Social Security is Broke, but U.S. Taxpayers Just Gave Ukrainian Pensioners a Double-Digit Raise

Social Security is Broke, but American Taxpayers Just Gave Ukrainian Pensioners a Double-Digit Raise

By: William Sullivan

As American taxpayers paying into Social Security today stare down the barrel toward substantial cuts to their own benefits, estimated to take place in 2034, they can at least take solace in knowing that all categories of Ukrainian pensioners will get a 20% raise in March 2023. “As early as this March,” says Ukrainian Prime Minister Denys Shmyhal, “the government will index pensions by 20%” for about 10 million Ukrainians.

Indexing the payments “is not mandatory according to the Law of Ukraine on the State Budget for 2023,” but benevolent President Zelensky has instructed them to reprice the benefits upwards anyway.

And why wouldn’t he? His government is swimming in American cash.

Americans have already spent more than $100 billion on aid to Ukraine. And, as the notoriously corrupt Ukrainian government is undoubtedly well aware, money is fungible.

This is an example of a common shell game that politicians love to play with the rubes when it comes to government spending. The Ukrainian government could have certainly diverted government spending from its pension outlays toward its own national defense in a time of war while calling for foreign aid to support its pension program, and the fiscal effect might have largely been the same. It’s just more politically defensible for Ukraine to continue paying uninterrupted pensions while demanding that massive amounts of foreign aid are needed to finance its national defense. And now, because Ukraine’s government no longer has to spend its own money on its own national defense, it has plenty of money to give generous raises to Ukrainian pensioners.

But we all know that few Americans would have signed on to billions in foreign aid if the impetus was to preserve Ukraine’s pension infrastructure. What’s truly amazing, though, is that Joe Biden and the media are just coming right out and saying exactly that — the government is using your money to pay Ukraine’s obligations to ten million of its pensioners. American aid to Ukraine, Biden says, is “going to allow pensions and social support to be paid to the Ukrainian people.”

One might think that senile Joe is just saying the quiet part out loud by directly telling us that our dollars are being sent overseas to pay for a corrupt government pension system and to support its vast welfare system. That’s possible, but not likely. What is incredibly disheartening is that it’s far more likely that he and his handlers meant for him to say exactly what he said, because they simply don’t have any fear of the electorate’s response anymore. They know we won’t like it, but in the eyes of the ruling class in Washington, we Americans are just too sedated, ignorant, and powerless to do anything about it.

How would the average American feel about paying billions of dollars to support Ukrainian pensioners, after all?

He/she probably doesn’t feel very good about that. If the government actually had any money to spend on pensions, it should probably deploy those resources in shoring up America’s national pension infrastructure first, most Americans would argue.

But, of course, the government doesn’t even have the money to pay for Social Security, much less Ukrainian pensions. America’s pension infrastructure is utterly broken, and most Americans instinctively know this to be true, despite the countless prominent idiots with microphones who try to convince us otherwise.

As of its 2022 report, the Congressional Budget Office:

…projects that if Social Security outlays were limited to what is payable from annual revenues after the trust funds’ exhaustion in 2033, Social Security benefits would be about 23 percent smaller than the scheduled benefits in 2034.

Even this is a rosier picture than may be deserved. Social Security pays benefits from only two sources — payroll tax income and Social Security’s trust fund “assets.” It’s been well over a decade since payroll tax income has covered the bills. Only after all payroll taxes are accounted toward benefits does the Social Security Administration tap into the “assets” of the trust funds.

These “assets” aren’t in a piggybank somewhere. The trust funds are owed principal and interest for non-marketable bonds that they purchased from the Treasury during those years when payroll tax income exceeded the benefit outflows. In other words, the assets and debts only exist on paper, and without any marketable value, while the government that owes the debt spent that money a long time ago. While the principal and interest are listed as an asset to the Social Security trust funds and as debts to the Treasury, the Treasury can’t even come close to paying its bills, and is running at incredible annual deficits. In fiscal year 2022, the government spent nearly $6.3 trillion, collected $4.9 trillion in revenue, and experienced a $1.3 trillion deficit.

So, it will happen like this for the next decade or so, barring any intercession. Social Security will not be able to meet its obligations by collecting payroll tax income, so it will call on the Treasury to repay the principal and interest on its debt so that full benefits can be paid to beneficiaries. But the Treasury will continue running at a huge deficit, so it has no money to pay the Social Security Administration what it owes. However, the Treasury is obligated by law to pay it, so it must take on new debt in order to repay its old debt to Social Security.

This cycle will continue until roughly 2034, until the IOUs from the Treasury run out, and the Treasury is no longer obligated to pay for the shortfall between what is owed to beneficiaries and payroll tax receipts. God only knows what the national debt will be at that time, but what we do know is that you, your children, and grandchildren will be on the hook for whatever is owed by the Treasury. And at that time, again, barring any intercession, all Americans on Social Security are expected to get a 20%+ pay cut.

Most people who contribute very little while standing to collect a lot from Social Security, along with those already collecting the benefits of the program, don’t care much to listen about these problems with Social Security. And most people who contribute substantial amounts of money into the system know that it’s a government boondoggle and a terrible “investment” that they are coerced to make. There are a lot more of the former than the latter, which unfortunately makes it a death sentence for politicians to even begin addressing any potential changes that might fix it.

But if there’s one thing that all Americans in both of those categories should be able to agree upon, it’s that, for the love of God, American taxpayers should not be paying billions of dollars that we don’t have to provide millions of Ukrainian pensioners a 20% raise.

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