Preliminary damage estimates by the Congressional Budget Office aren't pretty. Projected Social Security surpluses over the next decade have all but disappeared. Next year's operating surplus, previously estimated at $86 billion, is now $3 billion. Ten years of cumulative surpluses, once seen at about $703 billion, are now projected at $83 billion. ...Each year that the U.S. government fails to address its massive retirement and health care obligations raises the prospects of it defaulting on its debts, inflating its way out of them, or imposing punitive taxes to pay them off — any of which would cause greater misery than the changes needed to stabilize the system. A commitment to shore up Social Security would serve as a clarion statement that the U.S. economy is a sound long-term investment. ...
For all the talk about "trust funds," Social Security essentially operates on a cash-in, cash-out basis. And once the amount being paid out in benefits exceeds the amount coming in — now expected in 2017 — the government will have to borrow billions of dollars to cover the difference. ...
Preserving Social Security for the long term isn't that complicated. It can be done by gradually raising the retirement age for able-bodied workers, curbing growth in benefits and making high-income workers pay more payroll taxes. The longer a solution is delayed, the more painful it will become.
Update: USA Today also published another editorial with the title "Hands Off Social Security" offering an opposing viewpoint, although it does not mention raising or eliminating the ceiling on FICA.
The article was correct when it said the government would have to borrow, but it wasn't clear:
ReplyDeleteNow, the Social Security program has excess income that the government can use to finance non-Soc Sec spending. The government "borrows" that money from Soc Sec instead of borrowing it from the public.
But in ten years or so, that will reverse: the government will have to borrow from the public to pay the Soc Sec trust funds (either interest on their bonds or, eventually, the principal) so Soc Sec can pay the benefits due that year.
These estimates by CBO are not the estimates that matter. The annual Trustees Report, which should be out later this month, will give us the real figures.
ReplyDeleteBTW, you might want to know that the CBO chart you link to does not say what you seem to think. You link to a comment that the Trust Funds will experience a negative cash-flow in 2017. Actually, the CBO table shows the opposite. It shows continued annual surpluses throughout the period of the table, out past 2019.
The 2017 date is from last year's Trustees Report, and we will have to wait to see what the 2009 report will do to this figure.
The "trust fund" is a farce, a sham. It is an accounting ploy used by the government.
ReplyDeleteSure, the money exists on paper, but in actuality it is gone. To get the money back into the trust fund, either cuts need to be made to the general budget, or we will have to borrow the money. Which do you think is more likely?
Again mr hall your brillance shine through.High income earners,especially celebrities(ie actors,actresses,singers,rappers)should be taxed heavily.
ReplyDelete"Again mr hall your brillance shine through.High income earners,especially celebrities(ie actors,actresses,singers,rappers)should be taxed heavily."
ReplyDeleteA lot of small business owners fall in there too, so let’s tax people that might create jobs. Yep your brilliance shines through that hole in your head.
We all have to pay FICA taxes on our earnings. The idea that high income wage earnings pay FICA on all their earnings like the rest of us do rather than get a special exemption is simple fairness.
ReplyDeleteSo, are you also going to increase the amount that these high income earners can receive upon retirement or is this just going to be another income-redistribution program?
ReplyDeleteSocial Security was designed to be an income redistribution from the beginning. Income was to be redistributed from those working to those who were retired. The formula has been slanted toward the lower income worker for decades. People at the lowest earnings levels may get back as much as 90% of what they earned. The aim, at least at one time, was that the average earner would receive a benefit equal to about 42% of his/her average lifetime earnings.
ReplyDeleteRight, so if you lift the maximum taxable, there is no added benefit to those paying the additional tax. Just more socialism.
ReplyDelete"We all have to pay FICA taxes on our earnings. The idea that high income wage earnings pay FICA on all their earnings like the rest of us do rather than get a special exemption is simple fairness."
ReplyDeleteOK then to be fair the income tax should be flat as the FICA tax is. Everyone pays the same percentage tax on income.
NO! Social Security was designed to be an INSURANCE program against outliving you means. It BECAME and INCORPORATED an income redistribution element. When it was created, at the very first, there actually WERE personal accounts. This quickly changed, however, within a few years.
ReplyDelete"When it was created, at the very first, there actually WERE personal accounts. This quickly changed, however, within a few years."
ReplyDeleteThis is incorrect. There never were anything remotely like personal accounts in Social Security. You can examine the full text of the 1935 Social Security Act here: http://www.ssa.gov/history/35actinx.html
By all means, please let us all know which provision of the Act created "personal accounts."
Post-12: You are correct, what I meant to say was that it was fully funded at first (in my rush to post, I got my thoughts confused). It was always an insurance program, which includes the requisite transfer of funds between individuals. Need more sleep!
ReplyDeleteNOT A SINGLE STATEMENT above regarding the SS Trust Funds--note that there is more than one--and the status of payroll tax revenues coming into Treasury is correct. Rather than try y'all's patience and my own, I suggest you look at an excellent blog, Angry Bear, put out by knowledgeable people in academia for a correct explanation of how it all works.
ReplyDeleteI warn you, it is tediously complicated and not really amenable to simplification. However, here's an amazing science fact for starters. Employees' FICA taxes are submitted to IRS and then sent to Treasury. Immediately upon receipt, *ALL* incoming revenues are converted to special series Treasury bonds (real bonds, not IOU's) just like the ones we give to the UAE, the Saudi Royal family, China, etc. All payroll revenues are then mingled with general revenues (income and other federal taxes) and used to pay for ordinary government operating expenses. The SS Trust Fund earns interest which is credited to the TF's twice a year. Etc after tedious etc. So, the disappearance of "the Social Security surplus" is a myth. The Trust Funds jointly contain about $2.5 trillion US. So, the article reprinted here is false and misleading. Period.
Oh, just for the record, I've seen the Trust Fund. Beautifully printed, engraved, and so on, those indebentures the real thing. It's alive and well and wants you all to know that reports of its death are greatly exaggerated. Ta Ta For Now. NO
Yeah, a 2.5 trillion dollar trust fund full of worthless paper. Congress spends all the money the money, so they depend upon future taxes to fund current benefits. A trust fund that cannot be immediately converted is worthless.
ReplyDeleteWhat a joke.
"Immediately upon receipt, *ALL* incoming revenues are converted to special series Treasury bonds (real bonds, not IOU's) just like the ones we give to the UAE, the Saudi Royal family, China, etc."
ReplyDeleteWhat are "real" bonds but IOUs. I give the government my money and they promise to give me my money back plus interest. There is no pile of money sitting in some vault to repay those bonds. Just like the government has been doing with all the stimulus and bailout BS it will be made out of thin air and printed.