Thread

10-year Treasury yield climbs above 5.3% to a level not seen in 24 years

122 points · 193 comments · kaycebasques

GenerWork · 1790821127 · focus · HN ↗
The primary issue is Social Security. It’s the biggest driver of spending, and nobody wants to do anything to cap its costs such as means testing or straight up lowering the amount it can pay out.
As for the people that will inevitably bleat about how this is just horrible and we need to lift the cap on taxable SS income, that wouldn’t solve the core problem either unless you pair it with spending caps or cuts.
1. what · 1790821542 · focus · HN ↗
  > and nobody wants to do anything to cap its costs such as means testing or straight up lowering the amount it can pay out
  Yes because everyone paid into it and wants their money back with interest as promised? This isn’t weird.
  1. s3p · 1790821686 · focus · HN ↗
    [dead]
    [deleted] · 1790823060 · focus · HN ↗
    [deleted]
  2. klodolph · 1790822604 · focus · HN ↗
    You aren’t promised your money back with interest; that’s what an IRA is. Social Security is a different system which works by different principles. In Social Security, the money you pay goes to the people who are retired, and your retirement is funded by people who work in the future.
    Your money --> older generation
    Younger generation ---> you
    The main thing that makes my description incorrect / incomplete is that baby boomers, such a large cohort, broke the system. This was predicted and so the baby boomers actually did get their money back: they were taxed to fund OASI, which then goes back to fund baby boomers’ retirements, until it runs out.
    Baby boomers (only, sort of) <---> massive cushion in the OASI fund
    Xymist · 1790845469 · focus · HN ↗
    SS (and the equivalent in other countries) was, in hindsight, an incredibly stupid system to set up that way - people should be exclusively contributing to cover _themselves_ so that it's a saving/investment scheme rather than a pyramid scheme. If you're in poverty in retirement that shouldn't be because the current generation of workers is shrinking. It should be because you failed (or were unable - doesn't matter which) to carry forward enough from your own career.
2. consumer451 · 1790821686 · focus · HN ↗
  There is an easy solution to make Social Security solvent. Uncap the contribution. Problem solved.
  1. kolanos · 1790822115 · focus · HN ↗
    Why would someone contribute more than they are legally required?
    patch_cable · 1790822299 · focus · HN ↗
    I think the argument is for changing what is legally required.
    judge2020 · 1790822407 · focus · HN ↗
    Right now a ton of wages from top earners are not being taken out for social security because the cap is around 176k (for the current year); I'm assuming it would simply extend the timeline for it hitting its deficit.
    [deleted] · 1790823982 · focus · HN ↗
    [deleted]
    Lightbody · 1790822408 · focus · HN ↗
    They wouldn’t and with the current cap they don’t. Uncap it (or just raise the cap) and now they will have to contribute more.
  2. missedthecue · 1790822566 · focus · HN ↗
    This would add some more years of runway but does not solve the problem. Eventually, the fund would reach insolvency again. The SSA actuaries estimate that removing the cap would add 21 years before insolvency. 21 years may sound like a lot compared to the handful remaining now, but is well before the retirement age of the average person reading this comment.
    Also an underdiscussed issue with such a policy is that while it increases social security fund revenue, it decreases the amount of federal revenue collected. The CBO estimates that about 15% of revenues gained by an uncapped SSA tax are offset (lost) by a reduction in federal revenues. Worsening the deficit problem.
    <a href="https://www.cbo.gov/budget-options/60955" rel="nofollow">https://www.cbo.gov/budget-options/60955
    conception · 1790823248 · focus · HN ↗
    <a href="https://www.crfb.org/socialsecurityreformer/" rel="nofollow">https://www.crfb.org/socialsecurityreformer/
    It’s actually pretty easy- pick three or four options that have the very wealthy kick back into society what they have been syphoning out and it balances.
    seanmcdirmid · 1790823852 · focus · HN ↗
    Uncapping income it is applied to and throwing in capital gains would totally solve the problem if you sever the link between contributions and payout (which is a form of means testing).
    sharts · 1790833859 · focus · HN ↗
    And dividends
    seanmcdirmid · 1790853976 · focus · HN ↗
    Dividends are already taxed as income.
    Edit: I didn't realize dividend income was not subject to payroll taxes.
    bovinejoni · 1790864209 · focus · HN ↗
    The vast majority of US dividends are qualified and subsequently taxed at much lower rates than regular income tax rates
    HDThoreaun · 1790891722 · focus · HN ↗
    Only if youve owned the stock for less than a year. Over a year its capital gains
  3. pgodzin · 1790823640 · focus · HN ↗
    that would be one of the largest tax increases in history, used to fund transfer payments to the disproportionately wealthy
3. glimshe · 1790822049 · focus · HN ↗
  "Means testing" is the bad Social Security idea of the year. SS isn't a welfare program. Trimming benefits, changing retirement date (for all) and uncapping contributions are much more palatable to voters.
4. xbmcuser · 1790822275 · focus · HN ↗
  Social Security is not the issue no wealth tax, capital gains tax being less than income tax are the problem. Social security and government expenses going up are the symptom of the same problem ie not taxing capital gain which has resulting in prices for everything to keep shooting higher than incomes.
5. klodolph · 1790822328 · focus · HN ↗
  Social Security is funded by the people paying in, plus the money in funds like OASI. Yes, OASI is treasuries, so it’s connected, but the reason OASI exists is to cover the changing demographics as baby boomers retire. It’s not designed to be, long-term, the way the Social Security system works. The idea is that you collect income on the boomers greater than payouts while their cohort is in the workforce, and the pay that money back out when they retire.
  Yes, there are reasons why this isn’t working out as planned. But the idea that “Social Security is the biggest driver of spending” is not a cogent argument.
  1. aftbit · 1790824514 · focus · HN ↗
    The OASI fund was at ~$ 2.4 trillion in around 2025. That's only about 1.5 years of payments given no contributions. The net interest from the fund is only around $ 60 billion. If you add in the DI fund, it only changes by about 10%. The $ 1.7 T cost of Social Security in 2026 will not be meaningfully affected by these funds. Mandatory spending payouts will thus have to come from contributions (which are fundamentally just another tax that could be redirected to other priorities) and from the general fund. The contributions brought in around $ 1.3 T in 2026, leaving somewhere around $300 B to be paid out of the funds.
    Thus, I think "Social Security is the biggest driver of spending" is a perfectly cogent argument. The mandatory social security contribution is just another kind of income tax.
    Obviously we can't just turn off Social Security, for many political, moral, and practical reasons, but any solution to the deficit or debt that ignores social security will be fighting with one hand tied behind its back.
6. BoiledCabbage · 1790822662 · focus · HN ↗
  > The primary issue is Social Security.
  No it's not. It's about 15% of the 2 trillion dollar defecit. Whoever told you that mislead you.
7. sharts · 1790822912 · focus · HN ↗
  Social security is only collected from incomes 184K and below.
  It’s literally not a spending problem at all.
8. chasd00 · 1790823057 · focus · HN ↗
  There are more 401k millionaires now than ever before. I wonder if in 20-25 years decrease in SS payout will be more palatable as people rely on other, far more valuable, retirement accounts.
  On the other hand, I’ve been paying into ss for like 3 decades easy. Bitch better have my money!
9. seanmcdirmid · 1790823718 · focus · HN ↗
  > and nobody wants to do anything to cap its costs such as means testing or straight up lowering the amount it can pay out.
  You forgot the huge one, which is uncapping the amount of income it is applied to.
10. AzzyHN · 1790824354 · focus · HN ↗
  Ah yes, let's make our poorest citizens even more poor. Means testing doesn't work, read a book.
11. MisterMower · 1790826203 · focus · HN ↗
  It’s not Social Security, it’s Health and Human Services. It’s been the top line item in the federal budget for several years, and it’s growing at the fastest rate and has the largest unfunded liabilities.
  Social security is easy to fix. Just raise the retirement age. Or do nothing and benefits drop by 25% or whatever it takes to become balanced based on current tax revenue.
  Good luck rationing hip replacements and breast cancer treatments whose provision is statutorily required by law and whose cost will continue to rise with inflation.
  None of this even begins to consider interest on the debt. As interest rates continue to rise and the debt continues to grow this line item will eventually dwarf everything.
  Social Security is chump change compared to these two. But at least it’s nominally fixable by faking the CPI numbers used to set the cost of living increases. You can’t charge less for hip replacements or cancer treatments, they cost what they cost.
12. derangedHorse · 1790859063 · focus · HN ↗
  This is false [1].
  [1] <a href="https://www.usaspending.gov/explorer/budget_function" rel="nofollow">https://www.usaspending.gov/explorer/budget_function

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