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  • Can You Call it 'Social Security' if it's Built on Nothing but Monopoly Money?

    Social Security faces the serious danger of failing to live up to its name due to its unfunded obligations. Last week, the Social Security and Medicare trustees issued their report on the fiscal outlook for the program. We reported that:

    Social Security has a $7.9 trillion shortfall (up $0.1 trillion from last year), which means the program would require $7.9 trillion in cash—today!—to afford its promises. Alternatively, closing that gap would require payroll taxes to rise immediately and permanently from 12.4 percent of earnings to 14.24 percent. For a worker earning $50,000, that’s a $920 tax increase.

    This year, Social Security ran its first deficits since 1983. Though the program will rebound back into the black for the next few years (assuming the Administration’s projections for economic recovery are correct), the program will dive into the red permanently in 2015. By 2037, the trust fund will run dry. That means that while there is enough money to pay current retirees full benefits, younger workers face an uncertain future.

    But Heritage expert David John explains that by 2015, “Social Security will require large and growing amounts of general revenue money in order to pay all of its promised benefits. Even though this money will technically come from cashing in the special issue bonds in the trust fund, the money to repay those bonds will come from other tax collections or borrowing.”

    Writing for The Washington Post, Allan Sloan refers to the trust fund as “one of the world’s biggest piles of funny money.” Writes Sloan:

    Let’s say I begin taking Social Security when I hit the full retirement age of 66 later this year. Because its tax revenue is below its expenses, Social Security would have to cash in about $3,400 of its trust-fund Treasurys each month to get the money to pay my wife and me. The Treasury, in turn, would have to borrow $3,400 from investors to get the money to pay Social Security. The bottom line is that the government has to borrow money to pay me, regardless of how big the trust fund is.

    Instead of holding onto seniors’ savings to pay for later benefits, the trust fund consists of little more than IOUs. Last year, the trustees included this in their report:

    Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.

    Sloan puts this in layman’s terms: “The trust fund is of no economic value.”

    There’s no time to kill to solve Social Security’s impending shortfall. For younger workers, the program must be fixed now in order to put the “security” back in Social Security.

    Posted in Economics [slideshow_deploy]

    19 Responses to Can You Call it 'Social Security' if it's Built on Nothing but Monopoly Money?

    1. Jackson Pearson says:

      The SS trust was doing just fine until the government put their grubby paws on it. It all started with the Johnson administration eyeing that big pile of money, and had to transfer it from the lockbox, to the general fund…WHY? Then along came Jimmy Carter generously gave away SS welfare monies to newly arrived immigrants that never paid a dime into it. Next William Jefferson Clinton broke Roosevelt's promise to never tax SS, by taxing it. Even today, congress borrowed over 4 trillion from SS, and do not intend on paying it back. Social Security has become one big democrat lie, and place to steal taxpayer earned funds for social engineering.

    2. UPSET, ARIZONA says:

      The idea of raising the tax or age or anything else is criminal. This fund has been robbed by our crooked congress. This money should have never been put into the general fund and benefits are given to people who never paid a penny into it. If any changes are made to SS then every state, local and federal pension funded by the taxpayers should have to wait as long as SS receptiants have to wait. All congressional pensions should be eliminated since the money has been stolen from the social security fund.

    3. Hayduke, Colorado says:

      Social Security is a Ponzi Scheme. The government would procecute any private investment company that used the same methods. Other than that, SS is way beyond the power vested in the Federal Government.

    4. DeeBee9, Dallas says:

      What isn't generally recognized is that the use of Trust Fund money for funding government deficits is a triple whammy on higher income folk. First, if you earn at the top end of the SocSec limit (around $100K), you already are getting hosed because you get far less in SocSec benefits per dollar than people at the lower end — it has become increasingly "progressive" over the years. Second, SocSec taxes are paid using "after-tax" dollars, so because you're in the higher tax brackets you have to use much more of your income to pay those taxes. Third, since the money has all been spent and will have to be made up from "general funds", people who are in the top brackets will have to pay much more to make up for the missing money. A big triple whammy on hard work! That's what we need, more penalties for working hard!

    5. Paul says:

      As much as I hate to say it, if Social Security goes broke it will be the collective failure of every adult American just about. Blaming politicians only goes so far we are the ones who keep electing them, and believing their tripe about trust funds. We've collectively earned what we sowed.

    6. rjsgso, N.C. says:

      The wording of the Social Security Act of 1935 directs all SS taxes collected to the general fund. It's always been that way. The Treasury Secretary is supposed to appropriate funds needed to pay out SocSec checks. The rest is up for grabs. There is a statement about putting excess funds into a trust, but it's carefully worded so that "excess funds" are not sufficiently defined so as to create any kind of mandate.

      So, in reality, SocSec has been an enormous cash cow for congress to use. It's only now, as payouts start to overtake revenue from SS taxes, that they're wanting to rethink the program. The sad reality is that it's just another tax for the general fund. It was designed that way.

    7. Nataya, New York says:

      Social Security is NOT broke, NOT going broke, does NOT add to the federal deficit, DOES pay for itself, is NOT part of the federal budget, and IS the most successful social program in the history of the world.

      http://tinyurl.com/2esv6px

    8. Nataya, New York says:

      There is a lot of misinformation being spread around by those who would like to destroy Social Security; do NOT believe their swill.

      It would be a good idea to do some research before drawing conclusions.

      "Medicare Gets New Lease On Life; Social Security Remains Healthy" – read it at: http://tinyurl.com/237c972

      and

      "FDR's Grandson Debunks 'Mythology of Fear' About Social Security" — read it and see the videos at: http://tinyurl.com/2esv6px

    9. Brad, Detroit, MI says:

      Nataya,

      The credibility of your link is sketchy at best when you rely on "facts" from Paul Krugman. He is an Obama schill and wouldn't know the truth if it smacked him across the face.

      Not sure if this article ever mentions that Social Security is broke. The plain truth is that the amount of money that I and other tax payers are paying into the system currently is not enough to cover the obligations of those that are living off of it right now. And when, SS is making money – Congress acts like a drunken sailor and spends it -instead of putting it into the rainy day fund, because we all know that in 20 to 30 years, SS will run permanent deficits.

      Kind regards,

      Brad

    10. Jeff, Boston says:

      Social Security has been a scam since the day of its inception. The only difference today is that it's becoming more obvious. Hayduke from Colorado is 100% correct.

      Oh, and Nataya, I recommend a rudimentary economics course.

    11. Lloyd Scallan (New O says:

      "Assuming this Administration's projections are correct". Is that some kind of sic joke? When has any "projection" from this administration been correct? How many times must you be lied to and deceived before you realize Obama DOES NOT TELL THE TRUTH. He "cooks the books" with the help of his lackeys in the left-wing media. He is betting he can destroy our entire economical system before the American people wake up.

    12. Cathy says:

      Nataya,

      What have you been smoking?

    13. Nataya, New York says:

      Since you won't permit my second post to be shown here, I have to conclude you are reluctant to allow any information regarding the solvency of Social Security; maybe you just don't want people to be informed of the facts.

    14. Nataya, New York says:

      "Cathy"

      Do you do any independent research, or do you just like to remain un-informed while you spout off?

    15. Norm Klevens says:

      Facts are stubborn and some will believe what their emotions point to and not reality. And then when reality actually touches down, they point their fingers at the same people who they derided previously. The same politicians who dismissed the debate Bush tried to bring forward are among those who are denying the present situation. [Mr. Bush was too singularly minded on two wars; some would say for good reason and could have approached the issue better] Over time the stock market does just fine, except when unreasonable and negative policies are implemented from the white house. It is at a high from Sept 2008. President Barack Obama is regulating and interfering with business cycles. However the stock market is just one investment path, but when Bush brought it up, no alternatives were discussed by either party. Its the same old song; "until it hits me, I do not care" [And this site is dignified; its not MSNBC where one can use caps and swear at people they disagree with.]

    16. Toady, NY says:

      Social Security is demographically unsustainable. It needs to be phased out. According to the census site, the over 65 demographic is the group with the largest net worth and the lowest rates of poverty. It is ridiculous to force the young to support a demographic that is wealthier than they.

      If the Chileans can privatize their system, so can we. Encourage people to save for their old age instead of depending on the government teat.

    17. Nataya, New York says:

      From the first days of Social Security, it has been the goal of right-wingers to destroy the program. I should have known that no one at a Heritage Foundation site would be interested in facts regarding Social Security.

    18. Drew Page, IL says:

      Heritage, wake up. Like so many others, you say that Social Security has "unfunded" obligations. While I'm sure that is true today, it wasn't always the case. Had those running the U.S. government not stolen Social Security funding, allegedly kept in a "lock box" for the exclusive purpose of paying out S.S. benefits, it would not be in the financial straits it finds itself in today.

      The article talks about IOUs, as worthless now as they were the day they were written. If I worked in a bank, helped myself to cash therein and left an IOU saying my grandchildren will pay back such-and-such an amount, I'd be in jail. Why haven't those who authorized robbing the S.S. fund been jailed??? I would be satisfied just to know who the authorizing party was that ok'd the robbery, how much was taken and what it was really spent on.

      Now I read how our tax dollars are being spent by Mr. Obama's administration. $400 billion to Hamas? Last I heard, the State Department still considered Hamas a "terrorist" organization (if we are still permitted to use that word). I have read we made this "investment" to clear the way for our State Department to begin negotiations with the "moderates" within Hamas. The moderates??
      What's next, a few million good will dollars to open negotiations with the National Man-Boy Love Assn (NMBLA), so we can negotiate with the "moderate" child molesters and deviants??

    19. Greg Clements, Round says:

      Nataya,

      It is only you who is not interested in facts, and the point that you cite anything from Paul Krugman as fact while disregarding the real facts being presented to you here means you wouldn't even know a fact if you saw it. The cash shortfalls are being reported by the very trustees of the program. Are you implying that they are nothing but "right wingers trying to destroy the system." You have no credibility…

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