SPEAKER_00 0:00

The views expressed in this video are those of the panelists and do not necessarily reflect the views of U.S. Money Reserve.

SPEAKER_01 0:10

Welcome to America's Gold Authority Podcast. My name is Mike Barnes. It is a Social Security shortfall. Experts say insolvency is coming maybe in six years, maybe sooner. Why is that and what are we going to do about it? Let's bring in a couple of experts and find out. Philip Deal and Brad Chastain join me now. And Philip, I want to start with you, 35th Director of the United States Mint, President of U.S. Money Reserve. Why is this happening with Social Security?

SPEAKER_03 0:38

Well, uh, it's not rocket science. I mean, the solution here is a combination of uh revenue increases for Social Security and some benefit cuts. And it's just as simple as that. Um and we've done dealt with this before back in the 1980s. My former boss, uh Senator Lloyd Benson, was one of the key players in the mid-80s of putting together a bipartisan agreement for doing just that, raising uh raising the taxes to raise revenue for Social Security. It's really very straightforward. The problem now is that we've waited so long to take these straightforward reforms that we are running out of time. And in order to fix the problem, it's going to take more cuts and more taxes in order to extend the life of the program.

SPEAKER_01 1:42

Brad Chastain, there are so many layers to this to talk about. One of the things that worries me is that it may not be in six years, it may be in five or four or three or even sooner.

SPEAKER_02 1:53

Yeah, that's the thing, is the the projections um are estimates that nobody knows. Um at the Social Security Administration trustees come out every year with a report with their own estimates. It's not some third party or someone with a a different agenda. It's literally the folks that that run the Social Security uh program. And right now they've reduced the uh time at which the trust fund uh depletes to the fourth quarter of 2032. So it's up a few months. It seems like every year it moves up a little bit closer, and to your point, nobody really knows because what that is, it's a it's a projection of how much they expect to be paying out over that period of time and how much revenue is coming in. So uh everybody pays payroll taxes between an employee and an employer. 15.3% in payroll taxes uh goes to Social Security and Medicare. Uh 12.4 of that goes to Social Security, so it's an estimate of what payroll taxes are going to be over that period of time versus how much is going to be paid out. And nobody really knows. And with uh job displacements that are already taking place with AI, uh it's very, very difficult, I'm sure, for them to forecast accurately, which is why they have to keep making adjustments. So it's certainly uh the timeline keeps moving up, and we don't know how how far up it's going to continue to move.

SPEAKER_01 3:13

Philip, I see a lot of things that could move up this whole timeline: immigration, birth rate, increased social security benefits, falling wages, political opposition. But the thing that worries me the most is recession because that could speed it up as well. Correct?

SPEAKER_03 3:28

Yeah, that that's correct. Um anything that has an impact on, a big impact on uh wages or total wages paid in the economy or uh business activity, the number of jobs in the economy has the potential of making uh either small or very large impacts on that, the projection of that date, six, only six years from now, at which point automatic cuts must occur there uh by legislation in order to protect what remains of the fund. And we're talking about cuts of around 22 to 24 percent of benefits across the board for all recipients. And that is a huge amount of money. It's a huge amount of money for a lot of people in terms of their income who are highly dependent upon Social Security, but it's also a big cut to the economy. And so this sort of feeds on itself that the loss of these uh the spending that would occur would then cut employment, maybe cut wages, and uh have a spiraling effect. But the biggest concern here is the prospect of a recession uh between now, sometime in the next six years. We have been on the verge of recessions, uh major recessions, in uh 2020, and that was prevented, that was really sort of nipped in the bud by the huge fiscal and monetary policy uh uh changes that were made to fight uh the effect, the economic effect of COVID. And then we were on the verge of it again two years later before the AI boom began and really uh supercharged the economy again. So we are uh we're a long way really from a major recession coming out of the 2007 financial crisis. And we're overdue for a recession. And the idea that we can go through another six years without a recession, I think is highly improbable. Now, when you have a recession, you have a loss of a lot of jobs, and when you have a loss of a lot of jobs, you lose that uh that income uh that goes into the Social Security Administration. During a recession, also, there's an increase in benefits paid because people take early withdrawal from the Social Security. They retire early because they've lost income. So back in the 2007 financial crisis, we saw the uh time period by which the estimate before the recession and then after the financial crisis, the uh length of time of uh to reach insolvency fell by eight years. So that was a huge reduction in time over the course of about three or four years. Uh currently, our changes of uh few months that Brad was talking about are occurring on an incremental basis. A significant recession could either reduce the time uh from six years to four years, or in the case of a big recession, could eliminate it entirely. And at that point, uh there'd be a big surprise uh in the the automatic cuts. People wouldn't really have a chance to prepare for it like we hope they do now with a six-year run-up.

SPEAKER_01 7:18

You mentioned one thing that I think is very interesting that if insolvency hits, Social Security benefits will be cut by 22 to 24 percent. And Brad Chastain, I want you to explain to me, insolvency is kind of like bankruptcy, but is there still going to be money left? How do we still get 78 to 76 percent of our Social Security benefits?

SPEAKER_02 7:38

Yeah, it's it's because it's a revenue-based system. So as long as there are some people still working, there is still revenue coming into the system out of the paycheck. So right now the estimate is by the Social Security Administration is by that time when the trust fund is depleted. So that's the excess that had been paid in over the years when more people were paying in the drawing out that has been reversed for quite a while and it's been drawing down that excess. When that excess is gone, it will strictly be based on how much money is coming into the system. And so their estimate is that it'll be about 78%, is their most recent estimate, so a 22% cut. But again, that's based on uh their models of how many people are still working. A significant recession that knocks a lot more people out of work, to Phillip's point, puts more people into retirement drawing out benefits. That can absolutely and would end up changing that equation. And that's a significant amount. The average monthly paycheck or Social Security check for the average American right now is $1,900 a month, so it's a little less than $23,000 a year. A significant portion of the population actually, it's their primary source of income. Social Security is really only designed to replace about 40% on average, it depends on what area income is, but on average, about 40% of somebody's income, and there's a significant portion of the population that it's 90% of their income. So you imagine a 22% cut if it's just that, and that's with no changes whatsoever and without a major recession. That's a $5,000 a year cut, drops somebody's income from less than $24,000, $23,800, I think is what it works out to, to closer to $18,000. That's gonna be a significant hit if there aren't significant changes to a lot of Americans.

SPEAKER_01 9:24

Philip, that's what I want to talk about next. Is if I'm retired right now and I'm getting $2,000 a month, and now I'm gonna be cut down to about $1,550 or so, what am I supposed to do? How do I plan for this if it's coming in four, five, or six years?

SPEAKER_03 9:39

That's really a very difficult situation to address. Uh there are no really straightforward solutions if that's where your income is today. Uh, and that's part of the tragedy that is impending for so many people because otherwise you're asking them to cut back on very meager incomes in order to save for a disastrous solution like this. Fortunately, there are some people who are not so dependent upon Social Security. Uh, but they are. Uh, Social Security represents a significant part of their income, but also they have the capability of preparing. And this is something that you've heard from us if you've been following our programs over and over. Uh, the best way to protect yourself in that kind of a situation is with a diversified uh portfolio of stocks, bonds, and gold. Increasingly, uh, experts, people who are well respected from outside the industry, the gold industry, are urging people to increase their allocations to gold. And they're talking about increasing the allocations from maybe three, four, five percent, uh, where on average they currently stand, and a lot of people have 0%, but increasing them to 10 to 15 to 20 or even 25 percent, especially going forward. Because the expectation of the vast majority of analysts is that stocks are not gonna perform as well in the future, over the next five to ten years, as they have for the last 10 years. And so, and and bonds also are there's a great deal of question about the performance of bonds because of the huge tsunami of debt issuances that are gonna be occurring over the course of the next 10 years by corporations and by governments all over the world. So gold is increasingly a part of the plan, and we've seen the benefits of gold and portfolios, especially over the last two and a half years. We've sort of hit a plateau here for the last four months or so, and I think that will, before the end of the year, we're gonna see a major takeoff in gold prices once again.

SPEAKER_01 12:16

Brad, what Philip just said, the description I just gave him about someone who's already retired, I think that's the scariest part. If someone is four, five, or six years away from retirement, they have a little bit of time, not much, but a little bit of time to plan for their retirement and figure out what they're going to do with that possible Social Security shortfall.

SPEAKER_02 12:35

Yeah, absolutely. And Philip's exactly right. What we can control is how we save and invest and take control of our own future. So he's spot on diversified portfolio. We've shown time and time again how a diversified portfolio that includes gold has actually even helped portfolios last longer during the drawdown phase as well than a just a stock bond portfolio. So it actually reduces the chance of running out of money over time when there's an allocation to gold there. So that's that's um certainly something everyone should be considering. And we've talked a lot about Social Security, it's not even just Social Security. We have uh there's also a shortfall on Medicare as well. So it's paid the same way out of payroll taxes, and and um, while part B and D, prescription drug, and doctor's insurance, has uh is kind of a bottomless pit in terms of the amount of money that Congress could be spending that can ultimately add to the overall debt, which we know is a uh a long-term driver or contributor to gold's price. Um, part A, which is the hospital insurance, does have a cliff. And so, in the same report, what they've also come out and said is in by the second quarter of 2033, there'd be only enough for uh covering about 89% of promised hospital bill part of Medicare as well. So that's something else is older people are using more hospital insurance that we've got to consider along with rising costs of everything else if there's a shortfall in Social Security and Medicare benefits. Um, being in control of your own future and taking the steps that you do have control of are so important.

SPEAKER_03 14:20

There's another issue here that we've just barely touched on, and uh, and it uh is related to the possibility of a recession. I mean, there's a lot of attention being given to artificial intelligence and the impact that AI will have on the economy. And and one of the deep concerns is the impact it will have on employment. And these concerns are not just being expressed by people outside of the AI industry. This is being expressed by people at the very top of these companies. Uh, people who are on the leading edge and have been on the leading edge. They're concerns that there's gonna be a displacement of a great deal, a great number of jobs in the economy. Now, eventually, some of those are gonna be replaced with people with people who have new skills and and new roles that are required in that economy. And we're already seeing this. Already in this year, we've seen uh at least 120,000 jobs that have been eliminated, attributable to AI. And as that number grows, and it is going to grow, and it's gonna grow rapidly, we're going to see a fall in revenue coming into Social Security. And the current estimate does not reflect uh this development, because it's too uncertain for them to have included in their models. But it's coming, and it's going to reinforce the loss of revenue that has occurred with the loss of immigrants working in our society. Immigrants uh in our culture, in our system, uh do uh they pay into Social Security, but they don't qualify for Social Security benefits. So as we lose them in the workforce, we lose a stream of revenue that does not uh that is not offset by benefits that are paid to those individuals.

SPEAKER_01 16:26

If only we could get AI to pay some benefits.

SPEAKER_02 16:30

That may be the case. The way the agentic workforce is starting to be built. I'm sure there's gonna be more talk about that in the future. But right now, to Philip's point, it is a net loss, just to put some numbers on it. Goldman Sachs is estimating there's about 25,000 uh jobs per month, not just displaced, actually lost, erased uh from the economy due to AI, with new jobs coming on that are being created by AI at about 9,000 currently. So it's about a, they're estimating right now about a $16,000 net loss in jobs. And hopefully, long term, it'll be like every other technology in history that more jobs end up created down the road, just replaces existing jobs with new forms of jobs and things. That's the sort of the history of technological advancements throughout the world. But um we don't know if that's going to be the case again, but um, at least in the short term, it's certainly uh moving in the opposite direction.

SPEAKER_01 17:24

Philip, I want to go back to where we started. The problem back in 1983 was fixed. I know it was a last second fix, but why can't we do that again?

SPEAKER_03 17:34

Well, it's a political problem. And uh the fact is, from the very beginning, the founding of Social Security, they were there were uh powerful people, there were members of Congress who opposed the whole concept of Social Security. And that opposition hasn't gone away. In fact, it ebbs and flows over time. And that is a problem overcoming that uh opposition to Social Security. Uh and it sometimes it expresses itself in uh among some people as an effort to so-called privatize Social Security. Those efforts uh are an obstacle and have been an obstacle to our ability to muster the political will, to bite the bullet, to uh raise taxes and cut benefits, uh, harming people on both sides of the equation, making them sacrifice in order to save the program. Uh and as I said, the longer we have delayed, the longer, uh, the harder it's gonna be to solve it. And one of the really sad parts of this delay has been there's a whole generation, maybe two generations, of young workers who have lost faith that Social Security is going to be around for them. And that has undercut the political support for Social Security. For decades from the beginning, the faith that Social Security was going to be there when you retired was fundamental to the political support for it. And we've lost a lot of that faith among younger generations. They just don't believe it's going to be there. And the only reason why there's a basis for that lack of faith is because we've been unable to act to before now to extend the program.

SPEAKER_02 19:38

A lot of times we look at the world and we think about how would we like for things to be, what is the you know, logical solution. Sometimes we forget to look at, you know, what is the most likely outcome based on the circumstances in play. And raising taxes is seems dead on arrival in Congress to meet it. It looks like we're increasingly likely to have a split uh Congress in after the midterms. Um so it's unlikely very much at all gets done over the two years following that if that ends up being the case. Um the other, you know, uh political suicide is cutting Social Security benefits that everyone feels entitled to. So both of those seem quite unlikely. It seems like the most likely is some kind of compromise or solution that involves more debt, more money creation, more dollar devaluation, um, which is ultimately one of the reasons why many of us hold gold. So I think that's increasingly looking like the most palatable outcome from a political standpoint because it's that kind of silent erosion that doesn't really have to be voted on in the same way and as publicly and visibly as a tax hike or uh benefit cut.

SPEAKER_01 21:00

Good way to wrap things up. Brad Chastain and Philip Deal, thanks so much for joining me today. Thank you, Mike. Thanks, Mike. It's a Social Security shortfall, and it's set to hit in just six years, maybe sooner. And it could cut your Social Security benefits by almost 25%. So our experts say now is the time to make sure your retirement portfolio is in good shape. Remember the 60 2020 model with 20% of your portfolio going to precious metals like gold. That can help your retirement plan not be as dependent on Social Security. That's all the time we have for today's episode. On behalf of all of us here in the U.S. Money Reserve Studios, thank you so much for tuning in. If you have any questions or you want to learn more about today's episode, you can call the number in our episode description and speak with one of our very friendly account executives. They'll be more than happy to answer any questions you may have about precious metals and the strategic role they can play in achieving a secure and comfortable financial future. I'm Mike Barnes. We'll see you next time on America's Gold Authority Podcast.

SPEAKER_00 22:06

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