Hour 3: How to save Social Security

815. Now, I don't know if you remember 2020. It was a pandemic, and the Fed had its target rate near zero to stimulate the economy. And it wasn't that long ago. I say that because here we are in the second half of 2026. And report says by 2032, Social Security could be insolvent by the end of 2032, and beneficiaries would see their monthly checks cut by almost a quarter, 22%. Romina Bacha joins us now, our guest, and she's been our guest before about Social Security. She's the Director of Budget and Entitement Policy at the Cato Institute. Good morning, Romina. How are you? Good morning. I'm well. Thank you. Let's talk about Social Security, and I don't know if you want to start with how it's funded, the Social Security Trust Fund. What happens with that? Take us through, I guess, if you will, a little bit of the history of Social Security, how it's funded, and then we'll get to where it is. I'll try to make a brief because we are talking about a 90-year history. Social Security is the oldest welfare program in the United States. And I imagine some of your readers' ears may have perked up when I called it a welfare program. There's this misconception that Social Security is a retirement savings account. We did a poll on this at the Cato Institute, and we found that one in four Americans actually believe that they have. a private account at the Social Security Administration. This is not the case. How many? One in four? One in four. Wow. Wow. Yeah. Yes. This is not the case. Social Security is funded by current workers. And that's what pays today's benefits. And even that cash is no longer sufficient. The trust fund is an so-called intergovernmental accounting mechanism. It basically says there was a time from 1983 to 2010 when Social Security was collecting more payroll taxes than it needed to pay out benefits. And those amounts were recorded in the Social Security Trust Fund. But in reality, I'm going to slow you down a little bit because I think this is important. So the trust fund came to be between 1983 and 2010 because of baby boomers aging, work, and et cetera, and they were paying more into it than Social Security was paying out. So they had to put this money somewhere and they put it in a trust fund, correct? Well, they didn't put it in the trust fund. They recorded it in the trust fund, but they actually spent the money right away. Wait, hang on. What? Yes. Yes, that's the problem. Otherwise, the money would be there. But even if the money were there. So they had a bucket that was called Trust Fund. They just didn't fill it up. Is that right? Yeah, they put paper in there. They put little IOUs in there. I got you. Okay. All right. Go ahead. Mm-hmm. It's actually a filing cabinet, not a bucket. All right. President Bush went and visited that filing cabinet in Richmond, Virginia at one point, so it does exist. Really? But yeah. Okay. Yes, yes. It's a filing cabinet. But in order to actually pay out benefits, Treasury has to borrow the money now from financial markets such that this year, Social Security will borrow more than $300 billion.

That's the shortfall between the taxes collected from workers and what Congress has promised to seniors in the United States. And the real issue with Social Security is that Congress has just promised way more than we're expected to collect in taxes, even with already very high payroll tax burden, such that the shortfall over the long term is as large as the entire public debt of the United States. at $33 trillion. Say that again. The Social Security shortfall is as large as the entire public debt of the United States. And that's $33 trillion. Yes. Wow. Why is it not insolvent now? If they're selling treasuries or buying treasuries, more than $300 billion, what's going to happen in 2032 to change things? So it is, I would say technically it's already insolvent because it doesn't collect enough revenue. But under current law, Social Security has claims to the Treasury. And so the Treasury is turning that into borrowed money. Arguably, if the Treasury wasn't able to borrow the money, maybe it would have to redirect other tax revenues to make the Social Security Administration hold there. So there is this legal tie between Treasury and Social Security. And so what happens in 2032 is there's no more borrowing authority. All of the... surpluses from the past will be accounted for, and Social Security will then have to run just on collected tax revenues. So the borrowing now is backed by the trust fund that doesn't exist, or am I missing something? Yes, yes. It's the IOUs. They're cashing in IOUs. Okay. That sounds like a show game. Let's pick it up there when we come back with Romina Bacha, who is the Director of Budget and Entitlement Policy at the Cato Institute. Yes, you heard it right. Social Security is a welfare program. You collect a lot more than you put in, and I guess you can make a case, and Romina will pick it up here, if people have been given a chance not to contribute. have their own accounts and not expect anything from the government, you could maybe make a case there. But otherwise, it is definitely an entitlement. 821 traffic now, WWL. 826, Tommy Tucker Carlson, WWL, July 6th. The day after the big week and weekend, Romina Bacha, our guest, Director of Budget and Entitlement Policy at the Cato Institute talking about Social Security could be looking at a 22% cut at the end of 2032. Somebody texted in and wants to know if America stopped helping other countries. If America stopped going to war, what impact would that have on Social Security funds? Well, the...

Certainly, wars are very costly. I don't recommend it. But the amount that we're spending on wars in no way comes close to what Congress has promised to Social Security beneficiaries in access of what we're projected to collect in taxes. Like I mentioned, we're talking about a shortfall in today's terms of $33 trillion. And this is a scale that surprises many Americans. Our Cato poll showed that 76% of respondents believe the program is at most moderately underfunded. Americans really underestimate just how much of a gap we're talking about, which is why they often fall prey to simple yet ineffective solutions, such as just eliminate the payroll tax threshold and tax higher earners and all of their incomes problem solved, well, actually would only solve about 30%. of the shortfall. So we still have a long way to go. So is there any way to resolve? First of all, on the other side of it, for people that six years is not that long from now. If they were to face a 22% cut in the budget, what would that look like for people? It would be a particularly damaging cut for individuals who rely mostly, if not exclusively, on Social Security for their income in retirement. It would throw many more seniors into poverty. I don't expect Congress to let a 22% benefit cut take place across the board. There's some arguments that the Social Security Commissioner has flexibility for how those cuts would apply. For example, if they were only applied at the very top end to beneficiaries who collect above more than $2,000 in monthly benefits, You could preserve benefits for the poorest seniors, and you would only cut them at the top end where it would do less damage because many of those individuals have other sources of retirement income, whether it's real estate or assets in financial markets. And somebody texted in about it's not welfare because you've already paid into the system, but actuarially speaking, people collect a lot more than they have paid in, right? And that's where it comes to, well, you could have made an argument if they had been allowed to make their own investment, but A, would they have and B, what would the return have been?

Well, the tricky thing is that we have a lot of legacy debt because when the first individuals collected Social Security, they basically made out like bandits. They got massive returns. The first Social Security recipient, Ida Fuller, collected a thousand percent return on her meager tax contribution because she ended up living a very long time. Social Security is longevity insurance. And it's also, it has a progressive benefit formula, but it's also true that people have been collecting it for longer and longer because the retirement age hasn't increased with improvements in longevity, such that people now live on average seven to eight years longer than when Social Security was first put in place. And yet the retirement age has not kept up with that. The other big driver of the discrepancy is that the way that Congress called it. calculates initial benefits. It's not directly based on someone's earnings or what they paid in in taxes, but they also get a huge boost from Congress applying a formula that gives them a bonus for economy-wide wage gains such that someone's wages from 1980 when they apply for Social Security, say, in 2020, get adjusted as if they had earned those wages in 2020, but not just in inflation-adjusted terms, but... what those wages would have been in 2020 given improvements in the economy. The problem is that that's not what people paid in to the program. And so you have this discrepancy that younger workers are asked to make up for because it's always been. a program that relied heavily on a younger growing workforce in order to fund benefits for retirees to whom they had been promised. The program wasn't set up as you pay in and then you get out. That was a lot of rhetoric, but it's really set up just like food stamps or Medicaid, where it's today's taxpayers that fund today's benefits. Thank you, Romaine. I appreciate your time. 831 at WWO First News now with Ian O'SN. O'SAN, I'm sorry. Fourth of July in the rearview mirror, and we look ahead to the midterm elections, 845, Tommy Tucker Carlson, WWL, joined by Justin Buechler, Associate Professor Political Science at Case Western Reserve University. Morning, Professor, how you doing? I'm doing well. How are you? I'm okay, sir. Let's talk about the midterms, and first look at what the Supreme Court ruled. They kind of got lost, I think, in some of the decisions that were handed down, National Senatorial Campaign Committee v. Federal Election Commission. Tell me what happened there. Okay, so there were a bunch of Supreme Court rulings. Remind me, was that the vote by mail? No, that was the one about campaign contributions. Okay, I'm getting lost in the ruling. I know they had a lot of them.

2010, 1994, you had a backlash against Clinton's first budget. In 2010, you had a backlash against the Affordable Care Act. We don't have those kinds of factors in place. We just have a midterm election with an unpopular president, and that tends to mean you're going to have the out-party pickup seats with the House of Representatives that has a very narrow Republican majority. That tends to mean high likelihood of the Democratic pickups in the House of Representatives. I would not call this. anything looking like a Republican washout, Democratic landslide, but you would tend to expect the Democrats to pick up seats. Does inflation play a part in any of this? Possibly, but inflation doesn't actually have a lot of predictive power for elections. Inflation probably works into Trump's approval rating a little bit, but any effective inflation is going to be factored in through Trump's approval rating, and then Trump's approval rating is going to be what's going to have predictive power. And when you say he's a relatively unpopular president, explain what you mean by that. So we can look at presidential approval at various times in their terms, and usually presidents come in with an approval rating a little above 50%, maybe a little higher. Their approval ratings will fluctuate. Some will have high approval ratings at various points in time. So if you look, for example, at George W. Bush's approval rating going into the 2002 election, it was unusually high. So that was one of these off-year or off elections. And the Republicans actually managed to pick up some seats in 2002. It's a very rare thing. And that happened because George W. Bush's approval rating was still very high after a rally around the flag effect from 9-11. So there's some variation, but President Trump's approval rating has never been very high. It has hovered usually around 40%. If you look at the polling averages, sometimes a little higher, sometimes a little lower. And that means that things are going to tend to skew against Republicans in a midterm. So you have to look at things in a comparative context by looking at where past presidents have been going into a midterm. When it comes to rally around the flag, certainly not that kind of feeling with the war in Afghanistan, Afghanistan, in Iran. Iran. Yes, certainly not. In general, public approval, public opinion ran against the war in Iran. The president did not really do much of anything to rally support. And without doing anything to rally public support until really a few weeks in when he was close to wrapping up action in Iran, public opinion ran against that war. And so if anything, there might be a bit of a negative effect, but I would expect that by November, any effect of that would probably be gone. All right. Let me take a break. We'll pick it up here when we come back. Speaking of rally, the president is explaining.

planning a big rally, as I understand it, for the Republicans. Will that be a difference maker or not? 851, 9 till 9. Traffic now, WWL. 8.56, 4 till 9, Tommy Tucker Carlson, WWL, on this Monday morning, July 6th, joined by Justin Bucler, Associate Professor of Political Science at Case Western Reserve University, talking about the midterms. We're a few months out. And the president's going to hold a convention, September 9th through 10th in Dallas. He announced on social media. That is different, Professor. That's not happened before, has it? Not exactly. Usually a convention is a formal nominating convention for presidential candidates. We will have maybe occasional rallies, but the normal role of the convention is a party's nominating convention. And since there's no presidential nominee, a formal party convention is out of the ordinary. But that's also not exactly what this is. sort of a rally event, right? Like a big campaign event? Yeah, the big campaign event. I wouldn't call it a party convention given that the normal functions of a party convention are not what this is. Is this the kind of thing that attracts any new voters or is the idea to rah-rah the Republican base so they get out and vote? The idea, I suppose, would be to try to get some media attention. Party conventions are really just spectacle at this point. Before some reforms after the 1968 conventions, if you remember, the riots in Chicago, they used to be how parties would select their nominees. But after the reforms, post-68, the parties had been basically... pro forma, and all that's really happened is the parties have tried to use them to get some media attention. And for the most part, people don't really watch the conventions because there isn't a lot happening. Maybe people will tune in for the speeches when the presidential candidates are nominated, but most of it is just sort of an attempt to get some free media attention. And maybe you'll put on a show, maybe you'll get some free media attention. The president is pretty good at... getting media attention, but that's really about all it might be. So when it comes to turnout, enthusiasm, etc., what are polls showing about the midterms? Well, midterms have lower turnout than presidential election years because if you look at what happens, the lower down the ballot you go, the less interest there is. So when there's a presidential election, that's when turnout is maximized because that's when interest is maximized. If you have statewide elections, senatorial and gubernatorial elections, turnout is higher. As you start moving down the ballot, people are less interested because people are interested more in higher-ticket elections.

So midterm elections are always going to have lower turnout than presidential elections. After that, you're looking at the competitiveness of the racers. So you're going to have a lot of variation in turnout as you look across the country. So is there one, two, three issues these elections are going to turn on? Basically, state of the economy, perception of national conditions, and it all tends to hinge on opinions of the president. Thank you, sir. Appreciate it, Justin Buekler, Associate Professor of Political Science at Case Western Reserve University. We're going to take a break. We come back. We're going to talk to our friend Andrew Schwartz, professor of IT and the E.J. Uso College of Business at LSU. He has been researching technology-related issues for over 20 years and has recently been focusing his attention on AI, and we're going to take a snapshot, take a look at artificial intelligence. because it is gaining by the day, and we try to keep up with it. We'll talk about regulations that are in place, and if you have any questions, 504-260-1870, I think you do about artificial intelligence. We'll be back.