>>If they are growing, we are probably taxing the people too much (surpluses) and if they are declining, then we are not taxing them enough to support the program. <<
I agree with the second half of your statement, but not the necessarily the first. In the early years after establishment of any retirement system, income must exceed outgo, or the fund will never be solvent. You have to build funds so that there is something to cash out when people finally reach retirement age.
Starting it the way they started the SS system, by letting people utilize it almost immediately, meant that income had to exceed outgo by a substantial amount, because those who retired after making just a few payments would be getting someone else’s money, rather than their own, in retirement.
I do think the retirement trust funds serve a purpose, because they serve as a measure of the general health of the system, and their direction provides clues as to whether adjustments have to be made sooner rather than later.
If they were to become line items in the budget, there would be far less of a constraint on politicians who would be inclined to raise payouts to buy more votes. You would completely sever the link between taxes paid in and benefits paid out.
I provided you with the CBO description of the Trust Funds. The problem is that the way they currently operate, they don't contain real assets, just promises to pay. There is a reason why the SSTF is included in the $14.3 trillion national debt under "Intragovernmental Holdings."
If anyone in the private sector tried to run such a pension scheme, they would be put in jail.
Starting it the way they started the SS system, by letting people utilize it almost immediately, meant that income had to exceed outgo by a substantial amount, because those who retired after making just a few payments would be getting someone else’s money, rather than their own, in retirement.
The numbers were far different then both in terms of workers to retirees and the percentage of the population over 65. It was the epitome of a Ponzi scheme. Take a look at the tax rates in 1937, i.e., just 1% of salary each for employee and employer up to a salary cap of $3,000.
In 1937, 42 workers paid 2% in payroll tax to support every retiree. In 1950, 16 workers paid 3% in tax for each retiree. Today around 3.3 workers pay 12.4%. By 2030 there will be just two workers for every retiree. I wonder how much they will have to pay to support the program.
If they were to become line items in the budget, there would be far less of a constraint on politicians who would be inclined to raise payouts to buy more votes. You would completely sever the link between taxes paid in and benefits paid out.
It would actually be more of a constaint on the politicians, especially now when the systems are in the red. The systems would no longer be on automatic pilot. There is no direct link between taxes paid in and benefits received. We haven't raised the SS tax since 1990. We have COLA increases that are not linked to revenue.
The politicians loved the SSTF because they used it as a cash cow when revenue exceeded outgo. It is a way of raising taxes on most of the population. There is an incentive to create a "surplus," which you can use to spend on something else and deposit an IOU into a trust fund that really inceases the national debt. It is easier to borrow from ourselves than from the sale of real T-bills.