How Sweden Saved Social Security
Centrist parties of the left and right came together 30 years ago to save pensions from insolvency.
By Johan Norberg | Feb. 22, 2023 12:54 pm ET
‘There are few issues on which Sweden and the United States are not in perfect sync,” then-Vice President Joe Biden said here in 2016. Here’s one: Social Security. President Biden refuses to consider any reforms, and so do many Republicans. But that won’t save the program; it’ll doom it. In a little over a decade, the trust fund will be exhausted.
Sweden faced the same problem in the early 1990s. The old pay-as-you-go pension system had promised too much. With fewer births and longer lives, projections showed the system would be insolvent a decade later. As Mr. Biden has said in another context, Sweden has “an ethic of decency.” Its politicians chose not to deceive the voters. The center-left Social Democrats acknowledged that the system “would not withstand the stresses that can be foreseen.”
In 1994 the Social Democrats agreed with the four center-right parties to create an entirely new system based on the principle that pensions should correspond to what the beneficiary pays into the system—a system in which the contribution, not the benefits, is defined.
The reforms were designed to make it impossible to run a deficit and pass the costs to future generations. Crucially, the agreement introduced a balancing mechanism nicknamed “the brake.” When the economy is doing worse than expected, pension benefits are automatically reduced, and when the economy picks up again, the brake is released.
Sweden introduced partial privatization of the kind the American left derides as a Republican plot to gamble our money away on the stock market. The Swedish government withholds roughly 2.3% of wages and puts it into individual pension accounts. Workers are allowed to choose up to five different funds in which to invest this money, according to their own risk preference, and can change them at any time free.
Commentators claim partial privatization would mean that pensions could be lost in a financial crash. That ignores that the money isn’t all invested or withdrawn at the same time, meaning that the performance in a single year isn’t crucial. The returns from the normal income pension is around 2% per year, but from the private accounts the average Swede has made an impressive average return of roughly 10% a year since its inception in 1995, despite the dot-com crash, the financial crisis and the pandemic.
Swedish social security isn’t perfect and doesn’t satisfy everyone, but it has the obvious advantage that it actually works and is sustainable in the long run. Far from being a cautionary tale, Sweden’s pension system was recently described as the world’s best by the insurance group Allianz, based on a combination of sustainability and adequacy.
The Swedish far left and far right never accepted the reform and have demanded and sometimes won higher payouts. But most of the system remains intact after almost 30 years. No doubt, part of the explanation is that Swedish politicians prepared their citizens with an adult conversation about costs, benefits and what was possible, instead of merely rehearsing slogans and ignoring the inevitable crash.
A SUMMARY OF THE 2023 ANNUAL REPORTS | Social Security and Medicare Boards of Trustees
A MESSAGE TO THE PUBLIC:
The Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs each year. This document summarizes the findings of the 2023 reports. As in prior years, we found that the Social Security and Medicare programs both continue to face significant financing issues.
Based on our best estimates, this year’s reports show that:
• The Hospital Insurance (HI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2031, three years later than reported last year. At that point, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits.
• The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of scheduled benefits.
• The Disability Insurance (DI) Trust Fund is projected to be able to pay 100 percent of total scheduled benefits through at least 2097, the last year of this report’s projection period. By comparison, last year’s report projected that the DI Trust Fund would be able to pay scheduled benefits through at least 2096, the last year of that report’s projection period.
• If the OASI Trust Fund and the DI Trust Fund projections are added together, the resulting projected fund (designated OASDI) would be able to pay 100 percent of total scheduled benefits until 2034, one year earlier than reported last year. At that time, the projected fund’s reserves will become depleted and continuing total fund income will be sufficient to pay 80 percent of scheduled benefits. (The two funds could not actually be combined unless there were a change in the law, but the combined projection of the two funds is frequently used to indicate the overall status of the Social Security program.)
• The Supplemental Medical Insurance (SMI) Trust Fund is adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources–premiums on enrolled beneficiaries and federal contributions from the Treasury–are automatically adjusted each year to cover costs for the upcoming year. Although the financing is assured, the rapidly rising SMI costs have been steadily increasing demands on beneficiaries and general taxpayers.
Since last year’s reports, projected long-term finances of the OASI and the OASDI Trust Funds worsened due to the Trustees revising down the expected levels of gross domestic product (GDP) and labor productivity by about 3 percent over the projection window. The Trustees made this change as they reassessed their expectations for the economy in light of recent developments, including updated data on inflation and U.S. economic output.
Despite the downward revision to economic assumptions, the projected long-term finances of the HI Trust Fund improved since last year’s report. The improvement is mainly due to lower projected health-care spending stemming from updated analysis that uses more recent data.
SMI Trust Fund expenditures for Medicare Part B as a share of GDP are also projected to be lower than previously estimated in part for the same reason. In addition, expenditures on drugs under SMI in Medicare Parts B and D are projected to be markedly lower as a share of GDP due to the impact of provisions of the Inflation Reduction Act, which became law in August 2022.
Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. We urge Congress to consider such options for both Medicare and Social Security, like the proposal for Medicare in the President’s FY24 Budget. With each year that lawmakers do not act, the public has less time to prepare for the changes.
A SUMMARY OF THE 2023 ANNUAL SOCIAL SECURITY AND MEDICARE TRUST FUND REPORTS
Table 1 lists the 2023 Trustees Reports’ key findings for each of the separate trust funds established under the law.
Table 1: Key Findings of the 2023 Trustees Reports
Social Security |
Medicare |
|||
OASI |
DI |
HI |
SMI |
|
Type of benefit paid from the trust fund |
Retirement and survivor benefits |
Disability benefits |
In-patient hospital and post-acute care(Part A) |
Physician and out- patient care (Part B); prescription drugs(Part D) |
Full scheduled benefits are expected to be payable until |
2033 |
At least through2097 |
2031 |
Indefinitely |
Percentage of scheduled benefits payable at time of reserve depletion |
a77 |
— |
b89 |
— |
75-year actuarial balance, as a percent of taxable payroll |
-3.62 |
0.01 |
-0.62 |
— |
Who Pays Corporate Taxes? Look in the Mirror…
Costs are passed on to consumers. If you work for and invest in companies, you get hit three times.
By Phil Gramm and Mike SolonApril 23, 2024 1:48 pm ET
In his call for Congress to repeal the 2017 tax cuts and increase corporate taxrates, President Biden asked: “Are we going to continue with an economy wherethe overwhelming share of the benefits go to big corporations and the verywealthy?” Rep. Richard Neal, ranking Democrat on the House Ways and MeansCommittee, said that extending the tax cuts will do nothing but fill “the pocketsof venture capitalists and some business owners.” President Obama’s topeconomist, Austan Goolsbee, said that debates over who pays the corporate taxare “an argument about whether making corporations pay more income taxeswould trickle down into lower workers’ wages.” But as John Adams once said, facts are stubborn things. Seven years into theweakest recovery in postwar history, as the economy slumped toward arecession, the 2017 tax cuts and the Trump administration’s regulatory reliefsent real median household income soaring by $5,220 in 2019. That’s 49% higherthan the previous highest annual gain in 2015 and 11 times the averagepercentage gain over the previous 50 years. Real median income rose more ininflation-adjusted dollars in 2019 alone than during the entire Obama recoveryfrom 2009-16. The poverty level plunged at the fastest rate since 1966, to thelowest level since the Census Bureau started collecting the data in 1959. The lowest income quintile saw its average real income rise by 9.4% in 2019, theyear after the tax cut took effect. The second quintile (7.4%), middle quintile(6.9%) and fourth quintile (7.8%) all experienced the largest annual incomegrowth in more than a half-century, and the top quintile (7.2%) had its second-highest income growth. The poverty rate in 2019 was the lowest ever recordedfor every category, including individuals, families, unmarried women, blacks,Hispanics and children. Since the Census Bureau doesn’t count refundable tax credits as income for therecipients or count the effect of any other tax change in measuring householdincome, none of these income gains and poverty reductions had anything to dowith the increased child tax credit. Economic growth was almost entirelyresponsible. It’s still a free country, and critics can say whatever they want aboutthe 2017 tax cuts knowing the mainstream media will let them get away with it.But they can’t change the facts. No federal spending or tax policy change in thepast 50 years was followed by as large an increase in real median householdincome or as big a drop in the poverty rate as the Trump tax cuts. Everyone expected that the owners of American public companies would benefit—and they did. The stock market surged in 2017 in anticipation of the tax cutsand, in 2018 and 2019, in response to them. Who owns American corporations?According to Tax Notes, 72% of the value of all domestically held stocks is ownedby pension plans, 401(k)s, individual retirement accounts and charitableorganizations, or held by life insurance companies to fund annuities and deathbenefits. Corporate tax rates, which were the driving force behind the permanent part ofthe 2017 tax cuts, receive less attention than individual income-tax rates onlybecause Americans don’t understand that corporations don’t pay taxes. Acorporate entity is a “pass through” legal structure—a piece of paper in aDelaware filing cabinet. When the corporate tax rate increases, corporations tryto pass the cost on to consumers. To the degree that the entire cost of the taxincrease can’t be passed on to consumers, those costs are borne by employeesand investors. Most economic studies conclude that 50% to 70% of a corporatetax increase not passed on in higher prices is borne by workers, while 30% to 50%is borne by investors. If you consume, you pay the corporate tax. If you consume and work for acorporation, you pay the corporate tax twice. If you consume, work and investyour retirement funds in corporate equities, the corporate tax rate hits you threetimes. Democrats call up the image of the greedy robber baron as apersonification of big corporations, but when you pull back the curtain, it isn’tthe wizard or the robber baron you see but yourself as a consumer, worker andpensioner. Many Americans don’t pay individual income taxes, but all Americans paycorporate taxes. In fact, a recent Treasury study confirms that 92.6 millionfamilies, 49.5% of all American families, pay more in corporate taxes than theydo in individual income taxes. Unfortunately Americans consistentlyunderappreciate the burden the corporate income tax imposes, especially onmiddle- and low-income Americans. President Biden’s proposed corporate taxincreases would raise taxes on more low- and moderate-income Americanfamilies than if he raised individual income-tax rates. Congress should reject Mr. Biden’s efforts to raise corporate tax rates, especiallyhis effort to circumvent Congress and the Constitution with the global minimumcorporate tax. If Congress refuses to adopt the global minimum corporate tax,Mr. Biden would allow foreign countries to tax U.S. subsidiaries to collect theequivalent of the global minimum tax on their U.S. earnings. Congress shouldpass a joint resolution rejecting the global minimum corporate tax. Further, itshould adopt legislation that mandates retaliation against any country trying totax American subsidiaries to collect the corporate minimum tax on U.S. earnings. Mr. Biden and congressional Democrats claim corporations that get taxsubsidies don’t pay their fair share, but the entire Biden program is festoonedwith special-interest corporate subsidies. We should eliminate those subsidiesand use the savings to reduce corporate tax rates. We must never forget that the corporate tax is a tax on everything we buy, a taxon our wages and a tax on our retirement nest eggs. By taxing corporations, theDemocrats are taxing the American people. Mr. Gramm, a former chairman of the Senate Banking Committee, is a visitingscholar at the American Enterprise Institute. Mr. Solon is an adviser to US PolicyMetrics. John Early contributed to this article.
USC Code 18, Chapter 29, Section 611 – Voting by Aliens
§611. Voting by aliens
-
It shall be unlawful for any alien to vote in any election held solely or in part for the purpose of electing a candidate for the office of President, Vice President, Presidential elector, Member of the Senate, Member of the House of Representatives, Delegate from the District of Columbia, or Resident Commissioner, unless-
(1) the election is held partly for some other purpose;
(2) aliens are authorized to vote for such other purpose under a State constitution or statute or a local ordinance; and
(3) voting for such other purpose is conducted independently of voting for a candidate for such Federal offices, in such a manner that an alien has the opportunity to vote for such other purpose, but not an opportunity to vote for a candidate for any one or more of such Federal offices.
-
Any person who violates this section shall be fined under this title, imprisoned not more than one year, or both.
-
(c) Subsection (a) does not apply to an alien if-