Social Security Upgrades for Retirement's Realities

We've got to get going because we've all got hard stops. Plus, we know Catherine's going to talk a lot about Social Security. I don't really like the implication that just because it's a Social Security episode, I won't be able to keep it tight. Hello, and welcome to Optimist Economy. I'm Catherine Eddard, economist. And I'm Robin Rousey, editor. On this show, we believe the U.S. economy can be better, and we talk about how to get there when problem and solution at a time Today on Optimist Economy, I get to talk about Social Security. What a day. Okay, so other stuff first, quickly. Announcements. I received via text a GIF of a large mascot, I think from Japan, with a money cannon shooting money out into the air, and she said, heard my first ad on Optimist. We are running cross promos with PRX, the new distributor that we are working with. And part of the PRX family is that we trade cross promos with each other. So it's not it's not ads ads when we tell you that we're funded by sponsorships. These are kind of part of our new distribution family, to which my friend promptly replied. So in kind ads, not even the good kind. She's an economist. She got it. Robin, any announcements from you? I did want to say that we got some of our first donations through the Optimist Economy website, including a spiritual sponsor level donation from Gina from Hudson, New York. Thanks, Gina. We appreciate it. And you too can be a donor at optimisteconomy.com. And we love it when you go there because no one charges us fees when you donate directly on our own website. Exactly. Okay. Okay. We start our show off with Retcon. Retcon for retroactive continuity. You know, sometimes it's filling in the gaps for when we like said something wrong and just want to correct it. And other times it's really about using this space to clarify, extend the conversation, respond, discuss, reflect. Feedback from our listeners matters so much. Feedback from people on Instagram and TikTok matters slightly less. However, the housing episode was not well received on social media. And we had some of our hardcore listeners tell us that they thought this one was more of a miss. I did wake up that morning to an email that said the subject line was you're wrong about housing. I was like, subtle. Thank you. Yeah. Yes. Yeah. Sorry. How did we know that people didn't like it? Because we got emails like, you're wrong. You're wrong about housing. Thanks. Thanks. Yeah. So, first thing, I doubt there is a listener among you who does not live in a place that has some type of explicit anti-density building policy, that has a height limit, that has a staircase or elevator restriction, that has the single-family zoning restrictions, that requires parking lots for every space, something that prevents dense housing from being developed. And for a lot of people, this is a very palpable restriction. They've seen, you know, you walk through your neighborhood and they're like, this tower doesn't belong here. That absolutely restricts the construction of dense housing. But that does not mean particularly in cities, particularly in cities. But that doesn't mean that we have an overall supply shortage or that it restricts the construction of housing overall. Whether you're not allowed to build a certain tower in a city doesn't mean that that is missing from the housing supply on net. It's just missing that tower and it could show up elsewhere. And so I think it was very hard for people to digest the supply is less of an issue than you think. But I guess the leap from we don't have the density people want to that is why housing is not affordable, that's the jump. That's the disconnect, yeah. Yeah. So I did not make my part about housing affordability being a result of income distribution to mean that there are no restrictions or those restrictions don't matter. It's not clear that those restrictions have led to the increase in prices that people are upset with. So that was part one. The other thing I wanted to bring up is that after we recorded the episode, the Federal Reserve Bank of San Francisco came out with a new research paper that basically said what I was trying to say, but they did it better and with evidence. And they were shorter, if you can imagine that. They said that the key driver of housing affordability was growth in the high-income population. So it wasn't about the number of people in the city. It was dispersion of income within a city, and they really related it back to demand. And one of the ways that they tried to explain this was explaining population growth in cities like Houston versus population growth in cities like San Francisco. San Francisco, kind of at or – High income, yeah. Yeah, it's at or below average for population growth. Houston is way above average for population growth, but the income growth in Houston is below average, and the income growth in San Francisco is above average. And their kind of calculations were that the supply of both cities expanded, but that San Francisco is more unaffordable because it has a portion of the demand side are very rich people who have a lot to spend, and that bids up the price of housing. So it's not just how many people move to a place. It's who those people are and how much money they're bringing with them. Yes. And one of the people who wrote back to me about this said, like, you know, how can supply not matter? Did you even look at Austin? So I think Austin in some ways is the exact case that I want to make of how to think about housing unaffordability. So the city of Austin, like a lot of cities in Texas, is a very fast growing city. And between 2000 and 2022, it grew 3% population a year. That's pretty fast. Yes. Now, in two consecutive quarters in 2021, the index of sale prices in Metro Austin. So this isn't based on what's listed on Zillow, but what is the price when the house is sold? Yeah, the actual sale price. Okay. Yes. In the second and third quarter of 2021, that price of closed houses in Austin went up 12% and then 10% in a quarter. Oh, in a quarter. In a quarter. So, I mean, that means over the course of a year, the home prices went up on net almost 40%. It was an absolutely incredible shock to the Austin housing affordability. And it is worth noting. This is the pandemic, people moving wherever they can move during the pandemic. Yeah, but they were moving from a very particular place when it comes to Austin. Yeah, they were moving from California. Yeah, they were moving from California. This is – It's like what's the Texas that doesn't seem to Texas? Yeah, it's the Texas. They called it the California Texas. So basically what happens in Austin is a microcosm for what is driving up home prices in a big way overall. Yes, Austin is a growing population. Yes, Austin probably hasn't built enough housing. But what caused Austin to have a 10% spike in housing costs over the course of a three month period is that a lot of people moved to Austin who had money to spend. So this wasn't actually just income. It was really equity, housing equity that they brought with them. Their willingness to pay and their ability of what they could afford was just higher than what the city of Austin was used to. And there was a lot of them. And so it's worth to me that like 2021 in terms of Austin population growth was actually a pretty weak year. It was smaller population growth on net than the two years prior or the two years following. But the people who moved were so rich and drove up Austin's home prices so quickly. Did they stay up? No, they're still way up from before the pandemic, but they did fall in some of the years following. And some people said like, yeah, Austin started to aggressively build accessory dwelling units and change some of their zoning. But this idea that rich people cause houses to be unaffordable, that was what I was trying to stress. And part of me was like, why were people so mad that I was blaming rich people? Normally that plays really well. like and here's another thing rich people do but i think austin's case like in a three-month period prices go up 10 and the next three-month period prices go up 12 that's not because they lost housing stock that's not because they put in zoning restrictions it's not any of those things it is truly that the demand shock of people who were very very wealthy and rich could come in and it bid up the price of all housing that is happening on some level in housing markets all over the country. One thing that a lot of listeners brought up was we didn't talk about what economists call vacancy chains, what humans call filtering. So it's merrily we roll along into terms and condition, which is the idea that like, okay, all these super rich people move to Austin, but like more is more when it comes to supply. And as long as you're building something, you're going to ease these price concerns. And this idea of a vacancy change is that with every new unit people move into, they leave one that's more affordable behind. I'm trying to picture so many people who never move because they've got a good deal on rent. Have these people been in a rent-controlled apartment? Anyway, yeah, go ahead. We didn't talk about it on the show because I thought it was a little dense to explain, so I decided to explain it in an even shorter segment. But the evidence on it is really weak because for it to be effective, you have to have really long vacancy chains. Like for a house to go for sale where the mortgage is going to be $4,000 a month, for that to hopscotch its way down to someone who can afford $1,000 a month, that's a lot of vacancies that have to open up. People don't move that frequently. People get into situations. There's a cost to moving and the vacancy change isn't that high or isn't that long to make a difference. And this is my final bit of retcon is that we did get a lot of negative reviews from the housing episode, but not from one particular group, which is that the number of people who work in low and affordable housing in cities who reached out to me to say, thank you for this episode, was really touching and overwhelming. I had a number of messages come in saying, I've worked in affordable housing in such and such city for 25 years and filtering does not happen. We've built so much housing for rich people and housing for poor people is only becoming less and less affordable. And I appreciated that from their on the ground perspective, this view that more is more has not worked out. And they reached out to me to say more is not more. We won't have affordable housing for low income people until the government does something. And that was very, that was nice to hear. Yeah. Yeah. We also got criticized for being dismissive of, I think in tone, more than actually in fact of what we said. And I think a lot of that came down to the reference to sort of abundance bros for development bros. And then I will personally, as the editor here, try to be more careful around the dismissive bro talk. The bro talk? I'm sorry. No, it was both of us. Well, it's a very, it's a super convenient answer that doesn't involve addressing income inequality, that doesn't involve... Which seems like a harder problem. So anyway, that is our retcon episode on housing. Okay. Before we go to Social Security, we're going to take a quick break. The Big Take from Bloomberg News brings you what's shaping the world's economies with the smartest and best informed business reporters around the world. We cover the stories behind what's moving money in markets and help you understand what's happening, what it means, and why it matters every afternoon. I'm Sarah Holder. I'm Saleha Mohsen. And I'm David Gurra. Listen to The Big Take and Big Take DC on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. And we're back. Yay. Okay. So in our first season, we did a Social Security episode, Social Security Don't Miss, about the program's inherent strength even as the economy has evolved. I mean, it's 90 years old and you love it and you know it and you want it. That's Social Security. What we wanted to do, I say we, I'm putting up some quotes here. This was all Robin. Is not Robin, just nod and then blink twice if you're in danger. what we wanted to do was talk about social security in a way that probably none of you have heard before which is how to make the program better i mean we are so narrowly focused on social security's solvency despite the fact that we've had about a 40-year runway to figure it out. And every conversation about Social Security has to be, don't cut, raise taxes, let's fund it. And we don't get to talk more about what we want this program to look like. It's our program. We pay for it. It has not changed in any significant way since 1983. So there are lots of ways that the program could be modernized, updated, changed to be better fitting to retirement and economic security as we know it today. And so I'm going to So pitch to Robin, if we can get to all of them, my top four policy changes. Can I ask a question first? I mean, we have this solvency problem coming that you have said that we're going to have to deal with. Are we in this window of time where between now and 2033, a lot of decisions are going to get made about what the future of Social Security is going to look like for the next 40 years? Yes, I think that this is our window. that when we address the solvency, that is our chance to change any type of programmatic changes we want to make. That's when we're going to do it. And I was talking – So we called this fun with Social Security. But like this is actually stuff that people need to be thinking about and talking about. I don't know if any of you Social Security nerds overlap with you space nerds and are listening. But it's kind of like how Earth and Mars aren't always well positioned for exploration and that if you wanted to have a mission to Mars you have to wait for their orbits to be closer aligned So like Social Security is like that like Earth and Mars are coming into alignment This is our time And I think there good to that too It not just congressional inaction People like to know what is going to happen with Social Security and have a long lead time. It's not a program that we necessarily want to change the basic structure of every couple of years because then people wouldn't be able to plan around it. So you want to have long periods of gestation for a program that affects a lot of old people so they can have time to know how to how it'll work. Yeah, well, I mean, some of us are all saving for retirement now, and you want to know what you can expect. Yeah. Okay. Okay. So fun with Social Security, round one. Round one. Okay. Okay. I'm getting ready. Hold on, I need to stretch a little bit. All right. So we can call this one Spousal Caregiving Benefit. When you claim Social Security, you are automatically eligible for both your own Social Security benefit, which is your highest 35 years of earnings, and the spousal benefit is half your spouse or ex-spouse earnings history if you were married at least 10 years. So if I never worked but was married and was a stay-at-home wife and I applied for Social Security, I probably have some earnings history and then my husband has a benefit. And so I will get whatever is higher, my work history benefit or half of what he got. So basically as a non-working spouse, you get one and a half as a couple. Yes. Okay. If you get divorced but you've been married 10 years in a day, you are still eligible for the spousal benefit. even if you're no longer married. This explains some things. Okay. Yes. The 10-year mark is really important for a marriage in terms of social security. But the problem is that this happens mainly to women, not entirely to women, but mainly to women. If you are the lower earning spouse, you have kids, you quit your job, you stay at home with the kids, and then your husband leaves you and you have to go back to work because you're no longer a stay-at-home mom. You're now a single mom and you don't really have any other options. You typically are kind of in the worst of both worlds in that you stayed out of the labor market long enough. You didn't contribute for a long time and you do end up working, but your own work history and earnings is insufficient and you end up with a spousal benefit anyway. The spousal benefit is designed with the assumption that it's two people living together. Okay. And the spousal benefit is not designed for divorced people. So I think we should design it around divorced people. Okay. I think that that might be the, when you're looking for the name, the issue here is divorce. Well, okay. So the issue is divorce, but the issue is also that you can stay married and go back to work. Like I have kids under five and I stayed at home until they went to kindergarten, but then I wanted to go back to work. But then I still am not earning enough for social security to give me my own benefits. So I'm going to like pay into social security for 20 years, but I still end up on the spousal benefits. Well, is that a problem? It would sound to me like a disincentive to work. Yeah, I mean, it certainly can be. And I mean, a lot of women know that if they aren't working, they aren't contributing to their own retirement. It's almost like you have insurance through the spousal benefit should you not earn enough, but that's not really the same thing as the social security benefit reflecting what you contributed. Because you're going to contribute a lot that ends up not getting part of your calculation. I don't understand that. If the spousal benefit is higher. Why? Okay. So two guys earn the same amount of money and they're both married to stay at home wives. So one couple stays married the entire time. The other couple gets divorced and she goes back to work and she works for the last 20 years of her kind of prime age working life before she retires. And even though she's worked for 20 years, her social security benefit based on her earnings history is lower than her social security benefit based on half of her spouse's history. So these two women end up with the exact same benefit, even though one of them worked for 20 years and one of them never worked at all. That is the problem. So what do you think needs to happen there? Okay, so here's my idea. So right now, social security is a 35-year look back over two benefit types. The 35-year calculation for spousal benefits and the 35 calculation for your individual work history. You were married for 10 years in a day. Your now ex-husband's highest 35 years are used to calculate a worker benefit. They divide it in half. You are going to get whatever is higher, the spousal benefit that's half of the husband or yours. And they're both based on the highest 35 years. I think that Social Security should replace the 35-year look back with each year is whatever is higher. For the newly divorced spouse. So in other words, she gets kind of credit for half of what her ex-husband earned for those years and then whatever she actually earned for the additional years. How would that make a difference? She would get a higher benefit. She would. So the woman who left work and then went back to work would get a higher benefit in the long run because she'd have 10 years of half of his earnings and then she'd have 20 years of her earnings. So she would end up with a higher benefit. I think the spin for this is that this could be considered the divorced benefit or a calculation to favor divorced people. But I think the other way to look at it is that it's really a caregiving credit. And it doesn't have to be that I stayed at home for kids. It doesn't have to be that I stayed at home to take care of parents. I don't need to tell Social Security why I was home. It would just translate to a caregiver credit. I was married. I wasn't working. This is my caregiving credit. And then this helps, I think, if you give a caregiving credit to married women who are not working, it would give a lot of political impetus to creating an overall caregiving credit that if you are taking care of someone and not working, Social Security has a very easy way to calculate what your benefit would have been or what your earnings would have been. So they can use half of your spouses or they can average from prior years. Most people who care give are married. I think it's the reason why this works. I was going to say, yeah. I mean, there's obviously people who are married who are not caregiving or working, but most caregivers are married. Most caregivers are married because we don't have paid family leave. Somebody's got to be paying the bills. Someone has to be paying the bills. I think if we had a universal system of paid family leave, which would be a great thing to add in this reform, you could also come up with a credit for people who are doing short-term caregiving. But with short-term, the difference is that most caregiving, especially if it's covered by paid family leave, it's assumed to be really short. It's assumed to be that you're caregiving for one to six months. Whereas someone who is staying home to take care of kids or someone who is staying home so that they can take care of a long-term illness, they're going to be gone for years. So they're not stepping away from the labor market for a period of time. They're completely stepping back. And so this is a way to give Social Security earnings history to people who cannot sell labor for a period of time or do not sell labor for a period of time but still contribute to our economy. By being caretakers. Yeah. So it sounds like maybe I should lead with the caretaking part. It's just getting there on the – well, God, I'm so excited I'm like slapping the microphone. Getting there on the policy side is like work back from divorce and then work forward from caregiving. But this would increase benefits for women. I would say – Even you said divorced women have like the worst retirement situation. The highest poverty rates in retirement are for divorced women, in part because their Social Security benefit is low and they're not living with someone. How much a difference would this make? I have no idea. Most of what we know about what a Social Security benefit would do is the Office of the Actuary tells us. And they will score a proposal if a member of Congress or someone important enough submits it. I'm not quite there yet. But I was seated next to the former chief actuary at a Social Security event, and I did try to very quickly run all of these ideas by him. and he said this would be very easy. It would be just easy to calculate? Yeah. Yeah. Okay. So that's one, spouses, caregivers. Yeah, I mean, I think it all makes sense. I do think you need to figure out a better way to... To pitch it? Yeah. Caregiver, spouse, divorce, wife. It rolls right off the tongue. It does. Our listeners will come up with a clever way to put that through. Okay, number two. This one is partial or temporary claiming. All right. Like short-term social security? It's almost like emergency social security. Emergency social security. Okay. I don't know if I actually like that, but that might be a great way to get across what I mean, even if I don't like the name. So the way that social security works is it's a one and done decision. As soon as you claim, you've claimed for forever. There's no going back. Some cases of disability, if you work, you can get off of disability. It's just that's the only case and it's not really structured. It's not really designed for success in that way. So for the most part, you claim Social Security, you're on Social Security. It's a one-time decision. This is sort of what they say about whether to claim early, whether to claim at your full retirement age, whether to delay. It's like you get one shot. You've got to make your decision. Yep. And you can claim Social Security once you turn 62. The full retirement age is 67. If you claim before you turn 67, you have a penalty on your benefit for each month that you're early, and that is a permanent penalty, you will have lower benefits for the rest of your life. If you wait after 67 through 70, you get a bump. If you wait until 70, it can be as much as a 25% higher benefit permanently for the rest of your life. Now, the penalty and the bonus between ages 62 and 70 are meant to be actuarially fair given life expectancy. So if the life expectancy is that once you turn 65, you're expected to live until 80, they've designed it so that if you claim at 62 versus you claim at 70, you would get the same amount of money by the time you turn 80. So the idea is you're supposed to live to your 82. You retire at 62. You get a set amount of money. If you retire at 70, you get the same amount of money, but just in bigger monthly payments. Yes. So there's lots of problems with that, which I'll get to for the next policy. But for this one, I think the big problem is that one in five people who claim Social Security will claim it early and still be working. Basically, they're 62. They're not earning enough money. They really need money. And so they claim Social Security. And they do it an incredible penalty simply because they need the cash in that moment. So is that like a passing moment or that is just like, it doesn't matter. I mean, a lot of them like they can't retire yet because they haven't saved enough or they need money for something. But they're three years away from getting Medicare. And because no matter when you claim Social Security, you get Medicare at 65. Right. I don't. Yeah. Never understood that. But OK. Yeah. There's a lot that goes wrong between I think the design of this program between 62 and 70. given that Medicare is 65, you have this big long claiming window. So I think one thing that would free up Social Security is to have kind of like a temporary or partial benefit claiming, where I can say, again, like, it's just a matter of applying life expectancy. So you could say, like, all right, Social Security is opening up a new partial benefit, where you can claim like a portion of your Social Security as early as 55 or 60, knowing that it could reduce your benefit later, but you could imagine that like, okay, social security, in order to prevent you from being poor in retirement, based on decisions you made when you were 50, we're going to hold in pocket like 60% of your benefit. But if you need to claim up to 40% of your benefit early, while you're still working, you can continue to contribute to social security, but take like a temporary or partial benefit as cash. Okay. So why would I want to do that? What are the circumstances where you are envisioning that being helpful? Well, like you got fired. I mean, cash is always helpful. Cash is helpful. You don't earn hardly any money. You have medical bills. You're low earning. You don't have savings. You want to work longer. I mean, part of the problem with the one and done decision is that Americans don't retire like that. I mean, to the degree that they did, they haven't really retired like that in 50 years. What do you mean about they retired like that? So, you know, the idea that like I go to work on a Friday and that's my last full day and on Monday I'm fully retired and I never work again. that full-time working to full-time retired in one decision is a minority, like a severe minority of retirement transitions. Most people will phase down work over a multi-year period. Sometimes they'll take more work on. Sometimes they'll go back. This is at the high end and at the low end of the wage distribution. And then a lot of people will backtrack where they'll retire, and then they'll be like, well, I don't like this at all, and then they'll go back to work. But they've already claimed Social Security. But they've already claimed Social Security. So the retirement decision is fairly messy. And we have really, really good data that it's very messy. It's messy for couples. It's messy for individuals. People retire and then change their mind. They go part-time and change their mind. It's a very flexible decision that can take six years to play out. So I think there's a way that Social Security can come up with an actuarially fair way to have a partial benefit claim where you claim a portion of your benefit early and then keep the rest later, or a temporary claiming where you can claim the full benefit for a period of time and then turn it off. I would imagine most people wouldn do it but you could definitely come up with an early benefit claiming system So would this work like I working full time and I 65 but not 67 I could take a partial benefit for the first couple of years and then go on full retirement at 70? Yeah. I mean, all you would really need to do is structure the work penalty for Social Security to be like structured around the partial claiming. I'm sorry, what's the work penalty for social security. Social security has two work penalties once you hit 62. If you're under the retirement age, you claim social security for a penalty with a benefit and you work, they will reduce your benefit like dollar for dollar. I think it's dollar for $2 above an earnings cap. Social security, at least as it's structured now, does not want you to be working and claiming. What's the cap? Do you know? It's around $25,000 this year. Oh, that's really low. It's really low. And then your retirement year, age 67, it's like $60,000. And then after that, there's not one. Yeah. So in addition to having a penalty to claiming between ages 62 and 67. The penalty just goes away after 67. There's also a benefit penalty to working while claiming before 67. But we know that a lot of people do it. I mean, the idea is like if we know people are going to do it and we're just saving money off of skimming off of people who were poor when they hit or needed money when they hit 62. That's a bad way for Social Security to be solvent. Right. Huh. Yeah, that seems like a mess. You've got to deal with the work penalty. You've got to deal with the benefit calculation if I claim half my benefit or 30% of my benefit, but then I keep working and I continue to contribute to Social Security. What is my highest 35 years of earnings? Does it stop after I partially claimed? There's a ton of ways that you can do it, but I think that you absolutely could design it so that it basically serves the purpose intended of insurance against economic insecurity. Right, right. Yeah, I'd love for you to get that figured out. I have all sorts of ideas now. So I've wanted to do this, but I really need to see the earnings. You need to see benefits and earnings behavior off of a large sample of people. So you basically need to be inside the Social Security Administration's data in order to do this well. And also understand actuarial fairness, which is of like, what a loose concept up here. But I totally think you could do it. I think it would be really popular because people, retirement doesn't go. Like you say, we're not all working on farms as lumberjacks. We can work later, but that doesn't mean life doesn't intervene. Oh, yeah. That's actually going to fill into my next policy. But I think Social Security is a good program that's meant to keep people from being economically insecure. And it shouldn't have solvency bonus points because it's pretty cheap to people who start 62 in a bad place. So that's number two. Okay. The third one is I don't think we should have one retirement age. Okay. It's 67. Currently. Currently. It makes no sense. In 1983, it was increased from 65 to 67. And it's kind of a perennial Republican proposal to raise it again. But in the kind of like nouveau populist Trump era, that is now like off the table. Oh, okay. So instead of an age, it would be how many years you've worked? Yes. Okay. So when you work, virtually all employment in the U.S. is covered by Social Security, and you pay taxes into it even when you're self-employed. No matter how many years you work, you're eligible for Social Security if you have 10 years of earnings. You're eligible to receive benefits if you have done at least 10 years of work. Mm-hmm. Okay. Your benefit itself, though, is based on your highest 35 years of earnings whenever they occur. So you could have gaps between them. It could be the first five years and the last 30 years with like a 10-year gap in between. It doesn't matter. It's just they'll order every earnings quarter basically from highest to lowest, and they'll cut it off at 35 years. And that is what is used to calculate your benefit. So I have a PhD. You do. After going to undergrad, I got another five years of school. I finished in five, but actually most people in a PhD finish in six. Six or seven, yeah. So that means that I have 10 years not working compared to people who started working at, say, 18. We have the same retirement age. That is not right. You think the person who started at 18 should be able to retire sooner? So right now, everybody has the same retirement age. It's 67. You can start at 62. for early claiming. You've got a bonus up until 70. But that person who graduated high school and went to work has 10 years of earnings on me as we hit age 60. Let's just say like, okay, we're both going to work the same number of years. She's going to start 10 years ahead of me. I work till 70 and I get a bonus for working older, but I still haven't worked necessarily longer than her. Oh, the same number of times. Yeah. Yeah. She still had two years of earnings on me if she worked until 62 because I was in school for so long. And I get a bonus for working fewer years than her simply because I was older. And because I have more education, I likely have more income and a much cushier job. Yeah. So if you graduate from college at 22, you work 40 years, you could retire at 62, and you would get your full benefit, not a penalty benefit. Yeah. So people who didn't go to college would be eligible around age 60. People who went to college would be eligible around age 64, and people who went beyond college, like a professional degree would be around 67, and then doctorates would be around 70. And you basically staggered retirement ages by the years you spent in school. There are so many problems with this. As you're proposing this? As you're saying this? As I'm proposing it, there's a lot of problems with it. Number one, it's old age insurance. The whole idea behind Social Security is that you would get old, not be able to work, and not have enough money. And so this is basically taking the program and turning it into a full-blown retirement program. Right. And that goes against really what the fundamental philosophy of the program was. The second problem is that we have immigrants, and they don't work 40 years. Because they came here later. Yeah, because they came here later. And some countries we have like harmony. Like reciprocity or something. Yeah, so we have reciprocity across the retirement systems based on where you are a citizen, where you work and where you claim. But, you know, for a lot of immigrants, they are not recognized for their Social Security contributions unless it is done while a green card holder or citizen. Yeah. So if you have worked in this country for 50 years, but you've only been a citizen for 10, you have very small Social Security benefit, no matter how much you've contributed. And then there's also like, okay, so now if someone becomes unemployed, they have to work longer on the back end. I'm glad that you've anticipated all the problems of this before. I don't have to like, oh, yeah, that would be a problem. That's also bad. That's also bad. The other way you can do it is rather than have 40 work years, it could just be a work life where like, you know, once you have like two years of consistent earnings, it's like that plus 40 or that plus 45. It doesn't have to actually be 160 quarters of earnings without a gap in between. What this is trying to get at is the fundamental inequality in earnings, in job quality, in the physicality of work, and the income of people in the United States. I mean, it certainly does seem like the more income you have that can get you through that gap between 62 and 70, the better off you are and you wind up claiming more. And you probably have a longer life expectancy because we know that people who are better off live longer. Yes, and if you're not aware of the life expectancy spread, but for Social Security, the really important one is age 65 life expectancy, which is conditional upon living to 65, how much longer are you going to live? Okay. The spread between men and women is about three years. So women, even at age 65, their life expectancy is three years longer than men's. And then the spread between lowest income and highest income by gender is around four years. So that means that a high earning woman would have a life expectancy of seven to eight years higher than a low earning man. Hmm. Yeah. And that's grouping all men and all women together. That's not looking by race. Right. So the idea of this, like, of moving the retirement age around is a way to kind of take into account that we have changes in life expectancy and improvements in life expectancy, but fundamental differences between them. I really hate the raise the retirement age policy. Yeah. I think it's just a benefit cut that people want to pass that they add a logic to. And if you really cared about life expectancy, you would tell black men they can claim it 55 and white women like me that they don't get to claim until 80. If you were truly just cared about the retirement age should reflect life expectancy, then you need nine or 10 because they're not the same. America in 1930, fewer than 5% of workers, maybe 5% tops, depending on which data source you look had any type of retirement, say, like pension. And men over age 65, 75 to 80% of them were still working, even though the life expectancy was around 61. So you had the majority of men were working past life expectancy. That means their retirement plan was to die on the job. Right. And that's what retirement looked like before Social Security. You either died a poor dependent of people who were willing to take care of you in a poor house or you died on the job. You hear people talk about life expectancy increasing in terms of Social Security and it's a bad thing. Yeah. Like, oh, people are living longer. We've got to do something about Social Security. And I'm like, hey, y'all, this might have been what the whole program was meant to do, is that we get to live past working independently. Social Security has purchased that for us. That should be the North Star of the program. We should be very happy that people are living longer, and Social Security should get credit for how much it has absolutely altered what the last 20 years of people's lives look like in the U.S. And all of these things that I want to do are just about making that better, about doing that job better, which they can do better. We do not work to service Social Security. Social Security services us. Yeah, I think you make a really important point there, which is that we keep looking at things that are – how can we show our benefits as opposed to looking at the program and saying, how does it meet the needs of who we are now and where we are now, right? There's a quote by William Gibson. I have thoughts on him as a writer, but the quote is, the future is already here. It's just not evenly distributed. and you can see that in life expectancy of you know someone like me i'm educated high earning white woman like i'm expected of longer than almost any other race by gender and education group in the united states a white woman with a phd is going to have the longest life expectancy that means i get to live in a future that y'all don't get to live in yet because i have benefited somehow that other people haven't and the program is basically like I don't know. I think people talk about Social Security as if not that I'm the problem, but that I'm the poster child, the person who succeeded, not the person who failed. Social Security's primary focus should always be on the people who had something bad happen and not something good. It shouldn't be designed... It's an insurance program. Yeah, it's an insurance program. It's not meant to reward people who manage to avert disaster or risk. It's knowing that disaster or risk could happen to you. Yeah. I don't have all the answers yet, but I think we should move the conversation to making Social Security work better for us, away from this point of view that we are all just worker bots in service of payroll tax contributions. Yeah. Last one, this one, it's just for the home crowd, because all of us, all of production, Sophie, Andy, Robin, Catherine, We are all self-employed and we pay both sides of the self-employment tax 6.2% for the employee, 6.2% for the employer. It comes to 12.4% total. Because we are the employer. We are our employer. I think that for people who are trying to start their own business, some people want to break out on their own. And the idea of being protected by Social Security and contributing to Social Security even when you're out on your own is good. But I think a lot of people who are in a similar situation to us had a lot less agency when they were there. They would like to be an employee, but they can't because the company that they work for doesn't treat them like an employee. And I think that some companies use contractors judiciously and some companies use contractors exploitatively. Absolutely. So we have tried through court cases and regulations to make a company like Uber pay its drivers like employees. And they have put all of the money they have into destroying those efforts. Oh, yeah. So what you can't regulate, you tax. And I think that we should have a 1099 issuer tax. So I say 1099ers, if you are contracted by a firm and they say they are like, we're going to do $25,000 worth of work and that's what we want to pay you for, they will issue you for tax season what's called a 1099 NEC, non-employee compensation. And 1099s are what they issue to their non who worked for them So you if you a wage and salary worker you get a W If you a contractor you get a 1099 I think that companies that issue 1099s need to pay a tax per 1099 that they issue. And I imagine this would be a graduated tax, so that the first 1099 is taxed at one rate, but maybe the 10,000th is taxed at a higher rate. So basically, the company ends up contributing to Social Security for anyone it employs, W-2 or otherwise, but if you rely on 1099 employees and you're relying on a contractor- As a way to get away from paying benefits and payroll taxes? Yes, you would end up with a tax bill for Social Security anyway. So this would just be a way for Social Security to collect revenue and taxes for people who rely on contractor workforces. And if you've got one or two, they don't need to be that high. But if you've got like 10,000 or so, So it's a pretty – like we can make it pretty steep. That's actually your labor policy. Yeah, that's actually your workforce policy. Would this mean that the person getting a 1099 wouldn't have to pay both sides of the equation? Yes, and here's – I actually think it's better for Social Security that they don't. So when I'm a self-employed person, I have revenue and I have expenses. So let's say I bring in $50,000 but I spend $20,000 on my expenses. I only pay taxes on that $30,000. That's right. And research into the earnings of self-employed workers have found that they do everything they can to lower their taxable portion of income in order to have a lower tax. Yeah. And so people deduct their home office, their computers, their cell phones, their printer cables, whatever. Yeah, everything. They deduct everything they can to try to reduce their tax burden because you're going to pay 40% off of the top between the Social Security tax for Social Security, for Medicare, and then also the federal income tax. So the thought was, is if there was a lower tax penalty on self-employed people, they would probably more honestly report their income and contribute more on the employee side to Social Security than they net contribute to the – because their Social Security benefit is just based on your employee side. That means that people end up under-contributing to Social Security for their wage record even as they are over-contributing because they're paying both sides, and so they end up with lower Social Security in the long run. No, Robin looks confused. Let me try this one more time. I did look confused. I think I kind of got it toward the end there. All right, so first things first, we are taxing Uber, and we are taxing them. No, I'm all for that. Any company that screws with the election system in California should just pay a tax. Any company that relies on contractors is going to start contributing to Social Security. It doesn't have to be tied to those contractors' wages. I think that it's more effective if it's just a per cap contractor tax that goes into Social Security. Can it be like a ratio of employees to contractors? Yeah, I think you could do it a couple of ways. I think you could do like a number of contractors you have and the number of contractors relative to employees. So if we're taxing people who use independent contractors, we're going to tax them heavily if they use a lot as a way to further incentivize having W-2 employees as opposed to contractors. or they're just using it to save money. Where a regulation won't work, a tax may. Now, that would mean I think you would not need independent contractors to pay both the employer and employee side. But I think there's an argument that would reduce contributions from those people, but it might increase their earnings. they're now incentivized to reduce their tax bill as much as humanly possible and they only claim their income net of expenses and they'll pay 12.4 percent on whatever that income net of expenses is but they only get the wage credit one time so they'll pay two taxes but get one wage credit Oh, right, right, right. That's what I missed. Yeah. So if I earned $100,000 net of expenses, $12,400 is going to Social Security. I will still only get $100,000 for the credit. Right. And I'm using $100,000 because it's just like an easy number to understand. So the thought was is that if instead of making self-employed people pay a 12.4% tax on their earnings but a 6.2% tax, they would be more likely to report higher earnings. So the incentive to reduce their taxable income would be lower, and so they would be contributing on their portion more to Social Security, and that would help them in the long run because one of the biggest problems that independent contractors and self-employed people have is that in order to reduce their tax burden in any given year, they end up under-contributing to Social Security. Right. And it's not a small problem. It could be a really big problem that self-employed people have been a – This is a fight between my tax guy and my retirement guy. Yes. Yes. You know. Back and forth every year. Okay. So those are my four. Those are my first four. The big four. The top four. Let me see if I can come up with a clever name for them on the back end. The caregiver calculation. Okay. The partial benefit. The smart retirement age. And the Uber, we're taxing you. That last one I'm still workshopping. All right. Well, that has been fun. That actually has been fun. Okay, good. I'm sorry that I don't get to retire in your system. I think my system would have some – we'd have to come up with additional financing. I mean, let me just say this. Would these cost a lot of money? We don't know. You'd have to have a really good look at the earnings of Americans now, make some assumptions about how they would behave differently, and then basically put that on a timer that an actuarial calculation can come through and say we think it would be net positive or net negative. I'm not sure. The spousal benefit would definitely cost more, but it would incentivize a lot of people to work. The partial and temporary claiming would cost money but would also incentivize people to work. I mean, I see a lot of incentive to work here. Even the smart retirement age, you know. It gets people to work. It would basically hopefully make the retirement more neutral. And then the 1099 would – Well, obviously we're all – This contractor pool is like, that's number one. I think the 1099 would just be a pure revenue. It would have other consequences where I'm sure someone who uses a lot of independent contractors would say, you're just cutting jobs. you're squandering economic opportunities for Americans because you're not letting us pay them as a contractor instead of an employee. And I would say if you really think that they're jobs, you should probably hire a worker. You should probably be employees. So if you tax something, you tend to have less of it. So if you tax independent contractors, you would probably have fewer independent contractors. Doesn't follow that's necessarily a bad thing. Okay. Yay, fun with social security. And for our next hour. Why are you laughing, Robin? All right. All right. We will take a quick break. And when we come back, there's a 50-50 chance I'm still talking about Social Security. We're back with executive orders. You want to go first? You can go ahead. All right. I have recently been on a tear ordering things that I've been putting off. And that means that I get an email about once an hour asking me to review a product. You know what? I don't need to review every product. I don't need to review cat food. I don't need to review coffee filters. I don't need to provide a workforce performance for every online interaction I've had with someone. There's got to be some limit. It's like the entire world is operating on a five-star system now. And I'm out. I'm out. I'm done. Robin's out. Rosie out. Okay, I like that order. I don't like reviewing stuff. My executive order is that the Olympics needs to have a children's broadcast. Oh, yeah. I'm not going to, like, they have so many questions about winter sports that I answer, like, as a Texas girl, as a many-generation Texan, I don't know why the blades look like that for speed skaters. I don't know how they don't get called. You don't have good answers. They were like, what? And then they were like, where's this country? And I was like, it's like top right, maybe. I'm just like really unsure. Oh, man. So I'm like, so I am now, we need to have a kids broadcast of the Olympics. If NBC won't do it, PBS will do an amazing job and just have it be a truly special place for children. Because you really do like. And you learn tons about the world. Why not? You learned so much about the world. We were watching the opening ceremony, and there were just a few comments. I mean, the opening ceremony had some commentary issues. But one of the comments was, it's in Milan, mind you. One of the comments was, I'm getting an Italian vibe from this, and like nothing on any of the music playing. Or why Mariah Carey was there, or who was on stage. and then sean white did the parade of nations in every country he basically talked about a place he had gone to in that country and it was like his his live travel blog and at one point my kindergartner looked over and said what is he talking about yeah it's like this is a chance to work to learn about a country to learn about the world to learn about fashion to learn about like cold and hot and like why there's lots of countries that aren't there um and my like the whole regions of the world are not going to send athletes but like australia does so i i just yeah i was like we need a children's broadcast where it's it's it's educational there's none of this like schlubby cross promotion i'm sean white and i've been to places and would just answer the many questions my kid had about the Olympics because they were so into it. Exactly. I'm so into the Olympics. We need six-year-old hosts. We need six-year-old hosts. Who ask their smart questions. We need a physics classroom where the seventh graders explain the physics of various things. Why speed skaters skates are like that? I'm like, I couldn't tell you. Seems sharp. Yeah, there's so much education and information to glean out of curious children watching the most incredible athletes on earth. And the current broadcast is either way over their heads or was drivable. So, NBC, sorry, that was mean. So, that's my executive order. We're going to have Kidlympics, KidOlympics, the kid broadcast. And there'll be kids on screen and kids doing interviews. and it'll probably be the feed that I watch till I die. Kids interviewing the Olympians. Oh my God. Can you imagine every question is, are you cold? How cold are you? How cold are you? Okay. We do not have sponsors for the show. As we explained earlier, we have commercial sponsors. We have in-kind promotional roles from PRX, who we are very proud to be a part of. funding for the show comes from you. You give us money. That's why we're able to do this. We don't really have it from any other place. So for the love of God, give us money. We have a website, optimisteconomy.com. Meanwhile, emotionally, we're being supported by other things. We call those things spiritual sponsors. Yes, spiritual sponsors, things that get us through the week, through production, through the day. Robin, who is your spiritual sponsor? You know, my spiritual sponsor was going out to lunch because I work at home and I stopped going out to lunch when we moved back to Los Angeles. My wife and I went out to lunch on a Wednesday and it was delightful. It was just delightful. I thought I should make a point to do this every once in a while. Um, my spiritual sponsor this week goes out to a very lovely listener who not only bought the Optimist Economy hat, but took the Optimist Economy hat on a 10 day cruise through the Caribbean and took a photo of the hat at all the stop on her journey. That hat saw sharks. Is this someone you're related to? This is someone I'm related to. But the hat, it was like the hat at a bar, the hat with friends, the hat on the cruise, the hat getting sun. And it was like Flat Stanley, if you've heard of it. It was kind of like the garden gnome from Amelie. It was just all the places that the hat got to go. And I get updates. The hat's living its best life. Yeah. Loving the bar here. And I was like, I think I would love it too. But at least the hat got to go. So my spiritual sponsor is the journey of the one particular Optimist Economy hat that made their way through the Caribbean, making friends and spreading economic optimism. Perfect. Perfect. All right. We're at the end. Yes, this is my part. Sophie Lalonde edits the Optimist Economy podcast, and Andy Robinson Video Consulting creates our online videos that you can see on TikTok, Instagram, YouTube, LinkedIn, where we occasionally connect with people but almost always get trashed by other people. 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