Following is a recent comment on this blog. It reflects the views of many (older) Americans and it’s just wrong‼️
“I haven’t seen anyone comment on the fact that the Democrats, under L.B.J.’s Great Society, stole trillions from the Social Security trust fund and left nothing but unpaid IOU’s for our money. If that money had been left to grow, the average S.S. check would be 20-30% higher with no problems about insolvency. Is anyone here stupid enough to not see that those trillions did just one thing?”
The Social Security Trust Fund has three basic sources of income; payroll taxes, interest paid on treasury bonds purchased by the Trust and a portion of the income tax paid on Social Security benefits by some beneficiaries. [the other portion goes to the Medicare hospital insurance trust] When the payroll tax was temporarily reduced during the recession an amount equal to that loss was paid to the trust from general revenue [no doubt adding to federal debt].
Those IOUs frequently talked about are the bonds held by the Trust. Bonds were purchased as an investment when payroll taxes exceeded what was needed to pay benefits. They are similar to the IOUs you hold if you ever bought a US Savings bond and to the other bonds and notes issued by the government that are held by pension funds, individual investors and foreign governments. They are all backed by the full faith and credit of the United States of America.
“If that money had been left to grow.” Does anyone know what that means? The money always grew by the interest paid on the bonds and if it weren’t for those bond interest payments full benefits would not be paid today without cashing in bonds. How else could the money grow? Should it have been placed in the stock market, invested in real estate or mortgage-backed securities? Glib statements such as those made above are uninformed and foolish.
The reason the Trust Fund is headed for trouble is simple, fewer workers are paying payroll taxes relative to the number of Americans collecting benefits and who are collecting benefits for a longer period of time. In other words, the taxes needed to fund Social Security are inadequate for today’s demographics and the benefits offered by Social Security.
If there were no other consequences, the solution is simple, just raise the payroll tax as noted by the Trustees. But there are consequences; on working Americans and on the economy so that simple solution is not so simple. There are also consequences when those bonds are redeemed to pay benefits, the federal debt will increase.
QUINNSCOMMENTARY 
If Social Security isn’t real then why not put all that money they took out of our paychecks for years, back in our pockets. So, in reality what has happened is that the Government has stolen money that we had to automatically take from our checks with no choice and they stole it from our pockets. Why doesn’t someone address this issue and demand repayment of money owed to the US people with interest who were forced to pay in if you got a paycheck from a company. We weren’t asked if we wanted to contribute we were forced to have it withdrawn from our checks. Now they won’t even give us a raise when they owe monies to the SS program, and they use to calculate our COLA’s by the 3rd quarter rather than a fair amount. What about all that interest that would have accrued had the $’s not been taken out of the fund and used for special projects? It is an unfair no win situation when it comes to having our concerns heard We have literally been victims of thief’s with no option to recover our money. I am totally appalled as to how this system works. We paid in, we should be able to be given OUR money that accrued interest over the years, rather than telling us that SS has no $’s in it. We are struggling to make ends meet, because we have more service people to pay for things in earlier years we could do ourselves which we can’t do now, so our costs are high even though differently used than younger people, we still have the same if not more expenses with our inability to do the things we used to do for ourselves. Where is the government’s conscience to us – I guess they have none!!!
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A major factor missing from the post is the point that a significant percentage of wages formerly within the SS wage base and on which taxes have been paid have been removed. If those funds had remained the concern would be much less. This is the skewing of wages to high earners in recent decades. Above the wage limit they are not taxed. So the entire wage base may be the same or even greater but less of it is subject to the social security tax now than in the past due to wage inequality increasing over time.
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That’s only partially true. To make the system solvent for 75 years (based on 2010 data) would require eliminating the taxable wage cap only for taxes, but leaving it for the benefit calculation thereby effectively turn SS into another welfare program. Here is what the Congressional Research Service said in 2010.
“CRS estimated the potential impact of eliminating the taxable wage base on future benefits and taxes. If the base were removed in 2013, CRS estimates that by 2035, 21% of beneficiaries would have paid some additional payroll taxes over the course of their lifetimes. However, the average change in taxes and benefits would be small. Looking only at individuals who would pay any additional taxes over the course of their lifetimes, at the median, total lifetime tax payments would rise by 3% and benefits would increase by 2% relative to current law. In general, those in the highest income groups would have the largest changes in both tax payments and in benefits relative to current law.
Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range deficit in the Social Security Trust Funds. For example, if the maximum taxable earnings amount had been raised in 2005 from $90,000 to $150,000—roughly the level needed to cover 90% of all earnings—it would have eliminated roughly 40% of the long-range shortfall in Social Security. If all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the Social Security Trust Funds would remain solvent for the next 75 years. However, having different bases for contributions and benefits would weaken the traditional link between the taxes workers pay into the system and the benefits they receive.”
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I appreciate those words T-O, and will try harder in the future to disagree without being disagreeable.
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See Dick…Vinnie makes his point and even takes a swipe at one of my, I think, postings BUT he does so in a GENTLEMANLY fashion stating his opinion without calling anybody names. I do question his expertise to call any opinion that disagrees with his “nonsense” but that is his opinion and he is entitled to it especially since he doesn’t even name names in his critique and he may just be using the word “nonsense” it to emphasize his point.
You are a gentleman VR and, though we disagree on this subject, you have my respect, so far on, how you have chosen to disagree.
“See ya ’round Vinnie” or should I say “TTYL”
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Thanks for this succinct explanation Dick. Yes, the problem is a simple one and can be understood easily: too little coming in, too much going out. A contributor to this blog not long ago mentioned “the contract” which is supposed to have been agreed upon by the government and the citizen regarding social security, to the effect that current recipients of social security are owed current benefits under the conditions that applied for the past forty years, ie,, No changes allowed. More nonsense.
As you stated, demographics do not allow the current system to continue as it is currently designed.
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