Since the arrival of President Trump in the White House, he and his allies have tried to repeal the affordable care act ("ACA"). In the process, the average voter has been overwhelmed with statistics of "millions-this" and "billions-that". Yet, as far as I can tell, no one is talking about the trillion dollar impact that new legislation might have on Social Security.
In 2010
The Trustees of the program decided that this legislation would drive taxable wages much higher, as much as a $1 trillion over the next 75 years. The logic is as the cost of healthcare premiums fall, business would spend the savings on the employee in the form of taxable wages.The economics are sound, and if you want details feel free to contact me.
If we repeal the ACA, it stands to reason that we will unwind the benefit as well. That is something you ought to notice.
The Trustees are the Bible on Social Security
People tend to say, "Wait, I didn't get a raise." That may be true, but keep in mind the assumption of higher wages exists in formulas and occurs over decades. The Trustees estimates are really what could happen, rather than what will happen. There is no certainty that the program will pay full benefits to 2034 or any other date. It is a best-guess and depends upon you getting those raises.
If you didn't get a raise, you probably ought to worry a bit more about the program.
Four things to know
As with many aspects of Social Security, few realize that the boost from the projected money was never there.
So it is hard for most people to worry about this revenue. That is probably a mistake for four reasons.
First, the trustees define the discussion of Social Security. So whether you get a raise or not is beside the point. The public debate on Social Security assumes that you did, and so did every one of your friends.
Second, we express the size of the problem in terms of wages because we pay for the program with a tax on workers' earnings.
This measure of the problem tends to shrink as we feed the program magic money for the future. In other words, our problem is smaller because our kid's paychecks will be bigger and more able to deal with it.To illustrate, in 2010, the overall size of the crisis grew by roughly $100 billion, yet the tax remedy shrank from 2 percent to 1.92 percent.
If increasing future wages makes the problem appear smaller, it stands to reason that removing the ACA magic money will make the problem larger.
Third, we are dealing with a large number. I use a ballpark figure of $1 Trillion in bonus money. As you remove the revenue from the projections, the program will have less money with which to pay benefits. This trend is not apt to change the date of the insolvency, but reducing the expected level of revenue will put more pressure on the size of benefit reductions. This is a serious problem because the discussion of Social Security focuses mainly on when it occurs rather than what is going to happen.
Fourth, if a $1 trillion doesn't sound like a lot of money, remember that it took 70 years for the program to generate about $6 trillion in unfunded liabilities (2010).
We are talking about creating another $1 trillion overnight as projections return to pre-ACA levels.
Heated debate
Social Security is a contentious debate by itself. So is healthcare for that matter. You need to ask yourself: with all of this discussion about both issues, why no one is talking about the cost to Social Security of tinkering with healthcare?
