Social Security, like similar systems in Europe, is on a trajectory to insolvency, which could lead to a sovereign debt crisis.
The reason for the crisis? Social Security has always been a pay-as-we-go system, dependent on many workers paying in to a system that sends their contributions to a smaller number of retirees. When the number of retirees expands above the ability of workers to cover at established rates, the system goes broke. Meanwhile, all the system’s budget overages from the beginning to the present date have not been saved and invested. Congress has been taking the overages and spending them, putting IOUs in a notebook.
It is a serious problem.
Or, it isn’t! That is, not if you believe The Nation, which states in a recent article that this is all the result of a legally mandated “bogus” accounting conceit. The Congressional Budget Office, you see,
assumes that Social Security and Medicare Part A will draw on the general fund of the US Treasury to cover benefit shortfalls following the depletion of their trust funds, which at the current rate will occur in 2034.
That would obviously lead to an exploding debt, but it’s a scenario prohibited by law.
The Nation’s somewhat confused author suggests the dire warnings are wrong because “Congress could preemptively pass laws to avert the situation before the deadline; it could take the approach favored by progressives and increase revenue to the programs by lifting the payroll tax cap, or alternatively raise the retirement age and lower benefits.”
Well, yes. But until a fix happens, the doomsday warning stands.
Why does he think we make the warning?
This is Common Sense. I’m Paul Jacob.
5 replies on “Assuming the Fix”
Isn’t that the same Social Security whose funds Bill Clinton rolled into the general fund in order to make his budget deficit look artificially good. Seems that if the Social Security funds can be rolled into covering general ecpenses,b that it would be just as reasonable to have general funds roll back.
And how come the food stamps program or the welfare program is never viewed as being insolvent? There’s no money for those either, and nobody paid money INTO those first with the idea that the government would hold their money in trust.
Social Security being called insolvent means exactly what you propose. Instead of as most people believe that there is a trust fund there with money waiting to be paid out to retirees, we will instead need to pull funds from the general fund. This means either raising taxes, reducing social security benefits or reducing spending elsewhere in the budget. Thus, in reference to the idea that Social Security is a self funded program that doesn’t rely on general taxes, it is insolvent. We don’t claim that status for food stamps or welfare because they were never understood to be “self funded” programs that didn’t rely on the general fund.
.… Social Security has always been a pay-as-we-go system .…
TRANSLATION: “social ‘security’ ” — born of the traitor, Roosevelt’s, effectively-Soviet-agent-owned, operated and controlled“new deal” — “administration — has always been the world’s biggest-ever Ponzi scam.
Less freight both ways to DC and the Mob’s (DNC’s) usual, usurious, rate of demurrage, whilst there.
.… a legally mandated “bogus” accounting conceit .…
TRANSLATION: Reality.
I’m confused. Are not Soc Sec benefits today exceeding the FICA collections? So, are we not already drawing down the trust fund? Is not the trust just a collection of gov bonds, aka IOUs?
So, are those bonds not being redeemed, already, out of the general funds, to pay annual benefits? Or perhaps the Fed buys them for newly created cash, to pay to shortfall in collections?
And finally, won’t, someday, the FED just pay the whole bill with newly created cash? What, me worry?