No money was taken out of the SSTF and that is not the reason that SS (and Medicare) is going broke.
Here is how SS works. It is a pay as you go system. Revenue is collected thru the payroll tax, benefits paid, and any "surplus" that is left over is placed in the General Fund. The Treasury issues interest bearing, non-market T-bills in the amount of the surplus and puts them into the SSTF, which was established in 1939.
SS is going broke because of an aging population that is living longer, fewer workers per retiree, and a system of benefits that increases without connection to revenue collected. The last time the OASDI rate was raised was 1990. 10,000 people a day are retiring and will continue to do so until 2030. By 2030 one in five Americans will be 65 or older, twice what it is today. In 1950, there were 16 workers for every retiree; today there are 3.3; and by 2030 there will be two.
SS is in the red now, i.e., it is paying out more than it is taking in. This requires cashing in the T-bills in the SSTF to pay for the shortfall. The General Fund must come up with the money to redeem them. SS will go permanently in the red in 2016 and the SSTF runs out of T-bills in 2036. The HI trust fund (Medicare Part A) has been cashing in its T-bills since 2008 and will exhaust them in 2024.
But an even bigger problem exists with Medicare Parts B and D. By law, 75% of the expenditures for these programs come from the General Fund with only 25% of the costs coming from premiums. The combined expenditures on Medicare Parts B and D now exceed the costs of Medicare Part A. As a result, the impact on the non-entitlement part of the budget grows year by year. Currently, Medicare claims about 11 percent of federal nonentitlement tax dollars. By 2020, Medicare deficits will claim one in every five federal tax dollars that are not already dedicated to Medicare and Social Security.
SS and Medicare are unsustainable as currently structured. They must be changed. We can't afford them. The Trust Funds are accounting conventions, but they are not the reason these Ponzi schemes are going broke.
Here we go again.
Money was TOO taken out of the SS trust fund. Further, the money was never put in there. Husband’s 401K plan invested the money, didn’t spend it, and it grew to great amounts. Us boobs out here in la-la land understand this.
The gubmint disallows folks taking other people’s money that they invested in good faith and spending it on their own needs. They did not even obey their own laws.
But move on....maybe someday you’ll convince somebody.
I must suppose in the end we all agree that it’s a problem.
Please note that the new feature “Sunday Morning Bray” is not written by me, it is written by.... Bray...
Please address your replies to him, thanks.
To all: When addressing the Sunday Morning Bray simply change to To box from “Alas Babylon!” to “bray”.
By the way, I agree with you. Especially the last sentence!
Thanks Kabar,
I understand that the demographics have changed over the years.
I understand that the Fed pays interest to the TF at what are probably current short term rates.
My question to you is: Does the Fed calculate the “time value of money” in these payments”?
In other words, $1.00 today isn’t the same as $1.00 in 1960 when it was paid in, even with compounded interest.
Your posts are great, and I look forward to your response.
WW