David A. Richmond Interview Federal Reserve Bank Price Alan Auerbach “Federal Debt, Social Security Trust Fund and Uncle Sam’s Uncle Samchon from hindering the work of the elderly” (ECON focus1/2 quarter 2025). Here are some points that caught my eyes.
The United States lost debt religion
As mentioned in recent years, the United States does not pay attention to national debt. It’s not true if you go back for more than 20 or 25 years. For example, when the debt or predicted defects have increased in the Reagan administration and the first Bush and Clinton administration, the government has taken measures to reduce this by increasing taxes or reducing expenses.
It ended in the early 2000s. It’s not there for the last 20 years. When we go back to the way we behave, the type of impact that continues to bump into the budget due to interest rates, infectious diseases, financial crises, or other items can be processed by this kind of government reaction.
Good news and bad news. It is good news in the sense we had before. It doesn’t seem as if you have to do an approach that has not been considered or practiced. But on the other hand, we have lost religion someday for the last 20 to 25 years. And it is not exactly clear what we will return because we have been lost in the papa validity. Congress and the White House had a greater constituency to deal with national debt when at least the problem became clearer.
Inflation and limited inflation adjustment are how to reduce the US deficit
[T]Inflation interacts with the fiscal system, and there are many ways to affect people’s taxes and their benefits. It can help them or hurt them. It mainly hurts them.
Some are not indexed for inflation. … [T]He is a threshold for you to impose taxes on your social security benefits. This means that the more inflation, the more people will be taxed in some or all of the social security benefits.
If you have an index of many factors of tax systems and benefits, there is a delay before the system follows. For example, social security increases the benefits every year due to inflation. In terms of tax, federal tax brackets are indexed for inflation, so inflation is 10 %, so if your income increases by 10 %, your parentheses will be indexed for inflation, so you will not change the parentheses. But indexing is delayed. It means that if inflation suddenly increases, the first year occurs before parentheses occur and the benefits begin to react. Behind the yes.
The last is that capital revenue (interest, capital gain, like that) is sorry for inflation. For example, if you buy an asset for $ 100 and doubles the price during the retention period, the actual profit is zero if you sell your assets for $ 200. But we are taxed on $ 100 because we do not index of capital gains to inflation. We do not index interest income. If the inflation rate is 4 %and 4 %nominal interest, the actual interest is zero, but it is still taxed for 4 %.
Thus, if it has a similar impact in terms of benefits in terms of delay, delayed delay, capital income, and delayed delay, not everyone who is generally reduced resources as a result of inflation. In a sense, it creates inflation as a more effective tool for dealing with the deficit. … I don’t think it’s a particularly attractive way to do it because it’s very arbitrary. The effect distribution varies from household to households depending on the type of income. We will not say that it is well designed.
Can social security be shifted to depend on general tax income?
In 1983, when the Social Security Trust Fund became close to exhaustion, we adopted the GREENSPAN Commission after recommending a change in social security, raising the retirement age very slowly and increasing the salary tax. It has a social security system on a better financial foundation for decades.
It can happen again. However, there may be no appetite for parliament and government to provide people in the social security system with this kind of bad news. They can just use general profit funds to cover the lack of social security. We already do so for Medicare Part B, Health Insurance and Medicare Part D, and drug benefits. They are not independent. We have a premium that pays a small part of the benefit, and the rest comes from normal revenue.
Some of the traditional supporters of social security say that it is good to be a self -funding system because people feel that they have a stake when paying pay taxes. However, if the government’s choice is reduced, raising pay taxes, or using general imports, I am afraid that they select ordinary profit and start can be.
