The debate about Social Security: Age, wealth and taxes

Panelists were in agreement Wednesday that a bipartisan deal will have to be made to change the way Social Security is run to shore up the entitlement program.

What that deal consists of, however, will be shaped by who shows up to advocate for the remodel.

Senior citizens know what they want out of their federal programs and are mobilized to get it, Russ Greene of the Prime Mover Institute said, but younger generations will lose out in the end if they don’t mobilize. The backroom deal will be biased toward the people who actually show up, he said.

That was on display Wednesday at the Committee for a Responsible Federal Budget’s event focusing on wealth, retirement and the generational divides, where a minority of the attendees were of younger generations.

Social Security is less than seven years from insolvency, at which point the law will call for a 24% cut to all benefits.

Despite facing deficits, Social Security continues to pay the country’s wealthiest couples roughly $100,000 in annual benefits. Just a few people enjoy the generous benefits currently, but that number will become increasingly more common, the committee said.

The committee proposed a Trust Fund Solutions Initiative that will aid Social Security solvency by creating a Six Figure Limit, setting a $100,000 cap on the total benefit a couple can receive. It would be adjusted based on marital status and the age at which people claim benefits, with a single retiree at the National Retirement Age limited at $50,000.

Over time, this could close part of the solvency gap and save more than $100 billion in a decade.

Greene was joined by Matthew Yglesias, a journalist who writes about economics and runs the Slow Boring Substack, and Marc Goldwein, senior vice president of the committee.

They discussed the concepts behind what Greene coined as Total Boomer Luxury Communism: a term used to describe how taxing younger generations diverts wealth to the baby boomer generation, enabling a more comfortable life for the older generation and putting that luxury out of reach for younger Americans.

They questioned why younger adults were trending so far left that they were turning to socialism like that of New York City Mayor Zohran Mamdani — blaming that trend on a federal government that spends more on older Americans.

“So in that context, if you think about their dissatisfaction with the status quo, it’s a rational response,” Greene said.

How did we get here?

Goldwein explained the committee’s proposal comes just a few years before Social Security is insolvent. Once it does, everyone across the board will get a cut in their benefits. Meanwhile, the richest Americans, those who have accumulated millions of dollars, are receiving $100,000 from the government each year.

The committee is proposing giving those Americans $100,000 but no more, or $50,000 for a single adult, and index it going forward to “stop the bleeding from people that can afford the most,” Goldwein said.

“The idea that Social Security would pay a couple $100,000 in benefits just strikes the average person as ridiculous,” he said.

When Social Security was created in 1935, there was an “embarrassment of wealth” in the system because there were a lot of workers paying into the program and very few who were collecting from it. The government spent that money on expanding benefits, and since 1972, the benefits have been reduced, but not enough; indexing is outpacing the ability to finance the program because demographics have changed and it’s gone from five workers per retiree to three and heading toward two, Goldwein explained.

Yglesias said that in recent years, both political parties have moved toward expanding Social Security benefits when the opposite was necessary. The Biden administration made benefits more generous through the Social Security Fairness Act and President Donald Trump supported the no tax on Social Security measure.

“One of the big trends over the past 25 years is that the existing safety net for the elderly, which was already much more generous than what we do for young people, has gotten even more generous under both parties,” he said.

Scaling back Social Security benefits isn’t popular, Yglesias acknowledged. Most people view the program in a positive light and want it to be available when they reach retirement age, knowing that they paid it forward when they were employed. People generally are less supportive of other programs like Medicaid, because they see the beneficiaries as “freeloaders,” whereas the elderly are viewed positively and it is “hard to take their money,” he said.

Greene said that by coming up with the Total Boomer Luxury Communism concept, he’s not trying to get younger Americans mad at the older generation for its wealth, but rather “direct preexisting anger” about wealth in the U.S. toward positive solutions.

As it stands, Americans believe that Social Security is a social contract. The country would be violating that contract by giving a multimillionaire couple $100,000 instead of $110,000 a year as they were expecting. But Greene argued that even if it existed, the contract should have been thrown out the window when the country surpassed $39 trillion in debt that has largely left the “younger generation with the bill.”

Are changes to Social Security politically possible?

Yglesias believes that to make changes to Social Security, people don’t need to be riled up and angry at the boomers. These issues will likely be addressed in “quiet rooms by tedious technocrats,” he said.

He noted that in previous decades, under the Obama administration and during Mitt Romney’s presidential campaign, there was willingness to have bipartisan discussions about how to change some of the country’s biggest programs.

Greene added that the room of technocrats will need to be bipartisan but also include an array of people from different generations. As it stands, there’s “total asymmetry” on the issue and young people need to start getting involved to advocate for what they want from their federal benefits, he said.

Goldwein acknowledged that it’s a tough sell to the American public to make changes to the program, but said the cost of doing nothing and hitting insolvency will be worse.

What would the benefit be to change Social Security to favor younger generations?

Panel moderator and Wall Street Journal reporter Greg Ip posed a “provocative question” to the panelists, knowing that for every $6 the federal government spends on senior citizens, just $1 goes to children. But, he wondered, “what is wrong with that six to one ratio?”

Ip noted that most public resources that go to young people are delivered at the state and local level, so why should the federal government pay more to them when they are typically healthier and don’t need funding for health purposes and have their entire productive lives ahead of them to earn money?

Goldwein replied that children should be invested in because there will be a return on the government’s investment. Children are going to give them a higher return than the elderly, who are past their working years. Seniors, he said, are also the wealthiest generation in America today and in the “history of the known universe.”

Data from the Federal Reserve, Ip said, show that since 1989, the elderly share of the population has gone from 8% to 12% and their share of all households has grown from 19% to 32%. In addition, their share of all equities has gone from 32% to 39%, meaning that seniors control a massive portion of corporate assets in the United States. It’s part of the reason young adults on either side of the political aisle are turning against capitalism, the panelists argued.

“This idea that you could keep upwardly redistributing because that’s the way we’ve always done it doesn’t strike me as quite right,” Goldwein said.

Yglesias made the argument that the funds shouldn’t solely be going to kids aged 18 and younger, but rather to the parents of children. The government doesn’t offer much financial support for the “work of parenting” and it’s seen in the declining birth rates, he said.

When funding does go toward benefiting children, it typically only goes to the poorest, whereas Social Security is a guaranteed benefit for all senior Americans. However, most middle-class families say that having additional children is a “significant financial burden” that isn’t “meaningfully relieved” by existing policy, Yglesias said.

There should be government incentives for empty nesters who potentially are retired and receiving Social Security benefits to free up family-sized homes for young, growing families, he argued.

“We want to have a society that is thriving in a long-term sense, which means people are having and raising children, not just out of some grim sense of duty, but (because) it’s really pleasant and fun and easy to get a big house and a backyard and so on and so forth,” he said.