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That is true if the rich and the powerful aren’t able to steal it and the US government doesn’t default!

Social Security is the most successful social program ever invented.  It requires less than two percent overhead expenses.  It covers millions of people besides retirees.  And it is secure financially, under present circumstances, until about 2035 with a surplus until then!   Any other US government programs like that?

Let’s be sure we understand how it works.  It is an insurance plan. Workers pay into Social Security as soon as they start working.  It is a pay-as- you-go plan with the expenses being paid out from the income from the contributors. No National Budget money is involved.  It is self supporting.  Excess income is deposited in the Social Security Trust Fund which is estimated to fund the current programs at the current programmed level past 2035.  Nothing is certain in this crazy world but the guarantees for Social Security are about the best there are.

What could go wrong?  The Social Security trust fund which is drawing moderate interest rates is being borrowed by the federal government to pay expenses that are part of the national budget.  Social Security is not part of the national budget and is officially and legally OFF BUDGET!  You wouldn’t know it by what the government and certain private parties are saying but it is true.  As you know, it is a separate item on the deductions of pay checks and those deduction monies don’t go into the general fund which comprises the so called, national budget.   When the federal government borrows from the Social Security trust fund it puts interest bearing treasury certificates of equal value to the loans into the Social Security trust fund.  Just as when the government borrows from a US citizen by selling treasury certificates of various denominations it borrows from the Social Security trust fund in the same way.  Treasury certificates are backed by the full faith and credit of the United States government and are regarded as the most secure assets in the world, at this time.

Let’s make sure we understand that Social Security has nothing to do with any financial difficulties that the federal government has other than the obligation of the federal government to honor the treasury certificates that it has deposited in the Social Security trust fund when it borrowed from the surplus there.

What happens if the income for Social Security becomes less than the expenses?  This is presently estimated to take place in about 2017.  At that point the trust fund will start “selling” its treasury notes to the federal government  to make up for the short fall.  This will continue until the trust fund is completely gone.  At that point the promised benefits will be cut back to about  70+ percent of present pay out.  You can see that Social Security will never GO BROKE!  In the 1980s contribution limits were increased to insure solvency and they topped out this year at about $107,000 of income per person.  Raising that ceiling, cutting benefits across the board or raising the age at which time  people could start drawing from Social Security would be options on how to keep the trust fund solvent into perpetuity.

One significant fact.  Illegal immigrants subsidize Social Security because they must pay into the system but never receive benefits.

Social Security is under constant attack by the rich and the powerful.  The trillions of dollars in the trust fund and the income from workers provide a mouth watering amount of money for the “investor class” to salivate over.  They point out, correctly, that it is just an insurance program which is compulsory so why shouldn’t it or at least part of it by open to private ”free” enterprise?  They suggest that they could make more money for the workers by investing that money in more “lucrative” places. They would be glad to handle the Social Security money for “a fee”.  They don’t mention the low overhead of the present system.  They also try to tie Social Security to the budget deficit by pointing out the enormous amount of money that is part of the payout system at Social Security.  Never mind that the money is already “stock piled” (in a “lockbox”)in the Social Security trust fund so the liabilities are really not liabilities at all.  They are loans from one government agency to another.

There is also the argument that there will be too few workers in the future to pay into the trust fund to sustain it for four more decades for all the “baby boomers” who are going to retire.   That is already “baked into” the current statistics.   But note that productivity is a more important factor than the number of workers alone.  Even if there are fewer workers if they are more productive it doesn’t matter.  Workers today are more productive by far than those in the past.  (Not that the workers have not seen their incomes increase in proportion to the increase in their productivity rather recently!)  Also note that the “baby boomers” are usually classified as such by being born from 1946 to 1964.  Do the math.  How old will the “early boomers” be when the trust fund runs out of assets?  Almost ALL of them will dead in 2035!

Additional notes:

Due to the current “great recession” there are fewer people working and less money coming into the Social Security program.  More money is being paid out at this time than there is revenue coming in.  This is being made up for from interest on the treasury certificates in the trust fund or the redeeming of the certificates themselves.  Not sure how that is being managed.  This is the worry that congress will have to provide for those two liabilities as long as there is more out-go than income during this time.  That could add to the deficit for the federal government national budget.  Could the government refuse to honor its obligation of the borrowing?  Anything is possible when congress is in session!  It is a worry.  There are great risks in doing so however.

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Filed under: Senator Patty Murray

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