Social Security Ameirca

[CaptHaddock]

Some posters are well informed and know how the SS system works. Some obviously know nothing about the system. Here it is in a nutshell;

The SS system was designed to be pay as you go. The current cost to taxpayers is 6.2 percent with their employer matching that amount. The total becomes 12.4 percent. There is and has always been a surplus and that surplus became VERY HUGE. Congress passed laws to enable them to borrow from the SS trust fund.

A large part of the national debt is owed to the SS trust fund. The federal government has been sucking funds out of SS for the past fifteen years. For the government to suggest that Social Security is broke is one of the biggest lies they have ever come up with. The government has never paid back any of the money. They didn't have to because there is and has always been a surplus. That surplus will become negative within the next 5 years or so.

If Social Security benefits are cut, those politicians making the cuts should go to jail. They had better find some way to start paying some of that money back. The SS trust fund was designed to act as a savings account in case of hard times. There should have been a massive amount of money in the fund but the politicians simply couldn't stand to see that much money available, especially money they thought they would never need to pay back. According to the accountants, there is still 2.5 TRILLION dollars in the SS trust fund. That will keep the system solvent until around 2042 unless the politicians steal some more of it. Yes, the SS system will indeed be broke (not self sustaining) soon. Times are hard and it's time to use some funds from the SS trust fund savings account.

This is not quite correct. SS was designed to be pay-as-you-go until the reforms of the Greenspan Commission in 1983 on whose recommendations Congress voted to increase the payroll tax to build up a trust fund, for the first time. The purpose of the SS Trust Fund is to pay for the retirements of the baby boomer generation which is larger than the older and younger cohorts. The increased payroll tax, which is now 12.4% counting both employer and employee portions (but not reflecting the current temporary reduction), has produced a surplus every year since 1983. The plan was to build up the Trust Fund while the boomer cohort was still working and then draw it down when they retire. Congress and the SSA faced the question of what to do with the surplus until it is needed for payouts. The only prudent choice was to buy Treasury Bonds. So, the SS Trust Fund, which is now at about $2.4 trillion holds its assets in US Treasury Bonds, regarded by the bond market as the safest bonds in the world.

As the boomer cohort starts to retire the Trust Fund, as planned, will go from increasing to spending down. Last year, for the first time, payroll tax receipts alone were not sufficient to make the SS payouts. However, it was not yet necessary to draw down the Trust Fund to make up the shortfall, since the interest payments made by the US Treasury on the Treasury Bonds held in the Trust Fund were sufficient. Eventually, the interest received on the Treasury Bonds will not be sufficient to make up the shortfall as the boomers progress from contributors to recipients. At that point the draw down of the Trust Fund assets will begin. It is currently estimated that the Trust Fund will be depleted, as planned, by 2037. At that point unless a reform is made, SS will revert to a completely pay-as-you-go mode, as it was from 1935 until 1983. If no reform is made the SSA, using payroll tax receipts alone, will be able to make 75% of planned payments, which are scheduled to be higher than current payments even after adjusting for inflation.

So, it is not correct to say the SSA is or will be broke, i.e. unable to make any payments. It is true that the Trust Fund will eventually be exhausted, but that in itself is neither a crisis nor a surprise, except to the uninformed.