Resources are always scarce. There is never enough time, enough wealth, enough friends, enough peace, enough thoughtfulness, enough introspection, or enough intellect. The fact is that this rock is replete with scarcity. This is fundamental economics. There is scarcity and therefore, we perceive value. If the streets were strewn with diamonds, no one would drop thousands of dollars buying one.
Financial advice gurus The Motley Fool recently reported on the 2025 shift in Social Security, which paved the way for many who paid into Social Security to now receive benefits. That is an equitable posture. Those who pay should be able to enjoy the return. The new law eliminates what was labeled the "Windfall Elimination Provision and the Government Pension Offset."
That provision impacted "public-sector workers such as firefighters, police officers, and teachers that (who) also held private-sector jobs." They earned pensions on their public jobs, and the Social Security they paid was generally in those concurrent "private-sector jobs." The inference is that those private jobs were essentially side gigs or part-time. Nonetheless, the workers earned income, paid Social Security, and then did not receive retirement benefits for that work.
In fairness, Social Security is fundamentally the socialization of retirement, with an element for disability. There are minimum payment amounts that benefit some and maximum payments that detriment others and enhance the liquidity of the program. But, it is not thorough socialism in that only those who pay its tax for ten years (40 quarters) are eligible for retirement benefits, less for disability.
The inequity of some workers paying the requisite quarters but being ineligible due to their full-time pensions led to the "bipartisan Social Security Fairness Act" being passed in 2024 and signed into law in January 2025. The equity and fairness are seemingly patent. The Motley Fools, however, suggest that this decision has broader implications than mere fairness for this relatively small group of wage earners.
They point out that there is a fictional "trust fund" (The Social Security Old-Age and Survivors Insurance Trust Fund)(OASI). This is a fund in name, but it does not contain dollars. It contains primarily debt (the American Government borrowed the money and the Fund is holding Treasure Securities that say the Federal Government owes Social Security about $3 trillion in debt (among the $36 trillion the government owes a variety of creditors).
So, it is a "fund," but its assets are basically paper. And, each minute, more tax revenue arrives from current workers to pay the current recipients. There are those who consider the whole concept a "Ponzi scheme," and others who disagree. Regardless of labels or pejoratives, the system largely lives up to yesterday's commitments with today's taxes, while planning explicitly on living up to tomorrow's commitments with next year's taxes.
The problem is scarcity. That $3 trillion is the foundation for most people's retirement. Many Americans (69%) are "reliant" on those benefits and a significant number (47%) will be "very reliant," according to CNN. It turns out that some people save nothing for retirement and others save very well. In between is a great population that comprises a spectrum of savers.
So, the "bipartisan Social Security Fairness Act," according to Motley, increases the pool of people that may draw those benefits. The Trust Fund was predicted to be insolvent by 2033. That is not new. One of my earliest blog posts was The First Social Program Bankruptcy is upon us (June 2014). Back then, Congres stepped in and found a way to enhance solvency.
More recently, before the Social Security Fairness Act, financial experts predicted that by 2033, there would have been only enough to pay "79% of scheduled benefits." That would mean that in 2033 Congress would have to find the dollars to pay the other 21% (despite the $36 trillion and growing debt load).
The increase in people drawing benefits due to the Social Security Fairness Act" means that the insolvency will come sooner than 2033, and the "other" percentage when the fund is insolvent will be 26% instead of 21%, according to Motley. In other, more patent, words, the fund was on a collision course before, and the iceberg is now closer and larger.
That is not a contradiction to the "fairness." Those people paid their withholding and the "fairness" is easy to see. Newsweek predicts that "insolvency" will occur in 2038. Despite the "fairness," some quoted there are critical of the new law. Regardless of opinions on equity, fairness, and finance, the fact is that a day of reckoning is on the horizon and it is closer today than it was in 2024.
This scarcity is part of the larger concept of scarcity and the reality that the U.S. borrows money in large amounts. The interest on that $36 trillion debt was $658 billion in 2023, and is growing. We approach a point when interest will be $1 trillion annually. That prediction is a reality in 2025 or 2026. This is fueling inflation, a decreasing purchasing power of the dollar caused by an oversupply of dollars chasing goods and services in the economy.
Another example of scarcity and price is in the delivery of medical care. There are about 18 million people in America who are eligible for subsidized health insurance. Subsidized means that the taxpayer is funding some portion of their health insurance premium, or that the government is incurring additional debt to subsidize that insurance.
The advertisements from HealthCare.gov suggest that some are obtaining health coverage for as little as $4.00 per month. There is no health insurance in the wildest imagination that can be economically feasible at $4.00 per month. The Kaiser Foundation says that the lowest monthly premium is more like $716 ($8,591/12). No, no one has figured out how to compress that to $4. The government has simply figured out a way to allow customers to pay $4 while the government expends additional debt to subsidize the other $712 per month for those beneficiaries. And the government pays to advertise to attract more people to this program:
The process of subsidy is similar here. Until the "Fairness Act," a group of workers were paying Social Security taxes at side jobs and yet not eligible for payments. Those workers were subsidizing payments to other retirees. Similarly, workers today are subsidizing health care for other workers. It is a large system of transfer payments in which some pay more than they will ever collect and others pay less than they will consume.
There are questions of equity, morality, legality, and more. The point, however, is that scarcity exists. The policymakers make various decisions in balancing their perceptions of the involved equities. There is compromise and periodic change. What does not change is that scarcity persists, and policy adjustments will not likely change scarcity but only change the legal adjustments or equities as to distribution and entitlement.
The same conundrum of scarcity is elemental in workers' compensation as legislatures struggle with the reality of benefit volume, medical reimbursement, and premium rates. In a less flexible system (workers' compensation has to balance the books each year and cannot use paper debt in fictional balance), there have to be trade-offs for the sake of perceived equity.
Perhaps we see in workers' compensation a microcosm of the reality of scarcity, balance, and legislative management intertwined with various challenges of liquidity, equity, and socialized risk. The inevitability of inflation continues to influence workers' compensation and workplace safety. The divergence between the consumer price index (inflation) and medical inflation continues to cause medical to consume an ever-increasing portion of the workers' compensation dollar. The available benefit is scarce through statutory and market constraints.
And, as illustrated by the Motley article, any action ("Fairness Act") will have actions both intended and unintended. Every action will be fundamentally Newtonian, and the reality thereafter will bring reactions, ripples upon the pond or waves. Scarcity is too often ignored.
The implications are intriguing and worthy of thought.
