Tuesday, October 22, 2013

Social Security is a trust, not a debt

Eugene : OR : USA | Oct 22, 2013 at 7:07 AM PDT

Acting Commissioner of Social Security Carolyn Colvin talks about Social Security and Medicare in Washington

 The Social Security Trust Fund is a simple thing. It is not a national debt. It is not in financial jeopardy. It’s a program with a $2.7 trillion surplus that has nothing to do with our budget deficit or the debt ceiling. Anyone who tries to link government debt with Social Security is either badly informed or a liar.

Since 1935, the Social Security Trust Fund has been a promise kept between the American government and citizens who pay into the fund through a payroll tax. For the next 25 years, that promise can be kept in full. But according to projections by the Social Security Administration, unless something changes, starting in 2039 the fund will only be able to pay out 76 percent of the monthly benefit levels it has promised to pay.
Borrowing money to fund the trust is not an option. Unlike other federal government operations, SSA directors don’t have the authority to borrow any amount in order to keep paying full benefits after 2038.

That $2.7 trillion surplus? It doesn’t just sit in some vault gathering interest; most of it has been loaned out by making transfers into the general fund, our national checking account that the federal government uses to pay its bills. When those transfers get paid back into the SSI fund along with interest, it’s the interest payments that add to our national debt.

One simple thing could fix the future of Social Security, and we can choose from several different options. A payroll tax increase of 2 percent would make the SSA accountants happy for the next 75 years. Tax increases are rather unpopular these days and would be a hardship for many employers, but we’re in luck – there’s an even simpler fix that also brings fairness and equality to funding our national safety net for senior citizens.
For reasons that make no sense at all, the government stops collecting the SSI payroll tax at $110,000. Any earnings above that arbitrary limit go untaxed. Raising that limit on taxable income would keep the trust fully funded for the rest of the 21st Century, but removing it altogether would be the fair thing to do.

Taxing all levels of income would ensure that benefits could increase along with the cost of living. It might even allow for benefit levels to be increased right away, or allow the retirement age to return to 65 instead of 67 as it is now.
Alternatives to either of those choices do exist. One would be to reduce benefits right now by 13 percent. A few legislators, several prominent pundits and some members of the billionaire club are pushing a different proposal that would reduce benefits only to future recipients. Both of those options are completely unnecessary, they don’t benefit anyone except a small percentage of workers who are already highly paid, and they require breaking a 78-year-old promise to the American middle class.

Medicare is a different program with different problems. Although the Medicare program is popular and efficient, with administrative costs much lower than for-profit insurance companies, 75 percent of its cost is paid from that national checking account as part of the federal budget.
Cutting Medicare costs would help balance the annual budget. Cutting Social Security benefits won’t add even one dollar to the Treasury or reduce the national debt by even one dollar. As another artificial fiscal cliff looms before us, as clouds of political rhetoric start to thicken before the next budget showdown or debt ceiling crisis, watch out for the politicians, personalities and pundits who try to lump Social Security into the short-term debt problem facing the country. Anyone who does is willfully ignorant, mentally lazy or simply lying. They should be voted of office, fired from their jobs and generally ignored.


No comments:

Post a Comment

Anyone have any thoughts about this?


Related Posts Plugin for WordPress, Blogger...