-OR-
2. Social Security payments come in to the SSA; what is not needed to pay current retirees is used to purchase special treasury securities which go into the trust fund; the cash goes to the Treasury where, as part of the General Fund, they disguise the true size of the Federal annual deficit. Should there come a time when current social security receipts cannot cover current social security disbursements, the SSA will redeem securities from its trust fund to make up the difference; the Treasury, which is obligated by law to redeem the special SSA securities on demand, must either give cash from the General Fund to the SSA to cover the principal and interest of the securities or, if there is not enough cash in the general fund, float government debt to cover the difference.
If (1) is true, then Obama was lying about not making payments to seniors on Aug. 3.
If (2) is true, and SS truly is a pay-as-you-go system, then SS will consume an ever larger portion of the federal budget as baby boomers retire, driving out all discretionary spending (especially defense), or taxes will have to go up dramatically in the absence of Congress taking steps to rein in SS and other "entitlements".
So which is it?
Is there a Freeeper out there with direct knowledge of the system?
Is there some 3rd way that I've overlooked?
Thanks!
a dishonest and usually illegal business in which many people are persuaded to invest their money and the money of later investors is used to pay the people who invested first —called also (US) Ponzi scheme
2, except that they also have the option of printing money, and at some point, the IOUs run out so that there will not be enough money to pay the benefits unless they either increase taxes or keep printing money even though they are not redeeming the IOUs.
LBJ raided the trust fund to pay for his WAR, promising to py it back, which never happened. It is my understanding that the Social Security money collected is still dumped into the General Fund, making it in effect pay as you go.
do a search on “Panzi Scheme”
The correct answer is: DOOR NUMBER 2!! Social security entitlements must be cut to bring the deficit down. It’s unlikely they will be cut for current beneficiaries, although the inflation component will be reduced or eliminated. For other Americans, especially those not yet 50 years old, it’s likely that the retirement age will be raised by at least several years, and benefits may also be cut. We can’t afford it anymore.
“So which is it? “
Easy question. It’s pay as you go now, and future revenue will not even come close to paying.
We’re broke...but who cares, we’ll just print our way out of it.
Ask yourself this: Why would they say SS couldn't be paid during this whole debt ceiling debate? That's your answer right there, in plain sight.
If there was a trust fund, it would not have been an issue, or at least an immeidate issue along with everything else that was supposedly not going to get paid.
It doesn't and it's not.
I believe the Supreme Court ruled that SS is akin to a pay as you go system, much like welfare. My memory suggests this ruling came in the late 1950s or early 1960s. Your number 2 is apparently the best of the two choices given my understanding.
Look up “Ponzi Scheme”. The short and nasty is that the federal government has spent ALL of the SS contributions ever collected. There is no money in the “trust fund”. Just a bunch of IOU’s that you and I have to pay. The Treasury relies on tax money collected (SS and other taxes) last month to pay this month’s bills.
Depends on how you look at it. All the excess money that was collected via the SS payroll tax has been spent via the the general fund by congress. They replaced that money with IOU’s. Of course congress does not have the money to pay it back.
But don’t forget that the SS tax is still being collected. So new money is still coming in. My understanding is that at this time it is pretty close to enough to pay current obligations. But the line has been crossed now where it is not quite enough. Since there is a surge in people retiring, and a reduction in employed people...Then It will very soon go very upside down. At that time the SS fund should have been able to rely on “Saved” money to make up the difference until something like 2037. But as I said that money has already been stolen and spent. So the only way congress can replace it is to borrow more on the national debt. Then that debt becomes all of our debt for which we pay interest besides. So we pay for social security twice because of what congress has done.
If we had not raised the debt ceiling then we still could have payed almost all of social security at this time via the SS tax from pay checks. That is of course, unless congress and treasury continued to steal that money for the general fund. And therefore made a direct choice not to use that money to pay current social security benefits.
I hope that helps.
Due to the extreme poverty of the elderly, and lack of jobs, the original approach was discarded, and switch was to make it a pay-go system. Envisioned to be like a continually flowing pipeline. The system has been adjusted many times since first established with respect to benefits, contributions, and retirement age to name a few.
The system has been pay-go for a long time, and the extra has been invested in special issue US government non-negotiable bonds, backed by the full faith and credit of the US government. Paying of Social Security is Mandatory, so Obama could not legally prevent the checks from going out.
The trust fund owns an asset, and the government has the debt. Hence part of the National Debt figure includes the debt owed to the social security trust fund. These bonds by law can not be used for anything else.
General fund issues-Initially Social Security could be described as an off-balance sheet item. During the LBJ administration, this changed to be included in reporting the financial position of the USA. Of course while it's running a surplus, it helps to make the government financials look better with respect to the budget.
LBJ inherited Vietnam from Kennedy, but what he really wanted was to initiate his war on poverty. He was also determined that he would not be the President that would go down in history as losing a war to a lesser adversary. Kinda like Bush. A War and new government programs to pay for.
The fund went in the red earlier than expected, one factor being the large number of unemployed reducing the current receipts. Current estimates are that the fund will last till around 2037 or 2038. If nothing is done, then all retirees will take an immediate benefit cut of almost 25%.
Currently income subject to social security tax is capped at about $106 thousand. Wages above this amount are not included when calculating the benefit. I think I read that Obama favors eliminating the cap entirely.
This would increase immediate extra cash for the system, but would also include a higher benefit for these higher income people. Of course, if they had to pay on the wage, but the benefit was not increased, it would help even more.
Converting to a private system would put more strain on the system and cause more debt during any transition period, and the USA can not afford it at the present time. It could have been done during the Clinton Admin.
Social Security fix is easy compared to Health Care. Just raise the retirement age to reflect that people are living longer. Raise the cap on income. Maybe raise the payroll tax by 1% shared equally between worker and employee. Some change to reduce Cola might also figure in. Some combination of these things.
What is really hard, and what is really pointing to long-term insolvency is health care. Funds stripped from Medicare, rising health care cost, additional Obamacare costs, demographics(baby-boomers)are all converging to create a perfect storm.
Obama refuses to delay or change any of his health-care program. Pelozi and Reid won't allow anything to impact either current medicare medicaid or the new spending. Republicans won't raise taxes. The system is deadlocked until the election, unless someone gives.
The most the commission will be able to do most likely is find the additional $2 trillion cuts. No long-term solution till after the election, if the control of the senate, and the presidency flips to Republicans. Since they did not distinguish themselves last time, it is not clear that the will to implement long-term solutions exits.
Most of the people on social security are not OLD PEOPLE....
You got millions of quasi-disabled.. and pseudo-disabled.. and others not disabled at all..
Additional info. The labor unions and liberals originally opposed this program. It was corporate republicans who helped the administration, many from insurance companies.