Susan Pendergrass speaks with Thomas C. Albus, United States Attorney for the Eastern District of Missouri, about public safety and criminal justice reform in the St. Louis region. They discuss the limits of risk assessment tools in bail decisions, why the city of St. Louis and St. Louis County have such different homicide rates, the case for judicial discretion over algorithmic recommendations, the connection between education, social capital, and crime, and more.

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Episode Transcript

Susan Pendergrass (00:02):
Thank you so much for joining us, Tom Albus, the U.S. Attorney for the Eastern District of Missouri. The Show-Me Institute, in the last year or so, we’ve been digging into the issues of public safety and criminal justice reform, because one of our goals is to make Missouri a growth state where people want to raise their families and businesses want to come and open. Clearly, if our cities are perceived as being a place where you can’t walk to your car at night and put your groceries away, then people won’t want to do that. We’ve been trying to understand what’s going on mostly in the St. Louis metropolitan area and have realized that a lot of the issue is a disconnect between what’s actually happening and people’s perceptions. People just perceive St. Louis as a dangerous city. I did a podcast recently with Doug Burris, and he had some encouraging things to say about our prison system. I appreciate you coming on and giving us another perspective, because the most important thing for me is to try to understand this.

Tom Albus (01:20):
Thank you very much for having me. Just so everyone understands, I know Doug Burris very well and think very highly of him. He ran the probation office here in federal court for many years. When I was an assistant US attorney, I was a line prosecutor for many years before I got this job, and immediately before that, I was a circuit judge in St. Louis County, so I was a judge in the state system compared to the federal system. Doug came and helped run the county justice center, and he’s a very innovative, thoughtful person. So I don’t mean to argue with him, but I listened to your podcast with Doug, and one of the things he was talking about was getting people off probation faster, which is fine. You might remember the example he used, the first-degree robber versus the grandmother who cashed her deceased husband’s Social Security check. Those shouldn’t be treated the same, and of course they’re not treated the same now. Alternative probation is a great option for somebody like that grandmother rather than sending her to prison. But bear in mind, if you explain to Mr. and Mrs. John Q. Public that this lady cashed $75,000 worth of Social Security checks, do you want to do anything to her? We probably don’t want to incarcerate that person, but the alternative would be probation with a requirement to pay the money back to the extent she can. So no one’s suggesting treating that person the same as a violent criminal, but people do need to have accountability.

Susan Pendergrass (03:13):
About this idea of applying a risk assessment when somebody’s arrested or convicted, so that we’re sure to lock up dangerous criminals and aren’t simply using building more prisons as our policy solution, what do you think is the more efficient use of government resources when it comes to making people feel safer?

Tom Albus (03:42):
You’re absolutely right. We use this risk assessment in St. Louis County. I didn’t learn any of this in law school, but I did feel like it was common sense: does this person have a prior conviction, that person is riskier to let out on bond before trial; is this person under a certain age, that person is riskier. Social scientists create these risk factors, and frankly, I think intuitively anybody, whether they have legal training or not, would apply something similar. They’re fine as far as they go, but when we were in St. Louis County, no matter how many priors the offender had, no matter how young they were, no matter how frequently they had priors, the recommendation was always, well, you’re going to let this person out on bond, and it was just a matter of how many accoutrements to the bond, how frequently they had to check in, and so on. There was no part of the risk assessment where it said this person should be detained before trial, which to me didn’t seem sensible. Some people need to be detained before trial. Another thing these risk assessments didn’t take into account was the strength of the evidence against the person. What if the person was found by police with the smoking gun over the body of the victim? Shouldn’t you take that into account? These risk factors don’t. A lot of times the risk assessment tools are being pushed by NGOs and foundations that, if you look at their website, say their goal is to get everybody out of prison. Again, this is social science, not chemistry. Everybody has a point of view that should be considered, but we have to consider the point of view of the groups pushing to reform how probation credit is counted or to add these risk assessments, because everybody in the criminal justice system has their own point of view.

Susan Pendergrass (05:58):
So what is the reality with the prison population in Missouri? Is it growing or declining?

Tom Albus (06:04):
I believe, and I’ll have to check these numbers, that the Missouri Department of Corrections population is roughly one-third less than it was ten years ago. I believe the United States Bureau of Prisons, the people in prison for federal crimes, is one-quarter less than it was ten years ago, between COVID, a different approach, and the First Step Act. Now, I know you’re very interested in educational policy. What if we had a one-third increase in fourth-grade reading scores in Missouri? Everybody would be pretty happy with that. So here we have these great statistics, but to the extent everything else is equal, if crime is the same and the prison population is down, everybody wants that. But is crime down, and is it down to a level we’re satisfied with?

Susan Pendergrass (07:04):
And is it? People are talking all over the place, including leadership in St. Louis, about how much crime is down. But when we’ve talked to people on the street or had public events, people don’t feel like crime is down. People still see panhandling and graffiti and public disorder. People still don’t want to park their car and walk to a baseball game downtown. Everyone knows you leave your car unlocked because you’re going to get smashed and grabbed anyway. There isn’t a perception that St. Louis feels safer.

Tom Albus (07:38):
Right, and it’s a complex situation regionally. The city of St. Louis, to its credit, has reduced homicides from the mid-200s in 2020 to about 140 in 2025. That’s 50 homicides per 100,000 people. The national average is in the high single digits, so it’s still very elevated in the city of St. Louis. Now you go across Skinker to St. Louis County, where I was a judge, and we’re sitting at roughly the national average in the high single digits. A trend you don’t hear much about is that’s a much elevated rate over the last 10 to 15 years in St. Louis County, maybe 2x or 3x higher than it was 10 to 15 years ago. Then you go across the Missouri River to St. Charles County, and they’re looking at about one murder per 100,000 people. So it’s a big difference as you proceed west on Highway 70, and one size doesn’t necessarily fit all.

Susan Pendergrass (08:50):
What’s been going on in St. Louis County that it’s gone up?

Tom Albus (08:56):
I don’t really know the source of it, but we are dealing with a lot more violent crime in St. Louis County than we did, say, twenty years ago. For example, even though we’ve got approximately four times more people living in St. Louis County than in St. Louis City, we only have about one-third as many homicides every year as the city. Yet we’ve got 200-plus people awaiting trial for homicide in St. Louis County. That’s really the focus of the prosecutor’s office, and rightly so, but they didn’t have the capacity twenty years ago to handle the rate of homicides they’re seeing now, and this backlog is a consequence of that, in my view.

Susan Pendergrass (09:48):
Plus clearance rates haven’t really improved. A lot of the crimes identified as murders aren’t getting solved.

Tom Albus (09:56):
If you look at it, the City of St. Louis Police Department would say their clearance rate has gone up quite a bit, and those are statistics the city updates every day on the police department’s website. At some points they’ve recorded a clearance rate of over 100 percent in the last year because they’re solving historical cases in addition to new cases as they come in. So they’ve gotten their clearance rate very high, and that’s important too, not only for how long you’re going to sentence someone, but because people need to understand that if you commit an offense you’re going to be called to account. Chief Tracy in the city is proud of his clearance rate going up, and he’s right to be.

Susan Pendergrass (10:39):
What are your thoughts on mandatory minimums when judges have discretion?

Tom Albus (10:46):
Mandatory minimums exist in state and federal crime. You could say someone is in prison for second-degree murder and subject to a mandatory minimum of ten years, that’s true, but I don’t think that’s what people are really thinking about when they raise this issue. There are very few people incarcerated in the Missouri Department of Corrections who are there only because of a mandatory minimum that the judge would have preferred to sentence below but wasn’t able to. There was a lot of that when I first became an assistant US attorney 25 years ago with the crack cases, where you could get a five-year mandatory minimum for a very small amount of crack. That was passed by Congress in the Crime Act of 1994, and those ratios have since been changed by Congress. People will talk about nonviolent offenders, but a drug dealer, to me, is not a nonviolent offender. We’re not talking about crack as much anymore. We’re talking about fentanyl, and everybody knows what happens when you come into contact with fentanyl, roughly two hundred Americans a day die from fentanyl overdoses. I would consider that a violent crime, not to mention that firearms and violence often go along with drug dealing. The whole point of my visit with you is just to say these are not easy questions to answer. But if somebody came into your neighborhood and was dealing fentanyl to anybody who wanted it and had money to pay, I would be concerned. Maybe strictly speaking that’s not a violent crime, but it’s a very dangerous, antisocial crime.

Susan Pendergrass (12:42):
So you see these nonprofits and NGOs saying, let’s clear the prisons, let’s put more people on ankle monitors, let’s stop building these massive prisons, Arkansas is building a billion-dollar prison, and there are a lot of foundations saying we could be smarter about this. It sounds like you don’t completely align with that thinking.

Tom Albus (13:13):
Everybody should know where everyone is coming from. You probably recall about ten years ago, when Governor Parson first became governor, Missouri was in the same boat. They said they didn’t have a lot of money, certainly not enough to build new prisons, and Governor Parson said we’re just not going to go down that road. As I said, we were able to reduce our DOC population in Missouri substantially, by a third, and the need for those new prisons went away. Statistically speaking, we’re doing better in 2026 than we did in 2020, notwithstanding the fact that we have a third fewer people in prison. That’s a good thing. But if a foundation comes in and says, well, we have this risk assessment tool, and it’s just science, nothing to it other than science, I’d suggest everyone go to that foundation’s website and see what their mission statement says. This is social science, not physics or chemistry or biology. Everybody has their political point of view, and there’s nothing wrong with that, but we need to disabuse ourselves of the idea that it’s a no-brainer, that you just use this risk assessment, let everybody off probation, and everything gets better and cheaper, a win-win-win. I just don’t subscribe to that.

Susan Pendergrass (14:45):
I saw a case, not in Missouri, of a guy accused in a terrible case involving a child, whose risk assessment was very low, but the nature of the crime was terrible. He was let out and reoffended. I remember thinking the risk assessment didn’t do its job because it didn’t pick up on this particular person’s potential for criminality. In a world with finite resources, what do we do to make St. Louisans feel safer?

Tom Albus (15:31):
That’s what’s so thorny about it. When I was sitting as a judge, sometimes I’d think, what would my wife think, or my mother, or a friend, about this particular person, risk assessment tool aside. For example, if someone’s on bond for a felony and then arrested for a new felony, that gets them a point on their risk assessment. But I think a lot of Missourians would say, I don’t care if you get one point or ten points or thirty points, if we’ve already let you out on bond and you committed a new offense, that’s it, you’re not getting another chance. And then we get into, well, was it a violent crime? If he stole a car on Monday and then steals another car the following Monday, some people would say we just can’t accept that, it’s absurd. I think people are at least entitled to that opinion, even though it’s contrary to what is supposedly following the science.

Susan Pendergrass (16:32):
So do we put more discretion in the hands of judges?

Tom Albus (16:35):
Again, I don’t think anyone’s suggesting the judge can’t override the assessment. I overrode it all the time, and my colleagues did too, because that’s the role of the judge. One thing that came up, you may have followed, there was a juvenile assessment tool that was frequently followed, and the juvenile officer or judge was very reluctant to go against the risk assessment for the juvenile. That got the police up in arms, and there may have been some legislation around it. But the judge should always be able to go against the risk assessment. And as I mentioned earlier, what about a written confession? There’s no question the person did it. You’re presumed innocent at trial, but we can weigh the facts against the person in terms of setting the bond.

Susan Pendergrass (17:34):
Yeah, I think my biggest issue with the perception of public safety in St. Louis, when I lived right between Skinker and DeBaliviere, near Delmar, was just a lack of the rule of law around me. People ran stop signs and stoplights, and there were smash-and-grabs, and someone could commit a crime and get on the MetroLink and get away. We all kind of agree that the MetroLink stations feel really dangerous. We’ve all just accepted that we have to keep floodlights on the outside of our house. Living in the city of St. Louis, which I love, you just develop this tolerance for the fact that crime is going to happen around you and there’s nothing you can do about it. I didn’t feel like the police were really enforcing the small things, and people were getting away with big things too. I wonder what the fix is for that.

Tom Albus (18:40):
Right, and another thing being debated is that you need police officers, and we have perhaps fifty percent fewer police officers policing the city of St. Louis than we did ten years ago. That’s not a good thing. I am in favor of having police officers in the neighborhood. When I was an AUSA, I would go to neighborhood meetings and try to understand what was going on. I never heard anybody say we want fewer police in our neighborhood. I always heard people in every neighborhood saying we want more police, this corner’s a problem, please take care of it. It’s a challenge for the city of St. Louis, and I wish them nothing but the best in getting as many more police officers as they can.

Susan Pendergrass (19:28):
Yeah, and 911 is a bit of a problem too. People complain about not being able to get through. We have 28 different systems, and the city-county line makes it all very confusing. Talks of merging the two always seem to result in nothing, but as you just mentioned, the difference in the murder rate between one side of the line and the other, something needs to be done to fix that.

Tom Albus (20:01):
I always go by the murder rate, because those all get called in. There’s also a difference in how frequently a car break-in might get called in across different areas of our region, so you can’t necessarily rely on all statistics. But homicides get called in, and homicides are a good indicator of the overall safety of a community.

Susan Pendergrass (20:24):
So generally, if you could wave a magic wand, what would you do? Is there anything you would change within the probation, pretrial, and prison system?

Tom Albus (20:38):
No one likes to think about building more prisons because it’s very expensive and it’s kind of the last tool in the toolbox. But in the city of St. Louis, they took out of service and knocked down the medium-security institution known as the Workhouse. That’s not available anymore. So the only place state court judges in the city have to put offenders being detained pretrial is the Justice Center downtown, and that’s at capacity. I would want a lot more police officers, and I probably would want some more places to put the real repeat offenders, the antisocial people, certainly the violent people, so they are incapacitated and out of our community. People who commit Class A or Class B felonies, or new felonies while on probation, parole, or pretrial detention, they still get bond because we’re out of places to put these people. And as we all know, we’re talking about a very small percentage of our community committing these serious crimes. Then we could go back to people having more social capital in the community, people looking out for them, and not letting teenagers or young people be directionless. I see a lot of that when I sit in a courtroom in the city or county, people who just don’t have a plan for their lives and don’t have people in the courtroom supporting them. That’s what I would really change.

Susan Pendergrass (22:17):
Yeah. I mostly study education policy, and St. Louis Public Schools has a chronic absenteeism rate of about 55 percent. I don’t think they even know where those kids are. Until we fix some of those things and somebody’s keeping track of these teenagers, I don’t see their propensity for committing crime going down. I believe first you fix the education system, before they get to the criminal justice system, but unfortunately we don’t have that right now in St. Louis. Well, I appreciate you coming on and giving a different perspective. I’ve heard more than one person, not just Doug Burris, say that risk assessment is going to be the way to fix the problem, and it’s good to hear a different perspective that it comes with a lot of caveats, at minimum.

Tom Albus (23:09):
Right. There are a lot of good people working on this problem, but it’s just not a problem that has a silver bullet, that I’ve seen in 25 years.

Susan Pendergrass (23:18):
Good to know. Well, thank you so much, Tom. I really appreciate it.

Tom Albus (23:21):
Thank you very much, Susan. Thanks for having me.

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The post A U.S. Attorney’s Perspective on Criminal Justice Reform with Thomas C. Albus appeared first on Show-Me Institute.

Susan Pendergrass speaks with Andrew G. Biggs, senior fellow at the American Enterprise Institute, about the Social Security trustees’ latest report and what it means for the program’s future. They discuss the projected 2032 insolvency of the retirement trust fund, why the trustees’ birth rate assumptions may be too optimistic, the proposed Moreno-Warren plan to eliminate the payroll tax ceiling, the Cassidy-Kaine plan, and why pension experts oppose it, what would actually happen if the trust fund ran out, and more.

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Episode Transcript

Susan Pendergrass (00:00):
I feel fortunate to have grabbed some of your time. Andrew Biggs from the American Enterprise Institute, I appreciate you coming on to talk to us. Social security has been nothing but in the news recently, and you know more than anyone else. So thank you for taking the time.

Andrew Biggs (00:14):
That’s why I’m so cheerful. The more you know about Social Security, the happier you are. But thanks for having me, Susan. It has been busy. I’m really happy to be with you today.

Susan Pendergrass (00:16):
I’m in my sixties. I see something about Social Security running out of money and I pay attention. So just to bring us all up to speed: in the last week, there was a news flash that Social Security is going to run out of money sooner. What does it really mean?

Andrew Biggs (00:39):
Every year the Social Security trustees, which is mostly members of the cabinet, the Secretary of the Treasury, the Social Security Commissioner, and so on, come out with a report projecting the program’s financial health, both in the short term and the long term. That happens every year, and it’s been getting worse every year. In this year’s report, they projected that the retirement trust fund will go insolvent, or run out of money, in 2032. They also projected a significantly larger long-term funding gap in the years thereafter, and this is worth explaining.

When the trust fund runs out, it doesn’t mean there’s zero money to pay benefits. As long as we’re paying a trillion dollars a year in payroll taxes, there will be money to pay benefits. But when the trust fund runs out, it means benefits will be cut, and their projection is somewhere around 22%. The size of that long-term funding gap dictates how big the cuts are going to be in the years thereafter. The trustees lowered their projections for birth rates, and they found that the One Big Beautiful Bill has worsened Social Security’s finances. A variety of things made this long-term funding gap worse. It’s really hard to paint a happy picture. The trust fund can be running out in about six years, and the funding gap and the benefit cuts in years thereafter are going to be larger. It’s a sobering picture.

Susan Pendergrass (02:16):
I’m not trying to pile on, but I think I saw that they extended the time when they expect birth rates to bounce back. Is that true? Because I have not seen anything anywhere, and I’ve spoken to some demographers, to suggest birth rates are ever going to bounce back.

Andrew Biggs (02:35):
Here’s the interesting thing. If you look at the Congressional Budget Office or the US Census Bureau, right now the fertility rate is about 1.6 children per woman on average, and both the CBO and the Census project that’s going to remain pretty much steady, declining a little bit over coming decades. Social Security had a very different picture. As of last year, they thought the birth rate, which is 1.6 now, was going to immediately start rising and go back up to 1.9 children per woman in the next several decades. That makes Social Security’s finances better. More kids being born means more people paying into the system. What they did in this year’s report is moderate a bit on fertility. They said, okay, it’s not going to rise back to 1.9, it’ll rise back to 1.75. So they are still over-optimistic. I’ve talked to some demographers and economists who’ve really focused on the birth rate, and they described the trustees’ assumptions as, quote, fanciful, meaning they just weren’t plausible. Now they’re somewhat more plausible, but they still tend

Susan Pendergrass (03:32):
Okay.

Andrew Biggs (03:48):
to be more optimistic than other agencies. And to me, frankly, this is a concern. You really want the people who are the scorekeepers, the umpires, to be playing it as straight as they possibly can. We know that these guesses are going to be wrong because this stuff is impossible to predict with certainty, but most demographers think the best guess is we’ll stay around 1.6 going forward. You’ve seen a decline, and a good predictor of birth rates is religiosity, the level of religious belief in a country. The US has typically been much more religious than Western Europe, and that’s played into fertility. There has been a big decline in religious belief, particularly among younger Americans, along with all the other pessimism you see among younger people. When people are pessimistic, they tend not to have a lot of kids. So the best guess is we’re going to stay about where we are.

I wrote something the other day saying the bad news in this trustees report is even worse than last year’s, but it could have been even worse. They project a long-term funding gap above 4.4 percent of payroll. What that means is if you took the 12.4% payroll tax today and raised it immediately and permanently by 4.4 percentage points, from 12.4 to 16.8, that would in theory keep the trust fund solvent for 75 years. But a better guess would be a funding gap of around 4.8 to 5 percent. This is real money. For years, people on the left have said, well, okay, we know Social Security has a solvency problem, but it’s a manageable issue. They were saying that when the funding gap was 2% of payroll. Now you’re looking at four to five percent. That’s a lot of money, at a time when a lot of other things are making claims on the budget. We have some difficult choices to make and we really have to start thinking hard about this.

Susan Pendergrass (06:09):
Okay, so what about this idea that’s been floated in the last week of getting rid of the payroll cap? First of all, explain the payroll cap, and then this idea of getting rid of it.

Andrew Biggs (06:17):
Sure. Social Security has a 12.4% payroll tax, half paid by you and half paid by your employer. That applies only to wages up to $184,500. That’s called the payroll tax ceiling, or the tax max. That dollar figure goes up every year, but this year it’s $184,000. You only pay taxes on those wages, and you also earn benefits only on those wages. People say, well, Bill Gates doesn’t pay more taxes than that. But he doesn’t earn any benefits either. So you’re capping both the taxes and the benefits.

To fast forward a little bit: there’s an op-ed in the Washington Post this week from Senator Bernie Moreno, a Republican from Ohio, and Elizabeth Warren, a Democrat from Massachusetts. They say it’s just common sense to eliminate that cap and tax all earnings for Social Security. The interesting thing is how uncommon that would actually be. Our payroll tax ceiling is $184,000. Almost every other country has a ceiling on their payroll taxes for their pension system, and in almost every other country that ceiling is lower. In Canada, you only pay taxes and earn benefits up to around $60,000 in earnings. In the UK it’s about $70,000. In Germany it’s about $70,000. We are already an outlier for how high up the income ladder we tax people. To eliminate the cap entirely is a big deal. It’s effectively a 12 percentage point increase in the top marginal tax rate. I pulled an example of somebody living in New York City. A high-income person already pays 37% in federal income taxes, plus regular Medicare taxes, the additional Medicare tax, state taxes, and city taxes. If you add another 12 percentage points on top of that, their marginal tax rate would be in the mid-60s. And that’s before we’ve fixed Medicare or done anything else. The federal budget is still broke, and you’ve taxed these people as high as you possibly can. So these things that look like common sense, why don’t we just tax everybody,

Susan Pendergrass (08:37):
Right, right.

Andrew Biggs (08:46):
look, there are reasons for that.

Susan Pendergrass (08:49):
And were they suggesting that if I make $300,000 and I pay my 6.2 percent, totaling 12.4 with my employer, on my entire salary, that my Social Security benefit one day would be higher? Are they talking about capping the benefit or just getting rid of the cap on contributions?

Andrew Biggs (09:06):
They haven’t been very specific. They say Social Security would continue to be an earned benefit, which kind of implies you would continue to earn benefits on the additional taxes you would pay. Let’s say if we uncap the payroll tax and base your taxes on your total earnings, you’d also base your benefits on your total earnings. What you get then is, okay, you’re getting all this money from people in the short term, but you have to pay them higher benefits in the long term. That offsets some of the savings. And this morning I was running some numbers looking back to the 1970s. We had a huge run-up in benefit levels from Social Security in the 1970s. The benefit formula we have today is not the one FDR invented. It really happened in the 1970s, where they jacked up benefits in a really foolish way, and then to help pay for it, they increased the payroll tax ceiling. Right now you pay taxes on earnings up to $180,000. If we had just kept the tax max from 1970 and indexed it to wages, it would have been only $95,000. So they essentially doubled the wages on which you pay Social Security taxes. But what happens is they also doubled the wages on which people earn benefits. I’ve highlighted the point that if you have a high-income

Susan Pendergrass (10:38):
Mm-hmm.

Andrew Biggs (10:43):
couple retiring today, they could get almost $100,000 in total benefits, which is absurd. There’s no reason a government program should be paying anybody that amount. If you want that kind of income in retirement, you save more in your 401k. It’s better for you, better for the economy. But it was a result of this short-term step they took in the 70s. They said, hey, we raised benefits too high, let’s jack up the tax max. And they didn’t worry about the fact that in the future you’d have to pay benefits on that. Well, the future is today.

Susan Pendergrass (11:05):
Okay.

Andrew Biggs (11:13):
Now we’re broke again, we need extra money again, and these guys say, well let’s just jack up the tax max. But then you’ll pay extra benefits in the future. It becomes this chasing-your-tail kind of thing.

Susan Pendergrass (11:16):
Yeah. Yeah.

Andrew Biggs (11:25):
And the problem when you do it is there’s no country on earth paying $100,000 a year from a social insurance program, except for us. And the reason we do is these stupid historical decisions. If you’ve got this high-income couple in the US retiring today, they can get almost $100,000 from Social Security. If they lived in Canada, they’d get like $35,000. And that’s perfectly fine. Nobody’s starving to death in Canada in retirement. They just save more on their own.

Susan Pendergrass (11:35):
I’ll say.

Andrew Biggs (11:55):
The irony is that we think of ourselves as a free-market, small-government country, and our Social Security program is enormous, primarily because we’re paying benefits to people that other countries say, yeah, we don’t need to pay benefits to these guys.

Susan Pendergrass (12:11):
And yet people say, I put my money in, I get my money out.

Andrew Biggs (12:14):
Yeah, and I understand it. When I say we shouldn’t be paying $100,000 a year to a high-income couple, you get the email saying, well, I paid in. And if you paid in, you feel you have this moral claim on benefits. The problem is Social Security is still broke. We still need higher taxes or lower benefits. The idea that you’re just going to get your full benefits with the taxes you paid doesn’t work because the system can’t afford to do it. So you have to make the choice: do I want to pay higher taxes or get lower benefits? I’ve got to pick my poison. Most high-income people would prefer to get lower benefits. They care more about their taxes than their benefits. But people are still living in this dream world where this system, which is $30 trillion in the hole, is somehow going to pay them everything they’ve been promised and just screw somebody else. Everybody thinks they’re the guy who’s going to get everything and somebody else is going to get screwed.

Susan Pendergrass (13:14):
Yeah. I definitely hear people saying today, maybe I should go ahead and take it early and then I’ll get grandfathered in and my benefits won’t get lowered.

Andrew Biggs (13:26):
It probably won’t make a difference. In general, the Social Security benefit formula works based on your birth cohort, the year in which you’re born, not really the year in which you claim benefits. And people who are going to do Social Security reform understand the incentives. They don’t want to make it easy for people to game the system. So Social Security reform will probably work itself out in such a way that

Susan Pendergrass (13:42):
Right.

Andrew Biggs (14:03):
you can’t get some big advantage by claiming early. I could think of some conceivable possibilities, but I still would not encourage people to claim early.

Susan Pendergrass (14:14):
Okay, I want to talk about two more things I read in the last week. One was a letter from Tim Kaine about his idea with Senator Cassidy. What’s that idea for fixing it?

Andrew Biggs (14:24):
The interesting thing is people say Social Security reform has to be bipartisan. So we have two bipartisan ideas. We have Moreno and Elizabeth Warren, a Republican and a Democrat. They’ve got one idea, eliminating the payroll tax ceiling.

Susan Pendergrass (14:39):
Third rail.

Andrew Biggs (14:49):
Cassidy, a Republican from Louisiana, and Tim Kaine, a Democrat from Virginia, they’ve got a bipartisan plan. And guess what? Their plan is also terrible. If there’s any lesson from this, it’s that bipartisan doesn’t mean good.

Susan Pendergrass (15:00):
Bipartisanly terrible.

Andrew Biggs (15:04):
Yeah. Look, ultimately Social Security reform is going to have to be bipartisan, given the way the political system works. On the other hand, there is some lesson that if both Republicans and Democrats can agree on something, it might be a terrible idea. With Cassidy and Kaine, they are explicitly, and Cassidy said this, solving a political problem. The political problem is that neither Republicans nor Democrats want to vote for either tax increases or benefit cuts. You’d think Democrats want to raise your taxes and Republicans want to cut your benefits. The reality is they don’t want to do either of those things because they realize both are politically unpopular, which is why we’ve gone 40 years literally doing nothing. So their solution is that we don’t have to make these difficult votes. Instead, the federal government will borrow about $2 trillion, invest that money

Susan Pendergrass (16:02):
Tough.

Andrew Biggs (16:04):
in stocks and private equity, high-risk, high-return stuff. Then they claim they’re going to hold this fund for 75 years so it can build up value. In the meantime, when Social Security’s trust fund runs out in 2032, the federal government will borrow against the assumed gains on this investment fund.

Susan Pendergrass (16:06):
Right. Mm-hmm.

Andrew Biggs (16:29):
They say the borrowing will be at a lower rate because it’s the federal government. And they say after 75 years, all the gains in this investment fund will pay back all the borrowing and we’re all good. And let me count the ways there are problems with that. If you work at the state level,

Susan Pendergrass (16:45):
It’s just kicking the can.

Andrew Biggs (16:52):
state-based think tanks almost know more about this than federal people. A lot of underfunded state pension systems do things called pension obligation bonds. Their pension system is underfunded, they don’t want to raise contributions or cut benefits, so they borrow and invest in the stock market and hope it works. The pension obligation bond is the hallmark of a poorly funded, poorly run pension system. Think New Jersey, Illinois, things like that.

Susan Pendergrass (17:21):
Yeah.

Andrew Biggs (17:23):
There’s a national group of state budget officers that has come out and basically said as an institution, don’t do this. Borrowing for your pension is a bad idea. So it really is fitting for the times that the Cassidy-Kaine plan says, let’s take this worst idea from state and local government

Susan Pendergrass (17:45):
Yeah.

Andrew Biggs (17:47):
employee pensions, which has been condemned as bad practice, and put it on steroids and do that for Social Security. And what it really gets to is they just don’t understand the finances of it. And to be frank, they won’t listen. They have talked to every pension expert I know, and this Social Security world is pretty small. We all know each other on both sides. We may not agree on everything. Literally every pension expert I know says this is a terrible idea.

Susan Pendergrass (17:54):
Yeah.

Andrew Biggs (18:17):
But their political considerations are more important than policy, and that’s the problem with all of them.

Susan Pendergrass (18:24):
I mean, it feels free. They’re basically saying it’s like a timeshare. It just feels free right now. We just borrow the money. Okay, so

Andrew Biggs (18:31):
It’s been pointed out to them that if you can fund Social Security this way, you could fund the entire federal government this way and never collect any taxes. At one point Senator Cassidy was quoted in a newspaper article saying, well, yeah, sure, in theory you could. And I’m like, if something implies there’s a free money machine, maybe you need to question your assumptions.

Susan Pendergrass (18:38):
Sure. Okay.

Andrew Biggs (18:54):
I could give you a whole variety of reasons why this doesn’t work, but one macro point that’s come to me: I’ve been doing Social Security for a long time. I worked in the Bush administration in 2005 when they tried and failed to do Social Security reform. One of the problems we face today is that your elected officials understand Social Security policy much less well than they did 20 years ago. They just don’t understand how the system works. Going back to the Moreno-Warren idea of applying the payroll tax to all earnings,

Susan Pendergrass (19:22):
Yeah.

Andrew Biggs (19:37):
okay, you’re adding 12 percentage points to your top tax rate. There’s a reason Sweden and France and others don’t do this anymore. They used to have incredibly high tax rates. They don’t now. We would end up in many cases with a higher tax rate than most European countries. We have some philosophical dedication to small government and things like that. They don’t. And so if they’re not doing it,

Susan Pendergrass (19:43):
Yes. Yeah, yeah.

Andrew Biggs (20:02):
it’s because there’s a practical reason this isn’t a good idea. The same applies to wealth taxes. That’s been tried in Europe. They’re like, yeah, we’re not doing that anymore because it doesn’t work. But your average senator now

Susan Pendergrass (20:14):
It is happening around the country, the billionaire tax. What happens in 2032 if no one is either brave enough or smart enough to take this on in the next six years?

Andrew Biggs (20:17):
They’re just not aware of these policy issues, and that’s a real problem. It’s like having a guy fix your car who doesn’t know how to fix cars. 2032 is the date. If you have a recession, it might be 2031. It’s not certain, but it is certain it’s happening soon.

Susan Pendergrass (20:47):
Yeah. Okay.

Andrew Biggs (20:53):
There’s a literal reading of the law, which is that Social Security can’t pay out benefits it doesn’t have dedicated resources for. Once the trust fund runs out, the only dedicated resources are mostly the payroll tax, plus a little bit of money from income taxes levied on retirement benefits. And those were cut as part of the One Big Beautiful Bill. So if the trust fund runs out, they’d have to rely on the money they have on hand, which implies around a 22% benefit cut.

A lot of times people assume that benefit cut has to be across the board. If you did it that way, you’d throw a lot of people into poverty. I did some work a year or so ago with a lawyer in DC named Kristen Shapiro, and what we found is that the legal precedent shows the executive branch, meaning the president working through the Social Security Commissioner, would have some discretion. What we found is you could maintain full benefits for about 50% of people, the poorest 50% of seniors, and then cap benefits above that. If you cap the maximum benefit at about $24,000 per year for a single person or $48,000 for a couple, that is enough to make Social Security solid without raising taxes. So the point is simply you have some discretion.

The reality is Congress isn’t going to allow big benefit cuts, for political reasons. On the other hand, are they willing to have the size of tax increases needed, all in one go, to keep Social Security paying full benefits? I don’t think they want that either. So the reality is probably they’re going to borrow a lot of the money. And that’s where you get to the issue of how much more borrowing the financial markets will swallow. We effectively borrow from the public to repay the Social Security Trust Fund, but there’s an end to that. You say, okay, 2032, we have to do something. We have to raise taxes or cut benefits. If in 2032 the stated policy of the federal government is, well, we’re just going to keep borrowing to pay Social Security even though we have no prospect of paying it back, you wouldn’t blame some big market players for saying, yeah, I’m out, because you don’t want to lend money at low interest rates to someone who says they can’t pay it back. Then you start getting a couple of things. One is more federal borrowing squeezes out capital in the rest of the economy, and so interest rates naturally rise.

Susan Pendergrass (23:18):
Right.

Andrew Biggs (23:31):
But then there’s a second element: if you’re afraid the federal government can’t pay you back, over and above that natural increase in the interest rate, you’d apply a risk premium to treasury debt. You’d say, look, Treasury is not this rock-solid investment anymore. It’s more like a junk bond, or like borrowing from Illinois, and you make them pay a premium. That’s going to drive up

Susan Pendergrass (23:43):
US government borrowing. Yeah, yeah, yeah.

Andrew Biggs (24:01):
interest rates, and that makes it tougher not just for the federal government but for everybody. If you want to buy a car or a house, all your interest rates rise. There’s also going to be real temptation to inflate away the debt. The federal government doesn’t want to default on its debt, but

Susan Pendergrass (24:24):
Yeah, yeah.

Andrew Biggs (24:25):
historically the way you deal with this is inflation. Think about all the debt we took on during COVID, shoveling money out the door to everybody, and then we had massive inflation after it. A lot of those people who bought treasury debt didn’t get a good deal, because if you get 20% inflation on

Susan Pendergrass (24:34):
Absolutely. Yeah.

Andrew Biggs (24:47):
a treasury bond with a nominal fixed interest rate, that’s a real problem. So inflation becomes increasingly tempting. You look at this scenario and you’re like, can’t anybody here play this game? Every other country is not going bankrupt. We just have to do what they do.

Susan Pendergrass (24:51):
Yeah, yeah. So could we, if we really got our heads around it and started today or next year, incrementally raise the 12.4%, or incrementally get people used to lower benefits after a certain income or wealth level?

Andrew Biggs (25:18):
Sure. Yes. The way I think about it, there are two ways people think about it: the wrong way and my way. The wrong way is, let’s just pick from this menu of options to make Social Security solvent. We can raise the payroll tax a bit, raise the retirement age a bit, cut cost-of-living adjustments a bit, raise the tax cap a bit, and do these things until the system is solvent.

Susan Pendergrass (25:34):
Yes. Yeah.

Andrew Biggs (25:54):
That’ll get you a solvent program, but it won’t be a program that particularly works very well or is good for the economy. A more effective way is to ask, what do we want this system to do? If you talk about Social Security reform, what you hear is that it’s a social insurance program, a safety net, an anti-poverty program. Okay, it has to do that. And that part is really very cheap, because we don’t literally have that many poor seniors, their benefits aren’t very high, and it’s not a problem to maintain benefits for low-income seniors. When you ask what Social Security should do, nobody is saying we need to be paying high-income seniors $100,000 a year. There’s no public purpose for it. Nobody thought it out in advance. It was simply an unintended consequence. So if you’ve got things that are really costing a lot of money and have no public purpose, and those people can save for retirement on their own, you start scaling that back. The distinction I’m making is between policy changes simply for the purposes of keeping Social Security solvent, and policy changes for the purpose of making Social Security do what it needs to do, the real public purpose, and not doing things that serve no public purpose. My point is the things I’m talking about are things you should do whether Social Security is insolvent or not.

I’ll give you an example: Australia’s retirement system. Australia is a lot like us, not particularly more conservative or liberal, just sort of normal. Their Social Security program essentially is targeted at eliminating poverty in old age. It’s actually a better safety net than Social Security provides, but the benefits decline down to zero once you get above the poverty level. And to help people above that level save for retirement, everybody is enrolled in a 401k-type account. What that says is, if everybody’s participating in retirement plans as they should, the government’s job becomes easier. Their Social Security system costs about two percent of GDP. Ours costs about six percent. It’s a third as costly, provides a better safety net, and it comes because they’re actually thinking about what they’re doing.

Susan Pendergrass (28:18):
Mm-hmm.

Andrew Biggs (28:26):
We’re literally not thinking about what we’re doing. There’s a saying in business: the worst reason to do something is because we’re already doing it. That is literally how Social Security policymaking works. Nobody knows why our benefit formula is what it is or why the tax max is what it is. It’s all just stuff we inherited from the 1970s from people who were not in any way thinking clearly about what they were doing. It was people in the 70s trying to win elections, and we end up with the bag.

Susan Pendergrass (28:52):
Speaking of 2005, there was an attempt to offload a small portion of people’s contributions into the market, right? That failed.

Andrew Biggs (29:09):
That was the Bush proposal. I was in the White House then, kind of in a number-cruncher role, so I knew that stuff pretty well. I did a lot of events with President Bush around the country. When we came up on the 20th anniversary of Bush’s proposal in 2025, I started thinking to myself, what if his plan had passed? What would have happened? So I built a model. Back then they were saying, okay, you’re going to have some reductions in traditional Social Security benefits for middle and high-income people, and then you’re going to have a personal account where you can invest part of your existing payroll tax in stocks and bonds. The total benefit you get at retirement is a combination of those two. People were speculating. Well, we don’t know what the stock market’s going to do. But 20 years later, we’ve got some data, so let’s just see what happened. The results were that for people

Susan Pendergrass (30:01):
Now we do.

Andrew Biggs (30:07):
retiring today, low and middle-income people would have had higher total benefits by a little bit. The very highest-income people, their benefits would be down by a couple percent because the cuts to their traditional benefits would be larger than the gains from their personal account. But even they would be fine; it’s not a big deal. Going forward, it looked like people would do a little bit better with the Bush plan than with the traditional system. But here’s the important thing: the traditional system is broke. We just talked about how it goes broke in 2032, with huge deficits. The Bush proposal wouldn’t have made Social Security totally solvent, but it would have addressed half or two-thirds of the long-term funding gap. So you’d get a system that would have paid you benefits around the same as, or maybe a little bit better than, Social Security, but would be in much more solid financial shape. Today the times are different, and I don’t think personal accounts are really viable. But the point is, if they had done something back then, everything could be easier today. But members of

Congress were just too afraid. Republicans were afraid of taking the political hit. For Democrats, it was too tempting to give the political hit. They knew they had to do something, but they couldn’t swallow hard and say, look, let’s just go in on this thing together. They didn’t want to give Bush the win because by that point Iraq was going badly and they really didn’t like him. So they beat him up. But the problem is Bush served his term and is happily retired in Texas. The people who really got screwed were the ones who depend on Social Security, because we didn’t fix it. And you just hope that’s not what we do again.

Susan Pendergrass (31:42):
Yeah. Somebody not us in 2045 could be having the same conversation, right? Like, if only in 2025 or 2026 we’d gotten serious. And I do think people mix up the trust fund with the whole program. A lot of people think all of Social Security is going to be bankrupt in six years, versus the reality that we’re still taking in a trillion dollars, we just need about 22% more than what we’re taking in.

Andrew Biggs (32:14):
Yeah. If you go back 20 or 25 years, there were all these arguments about whether the trust fund is real or fair or whatever. The trust fund is essentially IOUs written from one side of the government to the other. I thought at the time the trust fund is not real in an economic sense. It doesn’t make it easier for the government to pay Social Security benefits. It is a pledge that we will pay them, but it doesn’t make it easier to pay them. But here’s the interesting thing:

Susan Pendergrass (32:25):
Right. Al Gore. The lock box.

Andrew Biggs (32:50):
if having a trust fund doesn’t make it easier to pay benefits, then not having a trust fund doesn’t make it harder. The trust fund runs out, we still have taxes coming in, we can still pay 80% of what is owed. If we retarget that, you can maintain the safety net. It’s not like you’re totally insolvent or broke. All those long debates over whether the trust fund is real get resolved because the trust fund itself is gone in six years. So that doesn’t matter very much anymore. But I do hope that, as you said, we’re not in 2045 looking back on a solution of just borrowing $500 billion a year or whatever it’s going to be. People in 2045, when the federal government is bankrupt, the dollar is dropping, and all these financial crisis things we think only happen to other countries are happening to us, they would look back and say, I wish those people were more responsible. The Social Security problem, in a sense, if we went back 25 or 30 years ago, was a manageable problem. The real issue is not the demographics or the benefit growth or whatever. The real issue is just poor stewardship of this program by Congress and respective presidents. It is absolutely a governance problem. It is not a problem of economic or demographic fundamentals. All of that can be handled.

Susan Pendergrass (34:19):
Everyone wants to be Santa Claus, right? No one wants to be the Grinch.

Andrew Biggs (34:22):
It’s very true, but leadership is about giving people bad news. Good news kind of tells itself. Bad news has to be told and people have to be convinced that this is going to hurt, but we’ve got to do it. And we just didn’t have the willingness. President Clinton in the late nineties tried to do some stuff, but he didn’t deliver much bad news because we had surpluses. President Bush was willing to tell people, okay, look, you’re not going to get every penny you’ve been promised. Beyond that, the level of leadership has been very poor.

Susan Pendergrass (35:01):
Hasn’t been good. All right, well, next year when the trustees report comes out, come back and give us more bad news.

Andrew Biggs (35:09):
Yeah, until then, things are looking up. But no, it’s something people want to be aware of, and I think that’s the key thing.

Susan Pendergrass (35:13):
Well, I think one of the more important things you said is that no one understands it. People are upset and arguing over something they don’t understand the mechanics of. I do know people who think they have an account with their name on it that their Social Security taxes went into, and they’re just going to start taking the money out.

Andrew Biggs (35:23):
I have some bad news for that. Your taxes go into Social Security and go straight out the door to pay for your grandmother’s benefits. If you want to know where your taxes are, they’re in your grandmother’s bank account. So go ask her.

Susan Pendergrass (35:45):
That’s right. That’s right. All right, thank you so much. I really appreciate the time.

Andrew Biggs (35:51):
Thank you, Susan. It’s a pleasure to be with you.

Produced by Show-Me Opportunity

The post The Social Security Crisis Is Worse Than You Think with Andrew G. Biggs appeared first on Show-Me Institute.

Susan Pendergrass speaks with Doug Burris, retired Justice Services Director and Chief United States Probation Officer, about criminal justice reform in Missouri and St. Louis. They discuss Missouri’s risk-based approach to sentencing and supervision; why building more prisons may not reduce crime; low violent-crime clearance rates in St. Louis; the case for bail reform and expanded electronic monitoring; the Safer Supervision Act before Congress; and more.

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Episode Transcript

Susan Pendergrass (00:00):
Welcome to the podcast, Doug Burris, who has been in and around criminal justice reform. I know you’ve been making a lot of pushes nationally, and you’ve worked within Missouri. What I want to talk about today is that in St. Louis city and county, folks are really celebrating this reduction in crime. Murders are down, and therefore we are on the verge of solving this issue. But it doesn’t feel that way to people who live there. I know you ran the county jail for a while and you’ve been closely involved in what’s going on there. What is your perspective on the St. Louis region in terms of where things stand today, in the middle of 2026, when it comes to criminal justice reform and identifying and clearing crimes?

Doug Burris (00:57):
Well, first of all, Susan, thank you for having me as a guest on your show. It’s greatly appreciated. I’m such a fan of the Show-Me Institute. To answer your question, there has been some progress, but I think what we have done is taken baby steps and we still need to walk and then run. There’s much work that needs to be done. I think the state of Missouri as a whole has been a great example of what can happen when criminal justice reform is done correctly. What was done with the Department of Corrections with prior work, including House Bill 1525, allowed for focusing on more high-risk cases and moving low-risk cases through the system quicker, getting them productive and out once they are. That’s what should be done more at the federal level, following what the state of Missouri did, and also at the local levels in the city of St. Louis. I think that’s exactly where we’re headed.

Susan Pendergrass (02:00):
So what did happen at the state level in Missouri? How did they shift their focus? It sounds kind of strange, but to make this system more effective and efficient, you need to find and lock up violent criminals, but people who are not violent criminals who commit a crime could be dealt with differently. What did Missouri do specifically?

Doug Burris (02:01):
Well, Missouri led the way for the rest of the country, as did Texas, where they implemented various reforms. One was making sentencing decisions and supervision decisions based on a risk level, where they had risk assessments that followed the science of criminal justice on who needs to be the most supervised and frankly the longest incarcerated, as opposed to the exact opposite. I’ll give two extremes of the situation. At the federal level, we have a grandmother who continues to cash her dead husband’s Social Security check, and that person ends up on federal supervision on the same caseload as a violent child predator. It’s really not necessary to have that woman on supervision when the real focus should be on the violent person. There is the Safer Supervision Act that’s before Congress right now, and we’re really hoping that gets passed so there will be more emphasis on supervising the people who are at highest risk, using risk assessments as a tool to determine that.

Susan Pendergrass (03:45):
And how long has Missouri been doing this? Do we know anything about how it has impacted the size of the prison population?

Doug Burris (03:53):
That’s a fantastic question. It’s been in play for about five years now. What has happened is the population of both the prisons in Missouri and the people on supervision has decreased, but the crime rates have not gone up. The same thing has held in Texas, which has done it for just a little bit longer than Missouri. So following the science really does work. And it’s at a considerable expense. It’s about thirty thousand dollars to house someone in a Missouri prison, and in a federal prison it’s over forty-two thousand dollars. It might be cheaper to send these people to college than to send them to jail or prison. And of course there might be more good done too, because there have been all kinds of studies showing that people who get an education or vocational training have drastically lower recidivism rates. That’s what we really need to be focusing on, and not the grandmother I talked about earlier.

Susan Pendergrass (04:58):
Well, it seems to me that a lot of states, including red states, are moving toward the idea of just building more and bigger prisons and locking everybody up, because if you want to show that you really care about crime, you demonstrate that you are ready to lock everybody up. But that’s not effective or efficient, right?

Doug Burris (05:21):
No, that’s exactly right. And unfortunately we’re seeing that in our neighboring state of Arkansas, where they’re constructing a new prison expected to cost one billion dollars to open the doors. One billion dollars. And then to operate it, if their annual rate of housing someone in prison equals Missouri’s, it will cost about a hundred million dollars a year to operate. And again, we’re going to have people in there who could be supervised in the community or given opportunities like drug treatment, job training, and education, things that will have people contributing to the tax base rather than taking from it.

Susan Pendergrass (06:03):
How do you convince people that a risk assessment is going to work when they want all the criminals off the streets?

Doug Burris (06:10):
Well, it’s twofold. One is we have to educate people that putting someone in prison is going to cost tens of thousands of dollars every year, and in the end they may come out more angry and less able to adapt to the community. The other thing is to follow the science. Look at what Missouri has done and what Texas has done, where they have lowered the prison population and crime has actually gone down. This is something other states should be following as well. We can’t keep everyone in prison forever. We just can’t afford it. And not only that, but it’s also inhumane. The cost would be astronomical if we start keeping people in prison for low-risk crimes that in some cases have no victims.

Susan Pendergrass (07:10):
A couple of things came up in the last legislative session. Governor Kehoe passed a violent crime clearance rate grant program, but the legislature hasn’t funded it. What are your thoughts on that?

Doug Burris (07:27):
When it comes to violent crime, I’m all in favor of keeping the most violent people in as long as possible and perhaps even for life. The question is where can we find ways to save money with those who aren’t violent? That’s what we really need to be focusing on. When you’re supervising a violent person but you also have nonviolent people on your caseload, it really just doesn’t make sense.

Susan Pendergrass (08:01):
Well, I was just thinking specifically about trying to direct some funds toward clearing crimes, because even though murders are down, clearance rates on murders are still pretty low in St. Louis, in the thirty to forty percent range. I would think that the same people who are interested in locking everybody up would like to clear more of these crimes. If you look at carjackings, most of those go unsolved. Maybe one in ten is cleared. While we focus on risk assessment, which is a great idea, there are other things we could be doing, like working harder to clear the crimes that are committed.

Doug Burris (08:39):
Absolutely. That makes complete and total sense, because when you’re talking about the worst of the worst, they don’t commit one crime and then never do it again. This is an excellent idea for putting resources toward making the community safer.

Susan Pendergrass (08:56):
Another thing that came up in the last legislative session was DNA testing people who are arrested, running their DNA and then disposing of it if they don’t match anything. I don’t think that went anywhere. I know there are a number of bills that have moved through trying to make Missouri a safer place. It wasn’t a really productive legislative session in 2026 in Jefferson City. A lot of things didn’t happen, but things are being attempted. What about St. Louis specifically? Having run the jail in the county, what do you think needs to be done there to improve residents’ feeling of safety?

Doug Burris (09:38):
I think more resources need to be directed at the court level, first of all, and at the investigative level like you talked about. But there are people in jail awaiting trial who have not been found guilty for three to five years. Can you imagine what it would be like to be in a place where you don’t see the sun for three to five years? You don’t feel the sun on your face or the hug of a loved one. I saw some of those cases where people were headed to trial and after three to five years the case just goes away. I think we need to really focus on giving the courts resources, and that includes both prosecutors and public defenders. Public defenders have some of the highest caseloads in the nation here in Missouri. If someone is innocent or can be dealt with quickly and given a path to become a productive citizen, that’s what we really should be focusing on.

Susan Pendergrass (10:37):
What about the bail system? Does that need reforming?

Doug Burris (10:41):
Yes, I really think so. That’s one of the things some other states have done that has shown incredible results: using a risk assessment at bail. The federal system does that currently, and I think it’s still underutilized. There are things that can be done with that risk assessment in terms of supervision strategies, but I think the judge needs to know the absolute risk of that person and what can be done to address it when making a decision on bail.

Susan Pendergrass (11:14):
Can’t we put more people on monitoring? I hate to suggest everyone gets an ankle monitor, but can’t we monitor more people while they’re awaiting trial rather than having to house and feed them?

Doug Burris (11:31):
Yes, absolutely. That’s an area that needs to be expanded. In the St. Louis County jail, for example, which is the largest jail in Missouri, there are three hundred people in custody right now who are low risk. We’re spending about a hundred and twenty dollars a day to keep them in jail, potentially for years. Low-risk people, if you follow the science, can typically be supervised in the community.

Susan Pendergrass (12:06):
So do you think that if we were to implement all of these reforms, do a risk assessment on every person charged, only lock up the violent criminals, and let people await their trial at home, that St. Louis would feel more safe or less safe?

Doug Burris (12:07):
Well, I think with proper supervision you’d have to do it right. You just can’t let everyone out. Utilizing the risk assessment would really be the key, because someone may be charged with a low-risk crime this time, but they could be on parole for a prior murder or rape or something along those lines. That’s why you really need to look at the risk assessment to determine the appropriate strategies for releasing people.

Susan Pendergrass (12:42):
Yeah. This just seems to be a growing sector of our economy and a growing slice of the budget pie. Missouri has budget problems. We’re putting so much money toward this idea of reducing crime, and for some reason people still just don’t want to walk to their car alone at night. I know there’s a lot of general public disorder in St. Louis, graffiti, homelessness, panhandlers, that also contribute to it. I wish I could understand a reasonable, cost-effective approach to

Doug Burris (13:26):
Yes.

Susan Pendergrass (13:37):
improving those conditions, because I know other cities have and I believe St. Louis can do it, but we have this reputation of being a crime-ridden city, and I think that’s so unfortunate.

Doug Burris (13:47):
Right. I completely agree with you. The truth is the answer isn’t to lock everybody up. The United States has the second highest rate of incarceration on the planet, only behind North Korea. The Department of Justice reports that if incarceration rates remain the same, one out of every fifteen adults in the United States will serve a prison term. One out of every fifteen. And that’s a prison term for a felony conviction, not a jail term for a DUI or a bad check. The costs are astronomical: thirty thousand dollars a year to house someone in a Missouri prison, paid for by the taxpayers. There have been proven strategies for getting people in and out of the criminal justice system. Ninety-three percent of those who remain employed on supervision successfully complete supervision. Those who remain unemployed throughout their supervision have a more than fifty percent failure rate. Getting people a decent job where they can care for others and find meaning is really one of the keys to lowering crime.

Susan Pendergrass (14:45):
Yeah. And there are public-private partnerships, and partnerships through religious organizations and other programs that have been shown to work, if we would free them up.

Doug Burris (15:13):
That is so true. Chuck Colson’s old organization, Prison Fellowship, is one of the best with the programs they offer in prisons and to people when they get out. It has proven, particularly in Iowa, to show drastic reductions in recidivism.

Susan Pendergrass (15:25):
Wow, that’s great. So I’m surprised to hear that Missouri has led the way on prison populations. I thought there was consideration about building a new prison, but I believe it’s not happening. Is that right?

Doug Burris (15:55):
Yes, that’s exactly right. Our prison population has actually decreased in the last few years.

Susan Pendergrass (16:03):
Wow, that’s really surprising to me. But good to hear. So what are you looking for the governor or the state legislature to do in the coming years?

Doug Burris (16:12):
I think they should build on the reforms that have already been proven to be successful. The one thing you mentioned that I think is frankly brilliant is the idea of working to close open violent crime cases, because on the violent cases, the chances are it’s not one crime they committed and then they go to work the next day and never commit another crime. I think that would be something fantastic for the state legislature to do.

Susan Pendergrass (16:37):
And at the federal level, what are you hoping to see done?

Doug Burris (16:46):
The Safer Supervision Act, as I mentioned before, is actually a bipartisan act, but it’s being led by the right right now. The conservatives are the ones who have introduced it into Congress. The Department of Justice is in favor of it. It would make the assessments we talked about more prominent, and it would also give people incentives to do things right, like getting a college education or a good-paying job and paying off restitution, where they can get off supervision earlier. That makes complete sense. But also, almost everyone convicted of a federal crime now is given supervision, like the grandmother I mentioned earlier who cashed her dead husband’s Social Security checks after he passed. This would allow for a more

Susan Pendergrass (17:33):
Mm-hmm.

Doug Burris (17:42):
thorough assessment at the time of sentencing, for the judge to not put people on supervision who don’t need it. That would clear up resources so more time could be spent on the people who really need to be supervised, as opposed to those who don’t.

Susan Pendergrass (18:01):
Yeah. A lot of the sentencing reform we hear about involves mandatory minimums, which force judges into incarcerating people whether they want to or not. I assume that’s not something you would support.

Doug Burris (18:16):
No. I worked in the federal system for twenty-three years and saw the damage that mandatory minimums have done. For instance, with crack cases, I saw a judge sentence someone who was selling five grams of crack. A gram is equal to about a sugar packet you put into your coffee, and five grams carried a mandatory five years. And then you would have people with no mandatory minimums who robbed a bank and did a shooting receive lower sentences than drug cases. Thankfully there were two reductions in the crack mandatory minimums, applied retroactively. Over 23,000 people had a resentencing, and when they were released, they did not offend at higher levels than those who served their full terms. That was money well saved. The judge has a better idea on sentencing someone when they have all the facts of the case before them, rather than relying on a statistical report done ten years prior that says, because he was convicted of this crime, he gets this sentence.

Susan Pendergrass (19:17):
Yeah. Right. Well, I’m relatively new to this area, but I think it’s all pretty fascinating. We struggle enough to get people to live in our cities, and if they don’t feel safe, that’s not going to help. I look forward to learning more about this area of policy and following more closely what Missouri and St. Louis specifically are doing. I would like to have you come back and talk about it again when there are real policies being considered, because it’s not going away and there’s a lot to learn.

Doug Burris (20:11):
Well, I appreciate it. I enjoyed my forty-year career in the criminal justice system, and hopefully I’ll be the only guy you’ve ever met who has been in more prisons than John Gotti.

Susan Pendergrass (20:16):
Hopefully. Thank you so much, Doug. I really appreciate it.

Doug Burris (20:27):
Thank you, Susan. It was a real honor.

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Birth rates have been declining in the United States for decades, and there is little indication that the trend will reverse anytime soon. This poses challenges for many of our institutions that were built on the implicit assumption of continued population growth. Social Security is the most prominent example. Because the program relies on taxes paid by current workers to fund benefits for retirees, it depends on a steady influx of younger workers. Social Security is in trouble, and its day of reckoning is not far off.

More quietly, schools across the United States are struggling with declining enrollment. After decades of needing more—more buildings, more teachers, more staff—we’re entering an era where we will need less of all these things.

In Missouri, public school enrollment has declined about 4 percent since the turn of the century. The decline has been even steeper in many urban areas.

The enrollment decline is not a temporary phenomenon. Demographic projections indicate the trend is likely to continue and, in many places, accelerate. And unlike forecasts of the weather or stock market, demographic projections are highly reliable. We know what is coming.

Yet many districts continue to operate as if enrollment will rebound. This is understandable. School closures and staff reductions are politically difficult and often deeply unpopular. However, delaying these decisions does not change the underlying demographic reality.

Preparing for continued enrollment decline means consolidating and, in some cases, closing schools. It also means aligning staffing levels with student enrollment. With limited resources available for public education, maintaining excess capacity spreads those resources too thinly, undermining educational quality.

The demographic writing is on the wall. One way or another, our school system will need to respond. Districts that plan proactively for declining enrollment are likely to navigate the transition more successfully than those that postpone difficult decisions until circumstances leave them no choice.

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This shift will ripple through many of our institutions that depend on population growth. Social Security is an obvious example. But there’s a broader problem: modern institutions are built for expansion, not contraction. Enter our public school system, which is already experiencing declining enrollment. Statewide, enrollment in Missouri public schools is down 4 percent since the pre-recession peak in 2007–08, a trend recent fertility data suggest will only accelerate. On top of this, traditional public schools must contend with the reality that families are increasingly choosing alternative schooling options (e.g., charter schools, private schools, and homeschooling).

Are we prepared to address declining enrollment in Missouri’s traditional public schools? My gut tells me no, and there are some worrisome indicators. For example, many Missouri school districts already have declining enrollment, in some cases stretching back decades. What are we doing about this? At the state level, one thing we aren’t doing is adjusting their funding to reflect fewer students. Missouri’s “hold harmless” provision allows districts with shrinking enrollment to continue receiving funds as if their enrollment hasn’t fallen. In effect, the state is subsidizing higher per-student spending in these districts (this is also happening elsewhere).

This bury-our-heads-in-the-sand approach is manageable for now, but as more districts fall into the declining-enrollment category, it will be harder to keep overfunding them; education is one of many state priorities and our budget must balance.

More broadly, I worry school districts will be slow to close buildings, reduce staff, and otherwise cut costs in response to declining enrollment. These steps are painful and politically difficult, but delaying them only narrows future options. Ideally, districts—guided by the state—would use realistic enrollment projections to plan ahead. With proactive leadership, we could adapt to a new era of declining enrollment while minimizing harm to students. But if district and state leaders wait until acute financial pressure forces their hand, the cuts will likely be deeper and more disruptive.

The post Are Missouri’s Public Schools Ready for Declining Enrollment? appeared first on Show-Me Institute.

Susan Pendergrass is joined again by Elias Tsapelas, director of state budget and fiscal policy at the Show-Me Institute, for Part II of their conversation on the sweeping federal legislation known as the “One Big Beautiful Bill.” They unpack what the bill means for Missouri taxpayers, including changes to the standard deduction, tips and overtime, education savings accounts, and higher education policy. They also dig into the bill’s broader fiscal impact, from the growing federal deficit to the implementation challenges facing state governments.

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Timestamps

00:00 Exploring the One Big Beautiful Bill
04:58 Tax Implications for Missourians
10:20 New Savings Accounts for Children
12:07 Changes in Higher Education
18:09 Federal Deficit and Debt Concerns

Listen to Part I Here

Episode Transcript: One Big Beautiful Bill Breakdown, Part II with Elias Tsapelas 

(Download Here)

Susan Pendergrass (00:00)
So I guess it turns out that the One Big Beautiful Bill was too big for us to talk about in one podcast. Elias, thanks for coming back. I realized after we stopped recording that there’s so much in there we didn’t even discuss. We barely even really got into it. So let’s talk about more of the One Big Beautiful Bill because it’s huge—hundreds, at least hundreds of pages long. And I can’t believe the people who voted on it read it through carefully. Now, as you’re going through it and learning things, I’d love for you to explain some of it to me.

Starting with—how does the no tax on tips and overtime work? I’ve heard a lot about this. I know it was a campaign promise. So is it true that if you’re waiting tables now and you get a few hundred bucks a night in tips, you don’t have to pay tax on it now?

Elias Tsapelas (00:51)
In theory, yes. Now, it’s not clear if it’s going to be something that impacts Missouri tax liability. It sort of impacts the federal tax code a little differently than the increased standard deduction and some of the other changes. So it might change some federal tax liability, but unless Missouri’s legislature changes some stuff, it’s not going to immediately impact Missouri taxes.

Susan Pendergrass (01:16)
But why—do you have to itemize to do it?

Elias Tsapelas (01:19)
No. Basically, Missouri has rolling conformity with the federal government. Missouri takes its gross income from the federal government, and the tax on tips and overtime piece isn’t going to impact the gross income calculation. So it may or may not become an issue in Missouri.

There’s also a big open question here about how much income tip workers are actually claiming, and how much that will change if you say it’s not taxed—because if they weren’t declaring it before, we don’t really know what the change will be.

Susan Pendergrass (02:05)
Yeah, so if you walk home with a wad of cash, you’re not necessarily going to add it up and write it down and claim it.

Elias Tsapelas (02:09)
It still might not be worth declaring all of it. But if Missouri brings it into the state income tax code, it could cost quite a bit of money. There are quite a few tax provisions here—especially on corporate tax—where we really don’t know how much it’s going to cost, but it’s probably going to be significant. There’s full expensing, depreciation, all kinds of things that are going to change both federal and Missouri tax liability. And then there was the standard deduction change we mentioned last time.

Susan Pendergrass (02:47)
Okay. So one thing that does impact Missourians is our tax credit scholarship program, where you can donate to a scholarship-granting organization like the Archdiocese of St. Louis, and they give out scholarships. Right now, you can get a Missouri state income tax credit for that—up to half of how much you owe the state. And now there’s a new program where you can take a federal credit of up to $1,700 for donating to these organizations.

You can’t get credits for both on the same donation, but you could donate up to half your tax liability and get the Missouri credit, and then separately donate $1,700 and get the federal credit. I know there’s a lot of rulemaking still to come, and I also know this program doesn’t start until January 2027. So it won’t affect people’s returns until April 2028. But—how do you think that’s going to work? Do you have any idea based on what you’ve read?

Elias Tsapelas (03:54)
Well, Missouri has to opt in first, right? I think the first step is getting the rules out and seeing which states opt in. I would assume Missouri will. The hope is that this becomes something more people understand and take advantage of.

In Missouri, even though we have tons of tax credits that people do use, it takes a while to build it into tax preparation tools like TurboTax. So you kind of have to know what’s going on. Maybe once the federal piece is in place—and there are also changes to the child tax credit—that’ll help.

Susan Pendergrass (04:24)
Spread the word. How’s that changing?

Elias Tsapelas (04:51)
Some of the temporary provisions from the 2017 bill are now made permanent. One of the things the One Big Beautiful Bill does is take temporary changes and make them permanent. We’ll see in a few years how many of these stay.

Susan Pendergrass (05:10)
So the child tax credit is now permanent?

Elias Tsapelas (05:13)
Yes. The changes made in 2017 are now permanent. It’s higher now, and there’s more of it that’s refundable. There’s still an income threshold to get the maximum amount. I think there are going to be a lot of tax credit changes. The bill also got rid of a lot of renewable tax credits. So there are a lot of changes to tax policy for both businesses and individuals. I think people will need to start thinking about their Missouri taxes a little differently, at least for the next few years.

Susan Pendergrass (05:59)
Another piece is the savings accounts for children—kind of like IRAs for kids. I’ve read that anyone born after January 1, 2024, or maybe anyone currently under age 18, is eligible. The IRS has to open the accounts, and you need a Social Security number. For kids born between January 1, 2024, and 2026, the government deposits the first $1,000.

Elias Tsapelas (06:52)
Yeah. What I was trying to figure out is how these differ from 529 plans. I think these will be harder to withdraw from. They do come with tax benefits for employers and others contributing, but taxes will have to be paid when the money comes out.

Susan Pendergrass (07:25)
Yes—capital gains. With 529s, the money goes in pre-tax and comes out tax-free if used for education. These accounts are less flexible. You can take money out for education, a house, or a business, but otherwise there’s an early withdrawal penalty plus capital gains. It feels gimmicky, since the government only deposits $1,000 until 2028 when the program expires.

But for many low-income kids, this could be their only savings. It’s meant to help those who wouldn’t have a 529. They were originally going to be called “Invest in America Accounts,” but they’re now called “Trump Accounts.”

Elias Tsapelas (08:50)
I’m curious to see if the $1,000 is the only money ever deposited into these accounts for most people. It may not be worth putting in more, but even with tax obligations, it’s still free money.

Susan Pendergrass (09:27)
Right. You turn 18 and have $10,000—it’s not nothing. But some worry that a future Democratic president with control of Congress could expand the program—like depositing $500 annually for anyone under 18. It starts to look like a form of universal basic income. But I suspect it’ll go away—it feels gimmicky.

Elias Tsapelas (10:16)
I’m curious if the government will make it easier to use for college or similar expenses. There are a lot of higher education changes in the bill too. As someone with student loans, I’m getting emails every day about them.

Susan Pendergrass (10:33)
Yeah. So tell me—what are the changes to higher ed?

Elias Tsapelas (10:43)
Well…

Susan Pendergrass (10:46)
I’ve heard it might hurt community colleges, but I don’t know why. Do you?

Elias Tsapelas (10:49)
There are new caps on loan amounts and some income-based repayment plans are being eliminated. For example, the SAVE repayment plan created by the Biden administration has been tied up in court. Interest collection is resuming, but payments aren’t due yet. Borrowers need to switch plans, but the old ones are gone. The new plan tries to prevent negative amortization, but it’s still unclear how well that will work.

Grad students will be able to borrow less. The government wants loans repaid more quickly. After five years of paused payments, there’s a huge administrative burden now to unwind all of this.

Susan Pendergrass (12:11)
I know—since the pandemic.

Elias Tsapelas (12:17)
Exactly. There’s going to be a big process for certifying income and re-establishing payments. Colleges are nervous—lower borrowing limits could change students’ decisions. And I don’t know if the federal government is prepared to roll all of this out smoothly. I still need to re-set my auto-withdrawal.

Susan Pendergrass (12:56)
Yeah. It feels like we have to wait six months or a year to see what actually happens. Even the work requirements for SNAP and Medicaid were pushed out beyond the midterms. So while people are celebrating or panicking, a lot of this is still TBD.

Elias Tsapelas (13:26)
Yeah. And when people talk about “cuts,” especially to Medicaid, they’re mostly referring to ten-year projections. But a lot of the actual cuts are back-loaded. The benefits hit first—then the cuts. And some of those cuts may never happen. There’s also a big expansion of health savings accounts. People with bronze marketplace plans or direct primary care arrangements could use them, but rules still need to be written.

Susan Pendergrass (14:38)
I read there might be fewer subsidies, maybe higher premiums?

Elias Tsapelas (14:44)
Depends. There’s going to be a bill later this year to debate extending the enhanced COVID-era subsidies. But those subsidies created a kind of shadow market—shady dealers signing people up for plans they didn’t even know they had. About 2 million people were enrolled in multiple subsidized marketplace plans last year. So now there’s a push to reintroduce some “skin in the game.” But we’ll see what ends up mattering or going into effect.

Susan Pendergrass (16:04)
And our senator is already trying to undo parts of the bill he voted for.

Elias Tsapelas (16:08)
Yeah, especially the provider tax piece. That would help rein in spending, but the cuts don’t go into effect for several years—giving time for backtracking. If none of the pay-fors happen and only the expensive parts do, this bill just becomes even more costly.

Susan Pendergrass (17:08)
What does this bill, even optimistically, do to the federal deficit?

Elias Tsapelas (17:15)
I still need to see estimates, but we’re looking at adding at least $4 trillion to the deficit. Possibly more, depending on what’s made permanent.

Susan Pendergrass (17:53)
I thought Republicans cared about balanced budgets. This feels irresponsible. What do you think?

Elias Tsapelas (18:08)
It’s a lot easier to say you’re for fiscal responsibility than to actually do it. With Medicaid, people say cut waste—but cutting funding means cutting payments to hospitals, doctors, and nurses. And those tax cuts were always going to be extended. Every person taking the standard deduction is getting a bigger deduction. That costs money.

The real long-term budget problems are in Medicare, Medicaid, and Social Security—none of which were addressed. So someone will have to get back to those eventually.

Susan Pendergrass (19:48)
Yeah. Social Security’s trust fund is going to run dry soon—maybe within 10 years. The numbers are so big, it starts to feel imaginary. People can’t wrap their heads around what it would take to have a balanced budget. Both parties just keep giving stuff away, so you’d be foolish to sit on the sidelines.

Elias Tsapelas (20:24)
Yeah—it’s just different groups they’re giving to. This bill was very expensive. And I think future efforts will make it even more so by eliminating what little cost savings exist.

Susan Pendergrass (21:03)
The SALT deduction, for example—capped at $10,000 in 2017, now up to $40,000. That’s a $30,000 swing. For Californians, that’s huge.

Elias Tsapelas (21:27)
Yeah, and the benefit mostly goes to higher-income people. Even in Missouri, some homeowners might benefit—but it mostly helps the coasts. And it gives high-tax states more room to raise taxes, since the federal deduction cushions the blow.

Susan Pendergrass (22:19)
Exactly. Crazy stuff. Well, I think we’ve covered a lot. I won’t make you come back again, but there’s so much detail—it’s not really what either side thinks it is.

Elias Tsapelas (22:45)
I agree. Especially with Medicaid and SNAP. And states will carry a big burden implementing this. Some will do it well, some will fight every piece. There’s going to be a lot of news as this all rolls out.

Susan Pendergrass (23:46)
Totally. Not directly related, but recently I’ve met people surprised by the real ID requirement. It’s been around for 10–15 years, and Missouri resisted it. Some states just don’t want to jump into federal programs.

Elias Tsapelas (24:04)
Yeah—I’ve seen signs about it at TSA forever. Always “effective in 3 months,” then postponed. But it finally happened.

Susan Pendergrass (24:11)
Right. And this summer, people are finally getting real IDs. Missouri was one of the last to implement it. So I don’t expect the state to jump on many of these changes either. But there’s still plenty of time to talk about it all again.

Elias Tsapelas (24:28)
Yes.

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The post Social Security, Tax Cuts, and the Future of Retirement with Andrew Biggs appeared first on Show-Me Institute.

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The post Banning Smartphone Use in Schools with John Ketcham appeared first on Show-Me Institute.

The bill would cut the top rate on personal income taxes, cut the corporate income tax rate in half and exempt Social Security payments from taxation. State Rep. Dirk Deaton, R-Noel, said the bill would promote economic growth, noting that future tax cuts included in the bill only take effect when triggered by revenue growth.

“This is really just limiting the growth of government,” Deaton said. . . .

The bill would accelerate a tax cut approved in September that will reduce state revenues by almost $800 million annually when fully implemented. The corporate tax cut would be the second in less than five years.

House Speaker Dean Plocher, R-Des Peres, made a corporate tax cut a top priority for the chamber as the session opened.

For the individual income tax, the rate would drop from 4.95% to 4.5% immediately, eventually dropping to 4.05% after a series of triggers. The corporate income tax would drop from 4% to 2%, and then to 0% after a series of triggers. The exemption for all social security income would be immediate.

I’ve pushed for reductions and eliminations of the individual and corporate income taxes for years, so it should come as no surprise that this plan is music to my ears. Income taxes are the most destructive taxes from the perspective of growth, and among them, corporate income taxes are the most destructive of them all. Reducing both with the intent of eventual elimination is sound policy.

Further, while the targeted social security carve out is understandable, eliminating taxation for certain groups of people can make the overall objective of reducing and eliminating a tax for everyone more difficult over time, with fewer and fewer people carrying the cost of government. This concern applies to an even greater degree to corporate handouts like economic development tax credits, such as the one for film studios being debated this session. Fortunately, economic development tax credits aren’t involved in this bill, at least not yet.

Thankfully, the scope of HB 816 and 606’s “targeted” tax policy is limited; the bulk is solid in principle and practice. We’ll keep you posted on the bill’s progress.

The post Tax Cut and Reform Package Passes the House appeared first on Show-Me Institute.

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The post The Case for Capping Social Security with Andrew G. Biggs appeared first on Show-Me Institute.

People with disabilities often deal with a variety of complex medical issues, which makes them the costliest group to cover under today’s Medicaid program. It follows that reducing this group’s enrollment would lower costs. But the models don’t actually project lower total enrollment for disabled Missourians. Instead, the models employ what they call “PTD shifting,” which is an attempt to get the federal government to pay more for a significant portion of Missouri’s currently disabled enrollees.

In practice, PTD shifting refers to reclassifying currently enrolled disabled Missourians into the newly eligible Medicaid expansion population. Once reclassified, Missouri would be able to receive nine federal dollars for each state tax dollar it spends to cover the “newly eligible” recipients. This is a stark improvement over the state’s current federal match, which is roughly two federal dollars for each dollar Missouri spends. The problem—and it’s a big one—is that purposely classifying those who meet pre-expansion Medicaid eligibility requirements as newly eligible in order to receive additional federal funds is not allowed, and if money is collected under such a scheme it would need to be returned.

Don’t just take my word for it. New York tried PTD shifting, and its Medicaid program was then audited by the federal Office of Inspector General (OIG). Here’s what the OIG concluded:

Beneficiaries Were Disabled – Individuals may not be enrolled in the new adult category if they are otherwise eligible for Medicaid through a mandatory category. For 3 of the 130 sampled beneficiaries, the State agency incorrectly enrolled the individuals in the new adult group despite their case files demonstrating that they were certified as disabled and receiving Social Security disability benefits—a mandatory coverage group for which the standard FMAP rate applied.

There is an argument to be made that individuals who first apply for Medicaid may not know whether they are eligible to qualify for the program using their disability, but the OIG report concludes that it is the state’s responsibility to determine whether they are categorically eligible for Medicaid based on disability (someone who would be currently eligible, and thus only receiving the 2 to 1 federal match) before enrolling someone in Medicaid based on income (which would be someone newly eligible, thus receiving the 9 to 1 match).

Missouri’s Medicaid enrollment for people with disabilities has totaled over 150,000 annually for well over a decade. Models that project savings based on disregarding federal law should be met with extreme skepticism, to say the least.  And once you remove the PTD shifting assumption, the projected savings disappear entirely. Instead of continuing to look for a free lunch, we need to face the harsh truths about the cost of covering thousands more Missourians under Medicaid.

The post Uh Oh: Are Medicaid Expansion Savings Built on False Promises? appeared first on Show-Me Institute.

Advocates for Missouri’s current defined-benefit pension system argue that this type of system, where teachers are promised a generous and guaranteed pension once they retire, is needed because it increases teacher retention. Yet, there is little evidence that this type of system is a cost-effective method for increasing teacher retention. Rather, the example of these superintendents demonstrates how the system pushes out high-quality individuals. It does the same for teachers (teachers and superintendents are in the same pension system). When teachers hit 30 or 31 years, regardless of their quality or their desire to continue teaching, the financial incentive of the pension pushes them out.

Recently, Gov. Parson asked school superintendents to come up with a plan to increase teacher pay. One solution, which I have little hope will ever be recommended by the superintendents, is to change how we compensate teachers. A pension is basically a form of delayed compensation. We require teachers and their districts to contribute 14.5% of their salary to the pension system (the numbers are different in St. Louis City and Kanas City). That’s 29% of a teacher’s salary that is going into a pool that they may have access to if they make it to retirement.

We could give teachers in Missouri a 10% raise next year, with minimal cost to the state, if we just change this system.

Currently, teachers in the Public School Retirement System (PSRS) do not contribute to Social Security. The pension system is their only required retirement savings. In this proposed scenario, the teacher would receive a 10 percent raise on his or her salary. The teacher would begin contributing to Social Security (6.2 percent from the individual and the employer) and would be eligible for Social Security benefits. Additionally, the teacher and his or her employer could contribute a combined 5 percent of salary to a defined-contribution retirement account, such as a 401k or a cash balance plan. Of course, with a smaller raise the teacher could contribute more to retirement. 

There are numerous benefits to this proposal. First, teachers would own their retirement accounts. They would not lose any money if for some reason they do not vest at five years. They could also continue to work past 31 years and their accounts would not lose value. Teachers could also choose to invest more in their account, as many do now in 403b accounts.

The biggest benefit is that teachers would have higher salaries today. If we want to keep our best teachers and superintendents, higher salaries are a much more effective tool than outdated pension systems.

The post We Could Give Teachers a Ten Percent Raise Next Year appeared first on Show-Me Institute.

Dear Missouri teachers and all Missouri citizens:

As a Missouri public-school employee, I don’t pay into Social Security; I pay into the Public School Retirement System (PSRS) pension—to the tune of 13-15% of my salary.

The Missouri pension system for public employees REPLACES Social Security (i.e., I will never get Social Security or my spouse’s SS); that’s why the word “pension” misleads a lot of people.

We don’t get both.

Last month, a Missouri state representative from Nixa, MO, introduced a bill to change the current funding structure for teacher pensions to a defined contribution rather than a defined benefit plan, claiming that taxpayers might need to pay for any shortfalls in future years should the funds not be adequate. THIS IS NOT CORRECT.

Missouri’s PSRS has long been admired nation-wide as one of the MOST SOLVENT pension plans IN THE NATION.

We (teachers) are not the enemy; we are not the problem. Missouri’s financial problems should not be balanced on the backs of teachers who have paid into the system for their entire careers. The Missouri government set the rules. We have followed them. They have not. Now, they want to blame teachers for the State’s money woes, and steal from teachers’ retirement again!

Please call your state reps to support teacher-retirement funding and not changing it!

PLEASE.

Claim 1: “I pay into Public School Retirement System (PSRS) pension— to the tune of 13-15% of my salary.”

MOSTLY TRUE

Since 2012, Missouri teachers have paid 14.5 percent of their salary into the public school retirement system. This is matched by another 14.5 percent from the employer. It rose steeply from around 10 percent in the early 2000s in an effort to address unfunded liabilities (See Figure 3 here).

Claim 2: “The Missouri pension system for public employees REPLACES Social Security (i.e., I will never get Social Security or my spouse’s SS); that’s why the word “pension” misleads a lot of people.”

MIX OF TRUE AND FALSE

Missouri teachers do not pay into Social Security, but they may still be eligible for a benefit. According to the PSRS website, teachers “may qualify for Social Security benefits if you have 40 units (10 years) of Social Security-covered employment. You may also be eligible for benefits from Social Security through your spouse or ex-spouse (living or deceased).”

Claim 3: “Last month, a Missouri state representative from Nixa, MO, introduced a bill to change the current funding structure for teacher pensions to a defined contribution rather than a defined benefit plan…”

FALSE

House Bill 864 does not change the structure of current defined-benefit pension system for anyone in the system. In fact, it sets the current PSRS system as the default option for all incoming teachers. It would simply allow teachers the option of choosing a defined-contribution (DC) plan if they want to. Teachers who opt into the DC plan could chose to contribute between 3 and 50 percent of their salary into their own individual retirement account. The school district would be required to contribute 5 percent. If teachers wanted to stay with their traditional plan, they could. HB 864 would just give them more options.

This is a very important point that is worth repeating. The current bill, which has not even been referred to a committee and has virtually no chance of passing, would not change anything for anyone unless the individual teacher chose to opt into the DC plan. (To find out why some teachers might choose a DC plan, click here.) Florida has a DC option and roughly a quarter of teachers choose this plan.

Claim 4: “Missouri’s PSRS has long been admired nation-wide as one of the MOST SOLVENT pension plans IN THE NATION.”

MIX OF TRUE AND FALSE

Yes, it is true that PSRS is rated as one of the best funded pension systems in the nation. According to PSRS, PSRS was 84 percent funded as of June 30, 2018. This amounts to over $7.4 billion in unfunded liabilities. According to an analysis by Rebecca Sielman, an actuary at Milliman, this puts PSRS in the top quarter in terms of funded ratios among the 100 largest U.S. pension plans. This fact, however, says more about the sad state of other systems.

It should be noted that these comparisons are slightly suspect as they are based on plan reporting, and plans use very different assumptions. In determining that PSRS is 84 percent funded, the plan uses a high assumed discount rate of 7.75 percent to calculate liabilities. The median discount rate was 7.5 percent. That difference may not sound like much, but when you are talking about compound interest on billions of dollars, it adds up quickly. As Sielman writes, “A relatively small change in the discount rate can have a significant impact on the Total Pension Liability.”    

In an analysis for the Show-Me Institute, economist Andrew Biggs shows that if PSRS used a Corporate Bond Yield rate of 4.26 percent, the plan would be 52 percent funded and would have over $27.7 billion in unfunded liabilities.

It’s important to understand that not all of the money that is contributed to a teacher’s pension actually ends up funding the pension. Teachers contribute 14.5 percent of their pay into the pension, and their employer adds an equivalent amount, so the amount that goes into the pension is equal to 29 percent of the teacher’s salary. Only 17.44 percent is required, according to plan actuaries, to pay for the teacher’s retirement benefits. This means nearly two-fifths of the contributions are used to pay for unfunded liabilities (see p. 106 here).

Claim 5: “Missouri’s financial problems should not be balanced on the backs of teachers who have paid into the system for their entire careers. The Missouri government set the rules. We have followed them. They have not. Now, they want to blame teachers for the State’s money woes, and steal from teachers’ retirement again!”

COMPLETE NONSENSE

Ok there isn’t really a claim here, but there is a completely nonsensical assertion that this bill would somehow take money away. A version of this myth has been repeated numerous times—they want to take our pension money to pay for roads is a popular one. This bill (and every other pension reform bill that I have ever seen in Missouri) would not touch teacher contributions to the system. There is absolutely no mechanism for the state to take that money.

CONCLUSION

Teachers who spread viral posts with completely inaccurate information do not reflect well on their profession. Why are you trying to scare your colleagues? And have you thought of the unintended consequences?

My advice, teacher to teacher, is the next time you see a viral post like the one above and feel compelled to do something, consider this: read the actual bill, think critically, and do not blindly share hyperbolic posts filled with factual errors.

The post Viral Facebook Post about Missouri Teacher Pension Bill Is Filled with Falsehoods appeared first on Show-Me Institute.

According to a 2017 asset/liability analysis commissioned by KCPSRS, the system only has enough money in the bank to pay 64 percent of what it owes to current and future retirees. We’ve written about this problem before, but it’s worth repeating. The fund needs to earn at least 5 percent per year, every year, for the next 20 years, or they’ll be out of money. That’s right—no money left in the fund. (For reference, between 1998 and 2018 the annualized Dow-Jones Industrial Average inflation-adjusted return was 5.528 percent.) Not surprisingly, the KCPSRS has requested increases to the school contribution rate over the next few years from the state legislature. So, Kansas City Public Schools and Kansas City charter schools will have to take another chunk of their revenue out of the classroom to send to KCPSRS.

STLPSRS was also just 64 percent funded (see p. 11) in 2016 and has almost as many retirees as active teachers. An annual analysis by actuaries determines how much SLPS and the St. Louis charter schools have to contribute to the fund each year. However, difficulty keeping up with increasing costs led SLPS to request that the state legislature cap their contribution rate at 16 percent, and they did. Unfortunately, STLPSRS looked at how that cap would affect the fund and determined that it would leave them with a $192 million shortfall within 15 years, so they’re suing SLPS and the St. Louis charter schools.

Economic conditions, unaffordable benefit promises, and an unwillingness to use realistic investment return assumptions have resulted in shaky fund positions, lawsuits, and balancing the books on the back of the youngest workers. What’s worse is that in 2017, the average pension payment took about $1,200 per student out of the classroom.

Does it have to be this way? No. We’re actually seeing teacher retirement benefit innovation from within public education. In 19 states, charter schools may choose to participate in their state’s pension plans or not. A recent analysis of charter school participation in five states found that the schools most likely to opt out of the state plan are urban schools, elementary schools, and those that are managed by charter networks. And new schools in high-cost states like California are much less likely to join than they were just five years ago.

Most of the opt-out charter schools offer their teachers 401k or 403b plans in which the teachers are vested in less than one year. The reasons given for choosing this path include wanting to lower their estimated costs, giving teachers a wider range of investment options, and making their benefits more portable.

For today’s youngest teachers, this is an important point. Most of them will not meet a vesting period of ten years in one state, which means they will lose the amount that their employer contributed for them. Even if they stay, Missouri teachers have to work for 26 years before their contributions are higher than their expected benefit. When you take nearly 10 percent off the top of a teacher’s salary, plus another 6 percent for Social Security, you have to wonder why anyone would want to be a public school teacher in Kansas City or St. Louis.

The post Innovation Brings Hope for Teacher Pensions appeared first on Show-Me Institute.

As the authors of the KCPSRS analysis suggest, “long-term pension fund success is based on all three levers working together.” Those levers are contributions, benefit design, and investment design. As we’ve noted before, the plan is already shifting to riskier assets in an attempt to secure higher rates of return on investments. The system will likely keep the benefits design the same. So, what could they change in order to shore up the system? There is only one lever remaining: contributions.

Currently, teachers and their employers each pay 9 percent into the system for a total of 18 percent. An additional 12.4 percent is put into Social Security. The authors of the KCPSRS analyses suggest the system may need to increase contribution rates if they want to avoid insolvency. They project what the impact would be of increasing the contribution rate to 22 or 26 percent. Of course, increasing contributions will help the financial health of the system. It will also cost teachers.

Keep in mind that the contribution rate was set by the legislature at just 15 percent from 1999 to 2012. The legislature allowed for fluctuation in the contribution rate, but capped the maximum amount at 18%. In other words, increasing the contribution rate to the 22 or 26 percent highlighted in the KCPSRS report would not only require an act of the legislature, but possibly an act of a higher power. It is an increase that may be unprecedented in Missouri pension history.

Increasing contributions but not benefits means that employees of the future will get significantly less benefit from the pension system than their predecessors. They will, in effect, be paying for the benefits of the past.

The real question is how much are employees willing to pay for the same or a reduced benefit? Teachers today may be willing to put their 9% into the system, but would they be willing to put 11%? How about 13%? At what point do teachers decide they would rather have their contributions in a defined-contribution account, rather than an account that goes to pay for someone else’s benefits? 

The post How Much Are Kansas City Teachers Willing to Pay for their Pension? appeared first on Show-Me Institute.

Last November, the Cooperating School Districts of Greater St. Louis pitched the idea of providing high-quality teachers as instructional coaches in struggling schools. A similar idea was raised by CEE-Trust, the consulting firm that the Missouri Department of Elementary and Secondary Education hired to address problems in the Kansas City School District. The CEE-Trust proposal called on accredited school districts “to play a significant role in helping [unaccredited] systems improve.” The St. Louis Post-Dispatch heaped praise on this idea, calling it among the “more promising ideas.”

However, there is one easily overlooked obstacle standing in the way of turning this localized version of a teacher peace corps into a reality in our two biggest cities: the incompatibility of different pension systems.

The suburban districts are a part of the Public School Retirement System (PSRS), as are all other school districts throughout Missouri – with the exception of Saint Louis and Kansas City, which have autonomous pension systems. If a teacher moves from PSRS to one of the city plans, he or she will incur a significant loss in pension wealth.

This is not a new problem, but a longstanding one. Saint Louis and Kansas City have been struggling with this for years. Research by University of Missouri economists has demonstrated that the separate pension systems create a barrier to recruiting school leaders into the two urban school districts. The separate pension systems also limit the pool of teachers who are willing to work in the cities. Jeffrey Kuntze, chief operating officer of the Confluence Charter Schools in Saint Louis, says “the separate pension systems make it extremely difficult for us to recruit veteran teachers from the county. We can get them when they retire, but not mid-career.”

These pension boundaries are not a problem for Normandy and Riverview Gardens, which are in PSRS, but they would make it practically impossible for high-performing school districts to operate a program, run a school, or loan teachers within the Saint Louis or Kansas City boundaries. They simply could not move teachers or school leaders across pension boundaries without making them suffer great financial penalties.

There is no easy way to solve this problem. Some have suggested we move Saint Louis and Kansas City into PSRS. This sounds like a good idea but is practically impossible because of Social Security. City teachers pay into it while PSRS teachers do not. Schools in Saint Louis and Kansas City cannot withdraw from Social Security. In effect, we have a Hotel California problem — urban schools can check out any time they like, but they can never leave Social Security.

The only real solution is to close the current systems to new entrants and place them in a new, statewide system that participates in Social Security. Before this idea causes mass hysteria, let me stress that this would not affect current employees’ or retirees’ pensions. They would remain secure in their current system. It would, however, remove the artificial pension boundaries and allow us to create a better pension system for teachers and students.

Opponents of this idea claim that closing the current defined benefit systems would be financially unsound, as it would lead to considerable “transition costs” that would far outstrip any benefits that we may receive. This is the very issue tackled in a recent Show-Me Institute policy study by Andrew Biggs, a resident scholar at the American Enterprise Institute. Biggs examines the evidence for “transition costs” and concludes that the concerns are “largely mistaken and should not stand in the way of public employee pension reforms.”

Whether you believe busing teachers into failing schools is a viable solution or just another feel-good proposition, fixing this pension problem should be a top priority. Missouri should not have a system that puts our neediest communities at a disadvantage when it comes to recruiting talented teachers.

James V. Shuls, Ph.D., is the director of education policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Want Better Teachers In High-Need Schools? Fix Pensions appeared first on Show-Me Institute.

The time for enrolling in health exchanges is now upon us. Recent polls show that the majority of Americans continue to disapprove of the health care law — the Affordable Care Act, commonly referred to as Obamacare — enacted in 2010. But how many of us really understand what we can expect and what we will pay for this “affordable” health program? The simple fact is that most of us are just plain bewildered, not knowing how the controversial law will affect us.

A September 2013 USA Today/Pew survey provides some evidence on this. Of those surveyed, only one-quarter believed that they had a very good understanding of what the law’s impact would be on them and their family. When asked what the impact of the law would be on them in the future, over 40 percent thought it would have a mostly negative effect. Only one-in four thought it would have a positive effect.

How the law affects us is becoming clearer, sort of.  The Kaiser Health News reported that Obamacare affects treatment choice for many patients in eastern Missouri. This is because policies offered by Anthem BlueCross BlueShield, made available through Missouri’s online insurance marketplace, would not include Barnes-Jewish Hospital, or St. Louis Children’s Hospital. As reported in this newspaper, subsequent reporting revealed that BJC Healthcare will be part of another insurer, Conventry. Even with that mystery solved, just which services will or will not be covered under the new plan remains uncertain.

There also are broader negative economic affects that will arise from implementing the new law. What are the tax consequences that the average individual will face? How will these tax changes affect decisions to work?

Answering such questions is the purpose of a recent study by University of Chicago economist Casey Mulligan. (Read Mulligan’s New York Times article, “Health care inflation and the arithmetic of labor taxes“) The basis for his research is the observed fact that policies that raise taxes on your income reduce your incentive to work more. You may need to work to pay the bills, but your incentive to work a second job or someone in your household to take on a part-time work is reduced at a higher tax rate. The after-tax income may simply not be enough to induce you to work.

Mulligan’s study finds that implementing Obamacare will create significant implicit and explicit tax increases that negatively affect the decision to work for many individuals. One avenue for these higher taxes is through employer tax penalties. It also comes through higher taxes on individuals. Mulligan estimates that, on net, “all provisions combined raise marginal tax rates in 2015 by 10 percentage points of total compensation” for about half of the nonelderly adult population.

In other words, under Obamacare a large portion of the working population will experience a significant increase in their effective tax rate. And this increase comes on top of existing tax rates. The disincentive to work is larger under Obamacare than currently exists.

Mulligan’s analysis explores the labor market effects of Obamacare by considering the new, higher implicit tax on full-time work. That is, many individuals currently working full time would find it economically advantageous to shift to part-time, given the provisions of the law. “Some middle-class workers,” Mulligan writes, “will find that they can work substantially less [fewer hours] without losing any disposable income.” That is not a recipe for improving prospects for greater economic growth.

Obamacare will disrupt markets for medical care, forcing individuals to choose hospitals and doctors that they would not have chosen otherwise. Obamacare also will create substantial negative incentives for many individuals to work.

As an increased proportion of the population moves into retirement, this puts increased pressure on government social programs such as Social Security, Medicare, and now health care.

The tax increases under Obamacare will reduce the labor force as people opt out of working by retiring or they chose to work fewer hours.  Either way, the growth of output slows and with it income.

Since income funds Social Security and Medicare and now Obamacare, to fund these programs at existing levels — and with even more individuals enrolled in retirement programs — it puts strains on those still working, which is a shrinking proportion of the population.

Unless you cut back on existing programs (coverage, services, etc.) and/or raise taxes on those employed, there simply is not enough inflow of funds in out years to pay for all of these programs at current levels of coverage.

The disincentives created by the Affordable Care Act decrease the likelihood that the economic growth will rebound any time soon.

Rik Hafer is a distinguished research professor in the Department of Economics and Finance at Southern Illinois University Edwardsville and a scholar at the Show-Me Institute.

The post Obamacare: Less Choice, Higher Taxes, Slower Economic Growth appeared first on Show-Me Institute.

He poses the problem that Social Security and Medicare costs continue to grow as we live longer. In 1935, life expectancy was 59.9 years old for a man and 63.9 for a woman. More than 75 years later, life expectancy has grown to 76.2 and 81.1 for men and women, respectively.

So what is McClellan’s tongue-in-cheek solution? The government should stop encouraging healthy behavior and just let everyone do what they want. If people want to smoke themselves to death, eat themselves to death, drink themselves to death . . . so be it. “If somebody wants to opt for enjoyment over longevity, the government ought to leave that person alone,” McClellan wrote.

While McClellan’s overall tone is a bit morbid, he has a point. What should the government’s role be in our lives regarding our personal health choices? My natural reaction is to want all the people in my life to make healthy choices. Heck, I am a personal trainer. I spend a few hours every week educating people about healthy choices. But I am no Michael Bloomberg — I respect people’s choices and do not believe in forcing behavior that I want. The government should not have the right to do this either.

The post Should The Government Force Longevity? appeared first on Show-Me Institute.

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This is the five-minute version of a speech by Brian Riedl, lead budget analyst for the Heritage Foundation. In this talk, Brian Riedl shows that federal spending is expanding at an unprecedented rate and is scheduled to increase in the future. The result will be remarkably higher taxes for future generations of Americans. The cause? Expensive entitlement programs such as Social Security, Medicare, and Medicaid. The solution? Making politically difficult decisions that may hurt some people in the short term, even as they help expand the economy and increase societal wealth in the long term. Brian Riedl says that the alternative to acting soon could be economic catastrophe.

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