WhiteSites Blog
WhiteSites Blog
Interest rates are slowly ticking higher, and with 40T in debt this is going to be very painful if we don't solve the problem. Here are what I consider to be the only viable solutions to this problem.
1. Get spending less than revenues. This means either increasing taxes, reducing benefits, or a combinatino of both. The biggest problem is most social programs such as social security are not what we want to believe. We pay into this programs our entire life, wanting to believe there is a account similar to a 401K in the government that is carefully investing our money so we can retire someday. But that is now how it works. Yes they know how much we have contributed. But its effectively a slush fund, and the money paid in by workers, is paid right out to beneficiaries. There is no money sitting there collecting interest over your life time. And by 2034 they say it will be involvent. Meaning more money will be paid out vs money paid in. resulting in a drop in benefits. In the past they have kicked this can down the road by increasing the withholding amounts. Look at this chart which shows how they have increased the tax rates over the years.
| Years | Social Security (OASDI) | Medicare (HI) | Employee Combined | Employer Combined | Employee + Employer |
|---|---|---|---|---|---|
| 1937–1949 | 1.00% | — | 1.00% | 1.00% | 2.00% |
| 1950 | 1.50% | — | 1.50% | 1.50% | 3.00% |
| 1951–1953 | 1.50% | — | 1.50% | 1.50% | 3.00% |
| 1954–1956 | 2.00% | — | 2.00% | 2.00% | 4.00% |
| 1957–1958 | 2.25% | — | 2.25% | 2.25% | 4.50% |
| 1959 | 2.50% | — | 2.50% | 2.50% | 5.00% |
| 1960–1961 | 3.00% | — | 3.00% | 3.00% | 6.00% |
| 1962 | 3.125% | — | 3.125% | 3.125% | 6.25% |
| 1963–1965 | 3.625% | — | 3.625% | 3.625% | 7.25% |
| 1966 | 3.85% | 0.35% | 4.20% | 4.20% | 8.40% |
| 1967 | 3.90% | 0.50% | 4.40% | 4.40% | 8.80% |
| 1968 | 3.80% | 0.60% | 4.40% | 4.40% | 8.80% |
| 1969–1970 | 4.20% | 0.60% | 4.80% | 4.80% | 9.60% |
| 1971–1972 | 4.60% | 0.60% | 5.20% | 5.20% | 10.40% |
| 1973 | 4.85% | 1.00% | 5.85% | 5.85% | 11.70% |
| 1974–1977 | 4.95% | 0.90% | 5.85% | 5.85% | 11.70% |
| 1978 | 5.05% | 1.00% | 6.05% | 6.05% | 12.10% |
| 1979–1980 | 5.08% | 1.05% | 6.13% | 6.13% | 12.26% |
| 1981 | 5.35% | 1.30% | 6.65% | 6.65% | 13.30% |
| 1982–1983 | 5.40% | 1.30% | 6.70% | 6.70% | 13.40% |
| 1984 | 5.70% | 1.30% | 7.00% | 7.00% | 14.00% |
| 1985 | 5.70% | 1.35% | 7.05% | 7.05% | 14.10% |
| 1986–1987 | 5.70% | 1.45% | 7.15% | 7.15% | 14.30% |
| 1988–1989 | 6.06% | 1.45% | 7.51% | 7.51% | 15.02% |
| 1990–2010 | 6.20% | 1.45% | 7.65% | 7.65% | 15.30% |
| 2011† | 4.20% | 1.45% | 5.65% | 7.65% | 13.30% |
| 2012† | 4.20% | 1.45% | 5.65% | 7.65% | 13.30% |
| 2013–2026 | 6.20% | 1.45% | 7.65% | 7.65% | 15.30% |
You can see where this is going. last time it was raised was in 1990. Its likely they will increase it again. When I asked chatGPT what would it need to increase to to make the program solvent they said by 2034 benefits would have to be cut to 83%. However if congress waits ( like they always do ), rates would have to be increased to a combined 20%. If they act now it would be increaesd to 16.8%. Don't forget this is only social security, you still need to add an extra 2.9% for medicare.
2. Force the banks to hold more assets in reserve. Part of the stress testing after 2008 was to make sure if the market droped by a specific percent, the big banks would have liquid assets on their books to cover the loss keeping them solvent. The Treasury could set high reserve requirements which would force banks to keep their money in Treasuries, which in turn increases demand for Treasuries,and lowers interest rates.
3. Raise the retirement age. This is something they have already done. It started at 65, and they have increased the retirement age to 67 as of 1960. They have already proposed increasing it again to 69 by jumping 2 months every year. This would also drop the benefit percent if you start taking benefits at 62. One of the reasons for the shortfall is increased life expectancy. In 1940 when a person retired, they had an average of 11.9 years of retirement. If we had kept that same logic in place for today the retirement age would be 72, not 67. The system assumes the population is not going to start living to 100. Though not this is a good assumption. My grandma lived to 102. My other grandma lived to 94.
4. Fix healthcare. Technology, and progress are supposed to increase quality of care while decreasing costs. This is definitely not reality. in 1960 healthcare represented 5.1% of GDP. in 2024 it was 18%. It spiked to 19.4% during Covid in 2020. The biggest problem with healthcare is other than copays Americans are shielded from the true cost. Seniors will happily take mediations, drive scooters, and consume services as long as they don't have to pay. This has caused an all you can eat buffet mentality with seniors. They think they can solve problems with medications, instead of lifestyle chioces. Your average senior spends over $2200 / year on prescritpions. back in 1987 this was only $300 / year.