A New Argument For Using General Revenues To Augment The Trust Funds

     From the Center for Retirement Research at Boston College:

... The fact that in 2033 Social Security would be able to pay only 77 percent of scheduled benefits should focus our collective minds.  ... [I]f the cost of currently scheduled benefits simply exceeds what today’s workers are paying into the system, the traditional proposals to reduce benefits or raise payroll taxes would be most relevant.  

However, the cause of the shortfall lies elsewhere.  Specifically, the program’s “pay-as-you-go” financing – with the exception of the recent build-up and spend-down of the current modest trust fund – makes the program look expensive.  This financing approach is the result of a policy decision in the late 1930s to pay benefits far in excess of contributions for the early cohorts of workers.  The decision essentially gave away the trust fund that would have accumulated and, importantly, gave away the interest on those contributions.  The “Missing Trust Fund” provides a strong justification for an infusion of general revenues into the program.  ...