Is the Lock Box Empty? (Neon Liberalism #82, with Stephen Nuñez)

The American government is an insurance company with an army—so how do our insurance company's finances look? Samantha and guest Stephen Nuñez, Director of Stratification Economics at the Roosevelt Institute, talk about the state of Social Security. No, it's not because the boomers are retiring—but the problems are real and getting closer. What can we do about it?

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Transcript

**Samantha Hancox-Li [00:00:10]**
Welcome back to Neon Liberalism. I am Samantha Hancox-Li. I've heard it said that Russia is a gas station with an army. I've also heard it said that the United States is an insurance company with an army, and if you look at the federal budget, that's kind of true. The largest single expense of our $7 trillion federal budget is Social Security, amounting to about 17% of that budget, although interest payments on the national debt are coming on hard behind. But then after that, it's another series of health and Medicaid and veterans' aid, and military spending in there somewhere. But — an insurance company with an army.

So, to get a sense of what is the state of our insurance company, I thought I would have on Stephen Nuñez. Stephen is the director of stratification economics at the Roosevelt Institute, and has written a fair bit about the state of Social Security and related matters. So yes, Stephen, thanks so much for coming on the podcast.

**Stephen Nuñez [00:01:22]**
Thank you for having me. After our president, and then my colleague Rey Fuentes, was on, I felt extremely envious. I needed to get onto Liberal Currents — and Neon Liberalism.

**Samantha Hancox-Li [00:01:38]**
Someday I will have worked my way through the entire Roosevelt Institute roster, and by then you'll have hired new people, so I'll be able to start over.

**Stephen Nuñez [00:01:52]**
I like that plan. I like that a lot.

**Samantha Hancox-Li [00:01:55]**
So, before we talk too much about the future plans of this podcast, let me ask maybe a more relevant question: what's the state of Social Security? The lockbox, right? It's the — so, we're going bankrupt, is what I hear.

**Stephen Nuñez [00:02:15]**
Well, I guess you could divide that into kind of two pieces. One is, what is the state of the trust fund and the trust fund reserve — the OASI trust fund. And OASI is Old Age and Survivors Insurance, which is usually the lockbox that Al Gore talked about. So this is the trust fund that funds what we typically call Social Security. But obviously Social Security also includes the DI fund — that's for SSDI, disability insurance — and then the actual administration also includes SSI, Supplemental Security Income, which is not funded through a trust fund, but is also a very important program for folks with disability, or for the elderly poor.

So there's the trust fund side, and then there's the administrative side. On the trust fund side, we are where we've been, and where we've known we've been, for about 20 years now — which is that the trust fund reserve is depleting. It's depleting about 30 years earlier than initially projected when Social Security was last sort of reformed, which was in 1983, and we will need to do something about that.

I think — so, people tend to just think of Social Security as, this is my money and I'm investing it. But it's actually a pay-go system. So the money comes in from current workers, and it immediately goes through the system and goes out to current beneficiaries. And when more money is coming in than going out, that money gets put into treasury bonds, and it builds up a reserve. And when less money is coming in than is going out, they draw on that reserve in order to fund the difference. And since about 2009, 2010, we've been drawing on those reserves.

Which means — I think "bankrupt" is not the right way to think about it, because the current projection is (and this has fluctuated back and forth somewhere between 2033 and 2035, basically every year, for again, the last 15, 20 years) — at that point, when the reserve goes down to zero, in the absence of some kind of congressional action, we would be able to pay about 20% of benefits — or, excuse me, 80% of benefits — given the revenue that we have, and that would remain relatively stable for a while.

Now, in practice, nobody actually knows, because this never happened before. Could we — would there have to be a 20% across-the-board cut? Would they be allowed to stagger payments, or to prioritize payments to lower-income households? We just don't know.

But I do want to say that there's no real reason to think that we're going to be in that situation, because this actually did happen before, in 1982, which was when we had the last round of reforms. And what happened was, in '81, Congress just passed temporary bridge funding. They said, you can borrow from the hospital insurance fund and from the DI fund for the next two years or so, while we work on a long-term solution. And the zero point on the reserve came and went, and nobody ended up losing out on their payments or anything. And then they created these reforms, and paid back the loan from one trust fund to another. So basically, just moving things around on paper within like two or three years, and that was the end of it.

Except for that, it wasn't the end of it — because there were some problems with the projections that Congress adopted in 1983, which we could get into.

**Samantha Hancox-Li [00:06:24]**
Yeah, so I guess that would be my question. From what I've read of yours, they had these projections in 1983 about the future trajectory of the American population, American retirees, the American economy. And they're like, we're actuaries, and we did a lot of spreadsheets at it, and we came up with an answer about how much money we were going to be needing to take in over time, and how you accumulate interest, and blah blah blah. Boom! Here's the actual amount of money that we're going to be taking in and giving out.

And then that didn't work out. Why not? They knew the baby boomers existed. They could tell that there was a baby—

**Stephen Nuñez [00:07:07]**
Yeah. Yeah. Well, I mean, there's a kind of popular myth — that some good faith people push, but a lot of bad faith people push — that this is all because of the baby boomer retirement. And, oh, the baby boomers are wrecking our economy, they're wrecking the retirement, and so this is fundamentally unsound.

**Stephen Nuñez [00:07:28]**
But the truth is, when they made the projections — the trustees — they insisted, and they knew roughly when they were going to start retiring, and what that would look like. They also knew that fertility rates were dropping, and they actually had a really good projection. Like, this is what fertility rates are going to look like in 1990 and 2000, et cetera, and it's all really good.

So they built the entire series of reforms around the assumption that people were going to have fewer kids, there was going to be a graying population, the dependency ratio was going to go up, and people were going to retire roughly around this time period, in a wave. And they were tasked with coming up with at least 75 years of solvency — because, for reasons that I'm still not quite sure, the 75 years is the actuarial kind of time range that they work on. So they wanted to get us to the late 2050s, and in their plan, we would have started drawing on the reserves in the early 2020s, like around 2022, 2023. So the idea that eventually the outflow would outstrip the inflow was actually assumed, and that it was going to happen around there.

But a couple things happened. One was — and this is kind of technical — but basically, they had an assumption about how earnings were going to grow over this time period, over the last several decades. And they looked at 1982, and they said, right now the FICA tax has a cap, such that if you have earnings over this cap, you no longer pay into the system, and also your benefits don't take into account income above that either. And given where the cap is, we are roughly at 90% of all eligible earnings being captured by the FICA tax — being taxed — and then that money can be used to kind of build our war chest, our reserves. So we're going to go forward under the assumption that we want to stay roughly at that. And if we have these earnings gains on average, we can set the cap to rise every year by a certain percentage — which it does — and we can maintain that 90%.

And within about five years, it was clear that that wasn't happening, because there was massive unexpected earnings inequality. So, with all these projections, if you anticipate it and you build those assumptions into your model, it's fine. But there was really serious income inequality, such that there's about — I'd say 6% of workers who historically have earned above the cap, and that's actually still true. It's still about 6%. It was about 6% in 1982. But they captured about 68 — well, I mean, I would say their earnings went up by about 68% during this time period, and everybody below the cap, their earnings went up by like 13 or 14%, on average.

So if you average that out, it actually is the average earnings gain that they had assumed for this 40- or 50-year period. The problem is that it's extremely lopsided. They were essentially assuming that those three or four or 5% earnings gains would be shared roughly uniformly across the income distribution, and that didn't happen. So now you're at about 82 to 83% of eligible earnings being captured by the federal government, and that stabilized by about the year 2000, and it stayed that way.

**Samantha Hancox-Li [00:11:20]**
I mean, I want to stop, pause a moment here, and talk about this inequality, because it really is quite striking when you put the hard numbers on it. These days, wealth inequality is the new hotness, and there's a lot of reasons to talk about wealth inequality. Wealth inequality is important. But just the idea that since 1983 — whatever, the 1980s — the top 6% of income earners have seen a 60% rise in real incomes, and the entire rest —

**Stephen Nuñez [00:11:57]**
Yeah.

**Samantha Hancox-Li [00:11:58]**
— yeah, the entire rest of the distribution has seen a 17% rise. At least, we can argue about which exact percentage, but that's a pretty stark difference right there.

**Stephen Nuñez [00:12:37]**
That's right, and that was not anticipated, but it was very quickly identified as an issue, I would say.

So — the actuaries. I want to distinguish between Social Security's actuaries, who make their projections, and then the Greenspan Commission, which created a bunch of recommendations based off of that, and then the House and Senate at the time, that used the Greenspan Commission as a sort of template and implemented some of their recommendations, not all of them.

When you go into the trustees' reports, they have scenarios, and they'll say, this is the most likely kind of grand mean scenario, and this is — but we could see inequality like this, or we could see inequality like that. And if that were the case, then as this diverges, this is what happens to our solvency. So that was there, and they recognized it as a possibility, but it wasn't built into the legislation. There was no, "if we see projections deviate from — or we see reality deviate from our projections — then this triggers some change to the FICA cap," or whatever. They just had, like, no, we're going with this.

And within a few years, Social Security Administration was saying, okay, this is not going according to plan, and if this persists and it continues to grow, we're going to have a problem. Things are not going to work out the way that we wanted them to work out. And basically, Congress just did not want to revisit it.

**Samantha Hancox-Li [00:14:11]**
That's a problem for future me. Problem for future somebody else who's going to be elected 40 years after I die, or whatever.

**Stephen Nuñez [00:14:20]**
It's a problem.

**Samantha Hancox-Li [00:14:21]**
Like many problems.

**Stephen Nuñez [00:14:22]**
Well, I mean, it's true. Yeah, yeah. So there's a lot of passing the hot potato. It's also the case that there were a few interventions and tweaks to Social Security during the 1970s, and they had just sort of, I think, exhausted all interest or political will to do this.

So since the mid-1980s, Social Security Administration has known that there's a problem, and they knew that it was going to kind of mean that we were not going to hit the initial target — which was actually 2063. So it was actually 80 years, if everything had gone to plan.

But then the second thing happened, which was the Great Recession. And again, when you're doing these 75-year projections about economic growth and so forth, in general it's all going to kind of flatten out and average out to be — this is what the growth was like over 75 years. There's going to be some periods of boom. There's going to be some periods of bust, but it's going to correct, and there's not going to be a very long period of deviation from that trend. And that was just not the case with the Great Recession. It was extremely deep in a way that a lot of recessions hadn't been for a very long time, and then the recovery was extremely sluggish.

That meant — because our fiscal and monetary response was just insufficient, for whatever reason you want to get into, was not sufficient — which is why we had that long, kind of, they say, lost decade. It wasn't really a full decade, but it was almost a decade of a lost decade. And so you get things where — what happens? Well, now the earnings gains are also really bad. You have people who are dropping out of the workforce entirely in a way that is starving the fund for revenue, so that's exacerbating problems. And then you have a lot of people who are going to retire early now. And you say, oh well, they're going to retire at a penalty, they're retiring at 62 or 63, so doesn't that help us? And the answer is no, not really — because they're taking less, but they're drawing for longer, and also they're not providing the income that they were going to be providing during that time, right?

**Stephen Nuñez [00:16:54]**
So that just took everything that was already a problem because of the unexplained income inequality, and made it a lot worse. Which is why I think we were probably going to start drawing on the reserves around 2015 or '16, and now we're drawing in 2009, 2010. So it just meant these reserves did not get a chance to grow large enough, or to have compounding interest build them enough. So we just didn't have a huge war chest, and we had to start drawing on the little war chest that we had far earlier.

So now we're in this situation. People said, oh God, it's moved up to 2033. It moved from January 2034 — excuse me, first quarter 2034 — to fourth quarter 2033. So there wasn't really a huge movement, and it's quite possible that next year it'll bounce back up to quarter two, 2034. But the point is that sometime fairly soon, we are going to be forced — and Congress is going to be forced, kicking and screaming — to actually engage with the Social Security Trust Fund.

And I don't want to say in any way that this is existential, because we really can solve this problem. This is totally within our ability to solve. You could raise the cap. You could take the FICA cap and get rid of it, and that would get us to like 2055. Or if you're gonna instead say, we're gonna get rid of the FICA cap, but we're also gonna credit people for their income above that, then it's like 2053. If your goal is to get to 2063 for some reason, then that's most of the way there, and then you'd have to do a few other things. But generally, again, whenever they meet to actually do something, they're gonna try to do a 75-year plan, to get us to 2100, 2101 or whatever. And in that case, it's an important chunk of money.

And if we had bothered to get rid of the payroll cap 10 years ago, it would have taken us really, really far. But the longer we waited — now we're in a situation where, I know on the left people like to say, we just get rid of the cap. And it's like, yeah, maybe we should get rid of the cap. There's a good argument to be made for that. But it's not enough. We're also going to have to think about things like the taxation of Social Security benefits for high earners. We already have some of that. We might want to change the way that we structure that formula. We might have to talk about increasing payroll taxes, and we may have to start talking about other forms of revenue — taxing other forms of compensation that are not part of FICA. There's a lot of different things that you could do on the revenue side before we start talking about cutting people's benefits or whatever, right?

**Samantha Hancox-Li [00:19:22]**
This is kind of what I want to ask you about, because we've talked a lot about the accounting side of things. And right, from an accounting perspective, it's like, okay, well, here's the things that they projected correctly, and here's the things that they missed, and here's the revenue mismatch. And America is a turbo-rich country. We could easily make up the revenue mismatch if we just raise taxes or cut benefits. Either one would be easy. But that's not really the problem, is it?

**Stephen Nuñez [00:19:49]**
Sure. I mean, I think so. We also have just path dependence issues, right? So, for political reasons, when FDR was trying to pass this bill — the Social Security Act — he overruled Frances Perkins and his advisors, who wanted this to just come from general taxation, general funds, and said, no, no, no, no, this needs to be a payroll tax. It needs to be a clear line on people's paychecks, so they know that they're investing in it. This is for political reasons.

So when people say, oh, we could just raise taxes — well, I mean, not under current law. The Social Security Trust Fund is legally prohibited from borrowing, and it's legally prohibited from using funds other than the funds that come from the FICA tax, or from the trust fund itself, to pay for things. Right, so we've created this kind of accounting box that makes things difficult, right? People talk about the Australian system.

**Samantha Hancox-Li [00:20:41]**
Right. And when I look out, not just in America but across the developed world, I see that pensions seem like they're a big politically contentious issue these days, right? There's been some very contentious pension reforms in France. Britain, by contrast, has kind of done the opposite, with what they call the triple lock. We could explain what the hell the triple lock is.

**Samantha Hancox-Li [00:21:00]**
That seems to have locked in much higher benefits for their pension system, in ways that are maybe becoming politically contentious for another reason. Because on some level, these are questions about — I mean, like you said, these are all kind of pay-go systems, and so it's about a transfer from working-age Americans to Americans in retirement. And as we have a graying population, a population that lives a lot longer, right — the scale of that transfer becomes larger and larger, and that becomes a politically contentious issue, right?

**Stephen Nuñez [00:22:46]**
Oh, we have this investment system, and then there's a side, kind of means-tested, general funds thing. I mean, good luck getting to something like that, right? Because again, people are invested in the system that they know. This is — people say this is their money. And it's a very different structure. So that's part of it.

But like you said, there's a generational politics. Also, there's, you know, what about us? We should be investing in children, not in old people. Old people already get enough, or whatever, right?

**Samantha Hancox-Li [00:23:11]**
Yeah. I, as longtime listeners of this podcast know, am no fan of zero-sum thinking. Just want to get that out there.

**Stephen Nuñez [00:23:19]**
And I don't like that kind of — look, progressive — I don't like that kind of zero-sum thinking. I think, again, we have more than enough to provide a child benefit, and to do childcare provision, and all sorts of other things that other countries do, and also not impoverish old people who are dealing with a lot more than this, right?

So there's the standard story about — oh, I thought that Medicare covered nursing homes. Nope. Okay, like, I guess you might be able to get some kind of home health aide or whatever, if you can impoverish yourself enough to get onto Medicaid, and then you're in a state that is providing home and community-based services, and then also your state is not bleeding money because of HR 1 — so you'll still be able to get these services, right?

There's also just a lot of overlap between age and disability. A lot of these folks are receiving OASI. They're also receiving SSI, and they're not in great shape. The people aren't living — these are not older people like fat cats, burning dollar bills, like, ha ha, right, I live in beautiful retirement.

And then so there's the healthcare issues, there's the disability issues, and then there's just — I mean, I don't know exactly how you put this — but just longevity risk. People forget that Social Security is not just UBI for old people; it is actually insurance, right?

A few things. One, the survivors' insurance is really important, because people die, and then their family members need help. There are actually millions of children — I think it's something like 3 million children — that are lifted out of poverty every year by OASI. It's something like 70 or 80% of that are survivors' benefits. But there are also grandchildren that are being raised by their grandparents, or by their great-great-uncles or whatever. So it's their whole household. And then there's just families that didn't save a lot, and they lived longer than they anticipated, and they've run out of money. Right? Social Security has to be there for these folks.

So I want to make sure that we remember that this was meant, in part, to be — as Roosevelt likes to say — insurance against the vicissitudes of life, right? And there's a lot of different ways in which this program provides for elderly folks and for their loved ones. And I think there's also a lot of ways in which the social safety net, as it stands in the United States, is still not sufficient for older folks and for their families.

So before we start saying, you know, the greedy geezers are taking away money that should go to other populations, I think we've got to think about whether or not that narrative is correct, and whether or not it's meant to essentially sort of break coalitions. And I think there are a lot of kind of people who are up to no good out there. Frankly.

**Samantha Hancox-Li [00:26:34]**
I do want to ask, I guess, a kind of a philosophical question. This comes from the Liberal Currents Discord, actually, which is: what exactly do we want the purpose of Social Security to be? Because one story you can tell, right, is FDR passes this law back in 1935 — the Social Security Act — and it's going to provide security to people who are older, life expectancy is not so great. And some people will argue, well, the purpose of this law is just to provide security against absolute destitution in your old age.

But today it's like, oh yeah, you're going to have 30 years of retirement, possibly, right? And you want to have a decent life. You want to have access to medical care in that time period. And so, what do we want out of our Social Security system?

**Stephen Nuñez [00:27:27]**
Sure. I would like to see a system that allows people dignity in old age, and for them to not become a burden on their family — if they even had family — to take care of them.

**Samantha Hancox-Li [00:27:37]**
Yeah, I think that's worth dwelling on, right? That whatever we do with Social Security, people are still going to get old. They're still going to need care. They're still going to need to eat, and pay for their homes, and pay for medical care, right? And it's just a question of how we as a society want to arrange for that to happen. Or do we want to privatize misery, or do we want to take care of each other?

**Stephen Nuñez [00:28:01]**
I think so. I have a fellow working on a paper right now. So, stratification economics is about structural inequalities in the economy, and in society, and in the safety net. And I think there's a lot where you have to think about: who are the people who are going to bear the brunt of cuts? Or, we'll give them, like, a token allowance, and they won't be absolutely destitute, but, you know, we can't really afford to provide more than that.

And who are these people? Hey — it's poor people, and black people in particular, and people of color, and disabled people, who are never part of the conversation. We can have a whole conversation about this. They're never part of the conversation.

**Stephen Nuñez [00:28:50]**
They get ignored in every discussion about intersectionality and everything, and that's a huge problem.

So, what happens when our safety net for the elderly — whether they are disabled or not, whether they need long-term supports and services or not — is poor? Well, that burden falls on their families. And what does that mean? Well, in practice, for normative reasons, and for the history of patriarchy and so forth, it means women, right? And because of questions of who has money and who doesn't, it means, in particular, black and brown women.

So what do they do? They give up their own careers to become primary caregivers. Sometimes this is on the extensive margin — they drop out of the workforce entirely. A lot of times, it is they just dial back a lot on their hours, and they spend a lot more time, at the cost of their careers, to be full-time caregivers or to be part-time caregivers for these people. And they're sacrificing their career, their good life, their time for this. And that has implications for them in their careers. But it also has implications for their families, and for long-term economic mobility, and intergenerational transfer of poverty.

So, as I was saying, I have a fellow working on race and ethnicity specifically in this particular instance — Zawadi Rucks-Ahidiana, who's a professor in New York. And she says, think about paying it forward versus paying it back. Think about what wealthier — especially white — families can do. They can invest in their children's education. They can invest in making sure that their kids have some assets, or a down payment, or whatever. Meanwhile, everybody else is spending money to keep their elders afloat, to keep their family members afloat. So that just sort of replicates privilege, and it replicates the sort of inequality that we have, where it's like, these people have a leg up and are able to maintain that leg up, because they can invest that money forward into the future in a way that other people can't.

So I think it's just — when you look at our safety net, you remove the safety net, the problem doesn't go away. You're just pawning it off on somebody else. And sometimes there's a chain. Another one of my fellows is Jess Calarco, a professor of sociology, and she's pointed out, there's no safety net, so it goes to women, and then white women either bear the brunt, or oftentimes they just pass it down the chain to women of color as caregivers and so forth. And then they pass it down to immigrant women, and it just keeps going, right? So the problem doesn't go away if the government doesn't act as a coordinating mechanism to solve the problem, right?

So. Yes. Yeah, and I think, if you ask about the state of the safety net — even before HR 1, like Trump's big beautiful bulbous bill, or whatever he calls it. I don't remember, the—

**Samantha Hancox-Li [00:32:26]**
One Big Beautiful Bill.

**Stephen Nuñez [00:32:28]**
The One Big Beautiful Bill. Even before that — even if you get before that — we were already very much a, you know, you're-on-your-own kind of society. There's a lot of the work that is passed on to people to handle. Even when our safety net outsources work to households, you have to fill out the paperwork. You have to do everything on your end, right? There's really no—

We talk a lot in the Good Life Agenda about valuing people's time and giving them their time back. And some of this is work hours — you know, we have weekends, we have the eight-hour workday, and we could build on that. But some of it is just paperwork, and administrative burden, and dealing with systems, and spending your time on the phone to deal with everything, and with no real support. They just say, that's for you to deal with. And that's draining.

**Stephen Nuñez [00:33:36]**
And it's also — I think if that's your interaction with the safety net, it builds a sort of anger and cynicism that probably can be exploited by political actors to further cut the safety net. So I think it's a kind of a scary and vicious circle.

**Samantha Hancox-Li [00:33:53]**
So, I actually want to ask you about something that you mentioned kind of in passing earlier: that there are countries that have individual retirement accounts, right? For example, my partner was born in Singapore. He worked there for a few years. They cut a part of his paycheck and said, that's going into your individual retirement account. It's going to earn interest. You can cash this out when you retire. When he gave up his citizenship, he was able to get that specific chunk of money back from his individual retirement account.

And there's a sense in which the American system is this weird thing that you talked about, where it's like, we want to make it clear to people that this is your money, it is coming out of your paycheck right now, and that money is going to get handed back to you out of the lockbox when you retire. But then that's not really what's actually happening, right? Your money is not actually being invested in an individual account with your name on it. It is just a pay-go system. So I'm curious about the political economics of that, where there's kind of a gesture in one direction, but then you're talking about this much more "we take care of each other" kind of ethos.

**Stephen Nuñez [00:35:19]**
Yeah, I mean, I will say that what you pay into the system has an indirect effect on what kind of money you get back in terms of Social Security, right? Like, there's the average indexed monthly earnings — that is, the more money you've earned, it gets averaged in and indexed according to inflation and earnings and other sorts of things, and that creates your primary insurance amount, based off of this sort of system with bands that is meant to make the system somewhat progressive. It's not super progressive, but somewhat progressive.

So, but yeah, I mean, you do hear people talk about, oh, we should put the money in the stock market in some way. And you hear people on the right sometimes will say, look at the Australian system. The Australian system has this great — you invest the money, and then it's sort of propped up on the side by a lightly means-tested sort of supplement that is paid for through general funds. So this is all — it's not about demographics anymore. It doesn't have the same sort of pay-go problem.

But people on the right love to point to Singapore or Australia or whatever and say, market system. But then they don't think about the other part, which is that in Australia, every single employer in the entire country has to put 20% — or, excuse me, 12% — of their employees' earnings into this account every year. No exceptions. Mandatory, right? So we don't. We have a 401(k) system where some companies provide a 401(k) and some companies provide a match, but there's nothing mandatory like that.

And they're still in a transition, right? They started doing that part in, I think, 1991 or something like that. So for now, most people don't have enough money in that account to actually serve as the main provider. So they're in the middle of like a 45-, 50-year transition towards that system.

If we want to have a conversation about building up something like that, sure. I do think it would be difficult, because their pension system was always from general revenue. It was not through the separate payroll tax. So again, like I said, with a trust fund system, there is a real path dependence question. Could we get there from here?

But also, are the people who are so excited about a market-based system also excited about the government mandates that make market-based systems work? Right, whether it be in Switzerland, or whether it be in Singapore — whether we're talking about healthcare, whether we're talking about pensions — you're using the market, but you are heavily, heavily regulating the market. Are we going to have fiduciary responsibilities on these accounts, such that people actually do have a duty to make sure that the money is being invested for the sake of the employee, and not for the sake of the fund holder — at a time where, on the right right now, they are loosening restrictions around 401(k)s and so forth? I don't know.

But again, there are a lot of different ways you could solve the problem. But you know, I see a lot of kind of asymmetric conversation, where they're focusing on one part of the problem, or a program, but not on the back end that makes it work.

**Samantha Hancox-Li [00:39:05]**
Yeah, I mean, I absolutely agree with what you've been saying here. I'm a big believer in — you've always got to do comparative analysis, right? If you only know one country, you don't know any countries. But at the same time, comparative analysis is a great place to go cherry-picking, where you're going to pull one little piece of a system out and be like, look how beautiful it is, and not mention any of the other parts of the system that actually make the system work.

**Stephen Nuñez [00:39:34]**
Sure, sure, sure. Yeah, and I'm struggling with this too, because one thing that people have talked about for the Social Security system is these sort of automatic stabilizers. Which is to say — hey, we knew that this was a problem, but Congress didn't want to revisit this, so it just sat there.

**Stephen Nuñez [00:39:57]**
So what if we had built something into the system that would automatically have adjusted FICA rates, or automatically adjusted the payroll tax, or whatever? Maybe we could have done that. But then also, what would that have looked like, right?

Because you could imagine that it would end up looking like back when the Republicans and Obama were fighting over the sequestration, right? This idea that if we don't come to a deal, these sort of automatic things that are publicly unpopular are going to kick in, right? So you can imagine that they're not going to say, oh, we're going to raise the payroll cap, or we're going to adjust that formula automatically, or we're going to adjust payroll taxes. We're just going to cut benefits, right? And then maybe that'll force people to come back to the table and do something about it. Except for that, maybe it won't, right? Especially when we start thinking about the kinds of structural problems in our system of government that prevent it.

**Samantha Hancox-Li [00:40:57]**
Personally, I'm a big believer in independent agencies. Unfortunately, our Supreme Court is not a big believer in independent agencies, so maybe that's a conversation for a different day.

**Stephen Nuñez [00:41:10]**
Sure. I mean, yeah. That — like, the step that looms over every conversation around the safety net is, how do we do anything about it in this—

**Samantha Hancox-Li [00:41:19]**
Yeah, how do we do anything? One of the big questions in life.

**Stephen Nuñez [00:41:22]**
Yeah.

**Samantha Hancox-Li [00:41:23]**
So, yeah, I don't — like I said, conversation for a different day. What I do want to ask you about is, we've talked about what is to be done, possible changes, and there was one thing you mentioned in passing: HR 1, better known as the One Big Beautiful Bill Act, or OBBBA — I don't know, acronyms. Did HR 1 affect Social Security, the social safety net, these kinds of conversations?

**Stephen Nuñez [00:41:46]**
So, it didn't affect Social Security itself, except for kind of indirectly, I would say. We could have a big discussion about what DOGE did to Social Security, which is that — so, okay, DOGE did a lot of damage to the Social Security Administration, right, and that affects everybody who is receiving OASI, SSDI—

**Samantha Hancox-Li [00:42:08]**
But I thought they found like billions of fake recipients of Social Security. Billions and billions of them. Didn't that happen?

**Stephen Nuñez [00:42:17]**
Not the case.

So I think the problem is that the Social Security Administration had already had some serious structural challenges, and had really not been invested in by basically anybody for a while, such that there were long delays, and getting a disability determination could take a very long time. Martin O'Malley used to have a stat where he said something like, every year 30,000 people die while waiting for their initial DI or SSI disability assessment.

Having now basically fired an enormous number of people who answer the phones, and closed down a whole bunch of departments, and shut down a whole bunch of regional offices, and made it more difficult for people who don't speak English to receive aid — there are now a lot of additional problems. I have not received my check. Where is my check? Or, this amount is an error, right — I'm receiving too much, I shouldn't be receiving that. Oh, there's an error, right — I'm receiving not enough. So, overpayments and underpayments and so forth.

So state capacity has taken a hit in a way that is going to degrade — you know, Social Security Administration likes to refer to the recipients as customers — so it's going to degrade customer service. And again, imagine you are somebody who's on SSI, right? You have major, potentially, mobility challenges. You may have intellectual or psychological disabilities. You may have a caregiver trying to balance care for you with trying to figure out why the thing is late. Or, you said we went over our asset limit, but we don't — here, here's the bank statements. They're trying to deal with that at the same time that they're trying to take care of their person. So I think that's bad. That's not HR 1 specifically.

I will say HR 1 has done a few things. It's added an enormous amount of paperwork burden to the Affordable Care Act marketplace recipients, forcing them to do renewals and proof of income and all that sort of stuff on a much more regular basis. They've also — there's a lot of targeting across the entire safety net now on, make sure that immigrants aren't illegally getting these benefits. Which, you know, undocumented immigrants are not allowed to get any of these programs anyway.

**Stephen Nuñez [00:45:06]**
But there's this idea that there's fraud, and that means that everybody is now going to have to prove who they are in a way that is going to create a lot of false positives and cause people to lose their benefits.

And then, I mean, there's a lot of arcane stuff around Medicaid provider taxes and so forth. I have a paper coming out about that — which is going to do horrific damage to the home and community-based services that disabled folks and elderly folks rely on to live, and their families rely on to have the living arrangements that they do.

And then I think it's also just made our social safety net more work-conditioned than basically it's ever been, in a way that I think is kind of shocking when you compare it to where the national conversation was five or six years ago, and we were talking about the failures of TANF, and the desire to create a true child allowance that is unconditional and so forth, and the ways in which SNAP work requirements have been shown again and again and again to be a failure, and to be not worth it. And I think it's just kind of shocking to see. Again, I was somebody who was also involved in the UBI movement and guaranteed income policy in general, so it's just shocking to see where the conversation changed, and how it sort of shifted so much in the last just like five or six years.

**Samantha Hancox-Li [00:46:40]**
Yeah. I mean, I am personally struck — I mean, you talked about a divisive rhetoric, or rhetoric that's used to split groups. The extent to which people will make noise about, we have to stop fraud, we have to stop waste in government, we have to stop this. And then they'll do things that are — well, we're going to cut staff that goes looking for fraud, and we're going to increase the amount of paperwork that that staff has to process. And also, the actual existence of fraudulent cases you could fit on a napkin.

**Stephen Nuñez [00:47:11]**
Yeah. So I think — look, right. So, people will — like in stats, you talk about type two versus type one error, and the false positives. I always forget—

**Samantha Hancox-Li [00:47:21]**
I can never remember which one's which.

**Stephen Nuñez [00:47:24]**
— but it's false positives, false negatives, and the idea that as you push one down, you push the other one up, and that's just what happens, right? And then you get this idea that the optimal amount of fraud in a system is not zero, right? Because attempting to deal with that last little small sliver is going to actually cost an enormous amount of money, and harm a lot of the people who deserve the benefit, right? So that's part of it.

So there's that. I mean, that's if you take all this in good faith. And maybe some of this isn't being done in good faith, because I think that the other part of the bill was, let's make a lot of tax cuts permanent, and let's make a lot of additional tax cuts for very rich people. So there could be some motivated reasoning, there could be some bad faith. I don't know.

But I will say also, the focus on immigration is another big part of this — both Social Security and the safety net — that we are not talking about in a way that we could. And I feel a little bit ambivalent about the way that I'm going to say this, right? Because the main reason why I think it is awful that we are going after immigrants, going after undocumented immigrants, making the lives of documented immigrants so miserable that they don't want to come here or they want to leave, is because these are people, and they should be treated with dignity and with respect. So, before we even get to the consequentialist — like, actually, immigration is good for the country, for wages and all that kind of stuff. Turns out, what is moral is also expedient here, right? So, wow — take that, Cicero, right?

**Samantha Hancox-Li [00:49:11]**
You know, I am always happy to say that something is both right and good. Like, it's nice when those things come together.

**Stephen Nuñez [00:49:19]**
So, here we are. But I want to say this, right: getting rid of temporary protected status for Haitian immigrants. Where are a lot of people — Haitian immigrants — what do they do, disproportionately? A lot of them are home healthcare aides for elderly folks and for disabled folks.

I am part of the National Academy of Social Insurance, and Roosevelt and the National Academy of Social Insurance, we launched a Disability Economic Research Consortium. And one of the first conversations we had last year was with what we call intersectional scholars. These are people who have disabilities, and they are also sociologists and economists and so forth.

**Stephen Nuñez [00:50:02]**
And the first conversation was just on a personal level: they can no longer find people to support them at home. Their workers are being deported. Their workers are living in fear and not coming out of the woodwork. There are people who have just said, you know what? This is a hostile environment for me and my family. I'm going home, right? So that is having a huge impact on disabled folks and elderly folks.

And then, we need to stop undocumented people from getting these benefits. So we're going to set up this huge paperwork barrier, and make sure that only the people who are working, and only the people who are, like, truly disabled, are getting them. And, as we saw the last time they tried to do this, with a pilot program for Medicaid in Arkansas in 2017, 2018 — who ended up losing all their benefits under Medicaid? Oh look, it was a bunch of people who were already working, and a whole bunch of people who were actually, on paper, exempt from this. They were disabled folks, or they were caregivers, and they ended up losing their benefits anyway, because administrative burden knows no bounds.

And also, when you look at the amount of money that they said they were going to save under this program — $900 billion here, and other kinds of stuff — you can only do that if you are booting off people who are, in fact, exempt from all these rules. So we're seeing the attack on the idea of this, like, video-game-playing guy on his couch, who really is not representative of anything, or the unscrupulous undocumented person who's, like, secretly getting Medicaid or SNAP or whatever — we are seeing that do immense damage to people, in terms of them losing their benefits, and also them losing their caregivers and their neighbors and that kind of stuff. So that's not the main reason why this is bad. It would be bad even if that wasn't happening. But I do want to point out—

Oh, here's another thing, and this is about Social Security. One of the big conversations that we're going to have to have — and I've been talking with Kathryn Edwards, the economist, about this, because she has a paper coming out for Roosevelt soon, and we're going to be doing a sort of a convening around this — is: what do we have to think about going forward? We have to think about our assumptions about immigration. Because over the last 50 years, up until last year, every year we've had 1 million plus net immigrants. And last year we had negative 800,000, and this year we're likely to have even worse. And if this becomes a real issue, right — we're getting rid of the people who pay the payroll taxes that keep Social Security afloat. And I said, if you don't like payroll taxes, then you should like immigration, because the fewer immigrants there are, the smaller the worker base there is, the higher that payroll tax is going to have to go up.

I mean, if we're going to talk about payroll taxes and Social Security and all that kind of stuff — we also have a system where we have laughably low prime-age labor force participation among women in the United States, compared to basically every other peer nation. Why? Because we don't provide paid family and medical leave, and we do not provide childcare support. And again, in a situation where the safety net drops the ball, who picks up the ball? Women pick up the ball. So people are not able to work, and therefore they're not able to pay taxes, and therefore they are also not able to build their own AIME for the sake of OASI benefits down the road. So now they're going to have less money, and then they're going to need additional support from their family. So again, vicious cycle.

**Samantha Hancox-Li [00:54:20]**
Yes. As we mentioned earlier, these things don't exist in isolation. They are a system. And longtime listeners of this podcast know I have very strong feelings about many of the things that are happening here. Could expound on those feelings at length, but while I have you here, I'm going to ask you maybe a different question, which is: we've talked a lot about problems. What's the solution, right? What is the Stephen Nuñez plan for fixing the real problems that we've talked about in Social Security?

**Stephen Nuñez [00:54:48]**
Yes. Yes. Sure.

**Samantha Hancox-Li [00:54:49]**
You know, there's a lot going on in the world. I could ask you for the general Stephen Nuñez plan, but let's stick to Social Security for the moment.

**Stephen Nuñez [00:54:57]**
And Social Security specifically. Yeah.

Well, we obviously should get to doing it now, or sooner rather than later, because the longer we wait, the larger the fiscal gap. I am obviously a person who would like to protect the benefits. I've even seen some discussion about bumping the lowest-level benefits a bit.

**Stephen Nuñez [00:55:15]**
I have an asterisk on that. I will say that the National Academy of Social Insurance does a survey every few years where they do what's called a conjoint analysis. Basically, they are providing a bundle of policies that potentially close the gap. These could be taxes, these could be benefits cuts, retirement age. And then they can vary one of those in the bundles, in a series of many, many, many, many randomized control trials, to get a sense of not only what are the popular parts of the bundle, but how important they are in terms of valuing them. And there are huge, huge bipartisan majorities among people, regularly, for: maintain the benefits, do not raise the retirement age, raise my taxes — and, in fact, provide a care benefit for folks who need that additional support.

I like to say that when you put people into a white room with no noise, and you invoke a cost-benefit analysis frame, most people can actually think through these ideas, these trade-offs, and they can come up with something interesting. I don't think that's the way politics works at all, obviously. And so I'm not going to say that if they announce this, that everybody's going to be for it, like, immediately. But the point is, before all the noise of politics comes in, people kind of know what they want, before it starts getting shaped by tribalism and all sorts of stuff. And I think that's important to think about.

The asterisk I will say is this. I think Supplemental Security Income — SSI — has essentially been ignored. Right? It is America's forgotten safety net. We studied — we did 40, 50 years of SSI — more than half of people live in poverty on SSI. It is just a system that was designed in the '70s under a variety of assumptions that no longer hold, and it's just not been adjusted.

We have to fix it, both to help disabled people in general, but also to help the people at that bottom tail of the OASI group, because there are poor elders who are receiving OASI and SSI, and those programs interact. And if you do not pay attention to SSI when you're doing that, you could have a problem. It is actually the case that every dollar that you get in OASI is a 100% — like, dollar-for-dollar — deduction in your SSI. So I've seen people say, and we're going to make the OASI benefit like $500 more. And it's like, okay, well, that $500 will immediately go away, and they will be left exactly where they're at — except on the margin, where some people will now no longer qualify for SSI, and they will now lose Medicaid benefits. So you have to be extremely careful. Again, as you said, all of these things are connected.

And I would love to see a real — and I've done simulations on this with my colleague Jack Landry — like, a real reform to SSI as part of an integrated system that fixes Social Security, a long-term supports and services benefit for Medicare, which is another huge thing. And then we really need to intervene before the Medicaid provider tax changes from HR 1, the big beautiful bill, go into effect. Because if we do not, the home and community-based services that states provide, which are optional under Medicaid, are largely going to go bye-bye. And there are a lot of regional sort of hospital systems that rely on — again, optional — supplemental payments from the states that are in part funded by these provider taxes. Those supplements are going to go bye-bye, and we're going to be in a situation where a lot of — mostly, but not entirely — rural hospitals are going to go under. So this is a kind of a time bomb over the next four or five years on that end. And I have a paper — again, a paper coming out about that — suggesting that we really do need to think about revisiting this and—

**Stephen Nuñez [00:59:59]**
— in some way. Because this policy is going to have a lot of negative spillovers for folks. It's going to lead to additional institutionalization. It's going to — we're going to have a bad time.

**Samantha Hancox-Li [01:00:13]**
All right. Well, on that cheery note, we are coming up on the end of our time here. Do you have any last words for the listeners?

**Stephen Nuñez [01:00:21]**
We are the wealthiest country in existence, and that has ever existed, as far as we know, on planet Earth. There could be — there could have been other — there could have been another species a long time ago—

**Samantha Hancox-Li [01:00:35]**
What — sorry, are you one of the Atlantis believers? Are we going to be talking about Lemuria in a minute?

**Stephen Nuñez [01:00:43]**
Not so much, but I was thinking bigger about this. Like, if there were other species, would we have known, based off some kind of carbon imprint in the archaeological record?

Anyway, the point is, if anybody has the resources to create a safety net that works — if France can produce a better quality of life on a GDP per capita that's less than Mississippi, I feel like we can do a good job too. I really think we have the ability to do this. We don't currently have the state capacity to do it, because we haven't paid attention to state capacity and we've let it rot, and we have a lot of larger sort of political problems. But you get over that, and we do not have a resource constraint in the same way that a lot of other countries have it.

I mean, there are no free lunches. There's always trade-offs. But I think we can do — we're nowhere near the possibility frontier with where we're at, given the economy that we have. So I think we can do a lot better. We have some ideas for that in the Good Life Agenda piece, which I would pitch, because you should go do that. Elizabeth's awesome. I'm so happy to have her as the voice of Roosevelt.

**Samantha Hancox-Li [01:02:15]**
You can listen to a podcast episode about that right now. Yeah, yeah. Elizabeth was great. Talking to Rey Fuentes was very interesting. Always a pleasure having someone from Roosevelt on. So yeah, Stephen, thanks so much for coming on the podcast.

**Stephen Nuñez [01:02:31]**
So, yeah. Thank you for having me. This is really awesome, and I'd love to come on again and talk about all those other issues that we touched upon.

**Samantha Hancox-Li [01:02:40]**
These very, very cheerful and happy-making issues. But well, you know, as you said at the end, there are problems, but we are nowhere near the genuine resource constraints in the American economy. There are things that we can do if we're willing to do them.

**Stephen Nuñez [01:02:58]**
That's what I meant. That's — I agree.