career. And then you address the
• 11:11
  fact that people are living longer, and so you index the age of eligibility
• 11:16
  to life expectancy, you can use a more accurate inflation measure that gets you
• 11:20
  to solving the program and actually saving money. So Social Security takes twelve point
• 11:26
  four percent of everybody's paycheck today, well originally it took two percent, and
• 11:31
  the founder said, this will never take more than six percent of your income.
• 11:35
  So we've got to get that back so that people can actually have some
• 11:39
  money left over in their paychecks to save on their own. Well, that
• 11:41
  actually gets to the second step. So let me ask you, Well,
• 11:46
  let me ask you a question before you get to step two, Rachel,
• 11:48
  what would you say to those out there, because I can hear the ruminators
• 11:52
  of this program thinking, yeah, but I had more taxes taken out of
• 11:56
  my paychecks. Yes, I earned more money, but I also had more
• 12:01
  money taken out yes, And then I hear that and it is a bad
• 12:07
  deal. That is the reality of Social Security today. And that's why the
• 12:11
  people who are close to retirement there's going to be very little change for them.
• 12:15
  But it's going to be the younger generations who are just starting off to
• 12:18
  work today who are going to be into this new system, and by being
• 12:22
  in a system that has a lower benefit, you're not going to see that
• 12:24
  twelve point four percent go up to seventeen point five. Instead, it's going
• 12:30
  to go down over time to ten percent. So yes, you're going to
• 12:33
  have a smaller benefit, but you're going to pay significantly less in taxes over
• 12:35
  your entire career. And by the way, if you don't love this system,
• 12:41
  you can have an opt out wherever you are in your career. You
• 12:45
  can say, look, I've earned some type of benefit whatever's payable to date,
• 12:48
  but going forward, I'm not going to earn any more benefits, and
• 12:52
  I'm going to get to take my portion of the Social Security tax that half
• 12:54
  of it paid by the employee, and that's going to go in my own
• 12:58
  personal accounts, similar to like the government's thrift savings plan, and you're going
• 13:03
  to actually earn a positive rate of return. And the result of that,
• 13:05
  for probably nearly every American is going to be that you'll be better off having
• 13:09
  half of your money earn a rate of return than having all of it go
• 13:13
  into Social Security. What about the employer's portion under this proposal, do they
• 13:18
  continue to contribute or are they then alleviated of the burden. Under our proposal,
• 13:24
  they would continue to contribute and that would go towards making the program solvent.
• 13:28
  It's a bit of a buyout saying I'm still willing to contribute into this
• 13:33
  program, but I just want to take at least my half of the tax
• 13:35
  with me, and I think I can do better off and most people can
• 13:41
  and that over time. And that's a part we did talk about in the
• 13:43
  break that needs to be considered. If we don't do something and we have
• 13:48
  to raise payroll taxes, that is going to create more and a significant pressure
• 13:54
  of inflation on the economy. Absolutely, it is because employers are going to
• 14:01
  be paying more. Employees are going to have smaller paychecks, even if it's
• 14:05
  costing employers more to pay them. And the result of that is that they
• 14:09
  actually are going to reduce overall wages and it's just taking more out of the
• 14:13
  economy into this program. Rachel, you and I are going to stay in
• 14:18
  touch. You're my new best friend, and we're going to talk about social
• 14:22
  Security from time to time because it's really important, and it's really important as
• 14:26
  we get to the election season. What they're going to finally have the nerve
• 14:31
  to do or perhaps not do, and just keep kicking the can down the
• 14:33
  road. Thank you for all the work you do, and thank you for
• 14:37
  your time this morning. My pleasure. Thanks Preston, Thank you Rachel Grezler
• 14:41
  with us with the Heritage Foundation. You got some fact in fiction taking care
• 14:46
  of right there. You got some bitter truths and realities. And I'm telling
• 14:50
  you you better pay attention to this and demand that Congress do something. Every
• 14:56
  vote of yours needs to be connected to this as well. What are you
• 15:01
  willing to do to solve the problem. It has to change. Twenty seven
• 15:07
  minutes past the hour