Social Security question - for someone who really knows.

[Eric J in MN]

Since we went into deficit spending, does that mean that no new money is being added to the Social Security fund because our Social Security payments are going to pay for other things instead?

[Worst Username Ever]

1. Yes in fact it has been that way for a very long time.

Social security has not been funded with cash for decades. It is funded with Treasury Bills. Don't think about that too hard, it will make your braing hurt. The US is funding its SSI funds with IOUs, which will eventually have to be cashed to pay SSI benefits... but there is minimal cash in the fund, so where is this coming from? Some poor sap is going to be dealing with a MASSIVE tax hike.

That was one of the aspects of Gore's "Social Security Lock Box," that SSI money would actually go to SSI, and not other causes.

[Kanary]

3. I doubt "some poor sap is going to be dealing with a

MASSIVE tax hike"

Much easier to send all the SSI recipients quietly to the showers.

And, no, it won't be safer under Kerry.

Kanary

[Yupster]

18. The Lock Box was nonsense

Whether you put the IOU in a drawer or in the lock box, what difference does it make if there isn't any money set aside to pay it?

If Gore said to take the surplus money and invest it in bank cd's or insurance fixed accounts, then it would actually exist somewhere, but that's not what he proposed.

His proposal was rhetorical nonsense.

[SoCalDem]

2. In a word....yes..

But it;s always been that way.. Assume that $200 is sent in , and grannie's check is 100...the other 100 was always used to buy airplanes, give to cronies, etc..

We boomers had our rates boosted waaaay back in the 80's so that there would be SOOOOO much extra money, that by the time we retired, there would be plenty..Ha.. They just spent it as fast as they could, and now that we are nearing the end of the 5K, we are told it's a 10 K and we have to run blindfolded, and barefoot...on broken glass.:(

[H2O Man]

4. These two answers.....

are right on target.

[sangh0]

5. There really isn't any "Social Security fund"

and deficit spending doesn't add and subtract money from it, even if it did exist.

Basically, SS is a "pay as you go" policy. The people who are recieving SS checks now are getting the money from people who are working now. People who work, pay into SS, and the people who are retired take money out of SS. The difference in the amount taken and the amount deposited into SS is the SS surplus/deficit, which is NOT the same as the budget deficit.

Right now, SS takes in more than it pays out. IOW, SS is in a surplus position. The excess money is lent to the govt to help pay for programs, and the govt gives the SS "trust fund" a note (an instrument of debt, which basically says "We'll pay you back later") which can be redeemed at a later date. IOW, the budget deficit is actually much larger than what they tell you it is. The budget deficit would be much larger if it weren't for the loans from SS. Our SS surplus is masking the size of the real budget deficit.

[Big Blue Marble]

6. No money is currently going into the Social Security Fund or as it was

known at one time "the lock box." All monies collected from FICA taxes are either distributed to SS recipients or loaned to the Federal Government General Fund. The Social Security Fund receives only an I.O.U. Unfortunately, this process masks the true cost of any year's annual deficit. As all cash inflows including SS taxes are subtracted from all cash outflows to determine the deficit. Congress and the administration hides behind these numbers every year. Without the billions of SS $'s, our deficits are really significantly more scary.

[CaTeacher]

7. no--our Social Security payments are not going to "other things"

they are going to support the requirements of the older generation. The current recipients are getting everything they paid in as well as much of what we pay in.

The American Institute of Certified Public Accountants published a nonpartisan white paper about Social Security. It you're interested, visit the Institute's web site at www.aicpa.org

Here is the most useful information--if Congress does nothing--absolutely nothing--to save Social Security the best studies (AICPA) show that the trust fund will run out of money in roughly 40 years. This means that, if nothing is done, at that point benefits will have to be cut back to 75 percent of the amounts they pay today. For example, where today someone might get $1000 per month, in the future they may instead get $750. Where today someone might get $400, in the future they may get $300.

While this isn't quite the financial meltdown that some people think, it does mean that by the time the 30-something and 40-something crowd reaches retirement, Social Security coverage almost certainly will be scaled back.

[Big Blue Marble]

8. The "trust" fund is not being funded.

These studies assume that the money that the Fed Gov has borrowed will be paid back to the trust fund. This repayment must come from other borrowers or from taxpayers.

As an aside, I do believe the best way to resolve this SS crisis is to extend retirement age.
When SS legislation was passed in the thirties. life expectancy was around 65. Now it is around 80. As we live longer, barring disabilities, we need to work longer. (Assuming, of course, we have jobs available!)

[CaTeacher]

9. Yes--that is one of the proposed solutions,

it has been estimated that if the retirement age is raised by only 3 years, the crisis will be averted.

[PsN2Wind]

10. Easy to say

if you are an office worker. Go out on the construction sites and sell that to the block layers, cement finishers, roofers, hod carriers, etc.

[CaTeacher]

12. heeey wait a minute---

I did not say that I was in agreement with that particular "proposed solution" all I said was "yes--that is one of the proposed solutions".

I am not trying to sell anything to anyone.

I am just providing some information as I recently researched this topic myself.

I would just advise people--go read the nonpartisan report--and think about it. There are several ways to attack this problem (but it IS a problem)

Information and education are our weapons.

[Big Blue Marble]

14. We may have to sell it to them. It may be the only long-term solution

to this conundrum. Remember, SS was never intended to be the sole retirement funding
during retirement. And the option should always be there to retire early as it is now with
a discounted benefit. Also consider for those whose physical labor brings disabilities that prevent them from working until retirement age, there will be disability income to supplement. We are living longer and we are healthier than those who went before us.
That is a fact. It may mean we must contribute more before we can rest. To do otherwise,
puts an onerous burden on our children and grandchildren.

[CaTeacher]

15. I agree with you. The system is definitely in trouble, and

this is the simplest solution. But no solution is going to be workable for everyone. It is very difficult.

[Yupster]

23. It will have to be done eventually

Whern the average person lives to be 125, we can't have people retiring at 65. That will happen some day.

[PsN2Wind]

16. I propose a solution

lets make all income subject to FICA tax whatever the source. Capital gains, interest, a gift from your rich daddy, whatever. Increase the cutoff for the tax. How about a surtax on those imports of goods that used to be manufactured in this country but the factories have been shipped to Mexico, Indonesia, China etc. How about we put everyone in the same pot, federal, state, military, teachers, congress, senate, presidents, they can ALL start drawing at the same age. Na, too simple, just go tell some laborer that if he takes care of himself he shouldn't have any problems lifting those 100# lugs of asphalt at age 70.

[Yupster]

24. Agree plus one more idea

Take the government workers and teachers who are allowed to not be in social security (12 states) and put them back in the system with the rest of us. That would bring tremendous relief also.

[AirAmFan]

11. You are wrong. In the real world, excess FICA cash flow DOES go to other

federal expenditures. But there is an official fiction that the money is being "invested" in a non-existent Trust Fund. There is no dedicated Social Security Trust fund, just a cabinet full of IOUs for trillions of dollars in "investments" of positive FICA cash flow plus interest earned but not actually paid..

Read the press release on the Annual Report of the Social Security Trustees, at http://www.ssa.gov/pressoffice/pr/trustee04-pr.htm

"Income to the combined Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds amounted to $632 billion in 2003.

The Trust Funds paid benefits of more than $470 billion in calendar year 2003. There were 47 million beneficiaries at the end of the calendar year.

Total expenditures from the combined OASDI Trust Funds amounted to $479 billion in 2003.

The assets of the combined OASDI Trust Funds increased by $153 billion in 2003 to a total of $1.5 trillion....

The 2004 Trustees Report is posted at http://www.socialsecurity.gov/OACT/TR/TR04/ "

In other words, FICA took in $632 billion in 2003, but only $479 billion was used for benefit payments and administrative expenses. The other $153 billion in positive cash flow was "lent" to the Treasury.

According to the latest estimates, there will be a smaller and smaller positive FICA cash flow until 2018, when benefit obligations will start to exceed FICA revenues. What will happen then is a matter of controversy.

To feel confident that Social Security is sound, you have to believe that the White House and Congress of 2018 and beyond will honor the trillions of dollars in "Trust Fund" IOUs that will have been accumulated since the 1930s. You have to trust future leadership in Washington to slash other budget items, raise taxes, and borrow from the public to fill a huge budget hole created by the retirement of the Baby Boom generation.

Bill Clinton had a plan to create an ACTUAL, dedicated Social Security Trust fund much like public employee pension funds in California, Wisconsin and other states. But the Republican Congress deep sixed it as "socialism".

[Yupster]

20. That study assumes the government will make good

the billions it currently owes to the system, which is great except for the fact that the money has already been spent on missiles and things, and therfore ain't there.

If I loan my cousin my $ 250,000 retirement account, and he gives me an IOU, and then takes it to Vegas and bets it on red, and loses it, it's nice that I have his IOU, and it's nice that my projections show that as long as my cousin pays me back, my retirement will be comfortable.

Only problem is that my cousin is not going to pay back that IOU. The money is gone. Spent on other things long ago.

Still, I guess it makes me feel better having that IOU.

[lastknowngood]

13. Not only that but all the money put in has gone missing as well

welcome to republithink.

[Yupster]

26. What money put in?

Put in where?

Social security premiums go right into the general fund and are spent just like any other tax dollars.

There is no "there" for FICA money to be put into.

[Curious Dave]

17. A Dirty Little Secret...

about social security is how is serves as a subsidy for the rich. It works like this...

Earnings above $87,900 (IIRC, but since I've never made close to this much I can't be sure without looking it up) are exempt from withholding for Social Security. So, a person making $87,900 a year would have 6.2% of his earnings withheld for Social Security, or $5450 ($10,900 if they're self employed). A person making $200,000,000 a year will also have withheld for Social Security $5450 per year because the amount above $87,900 is exempt from Social Security taxes.

As has already been mentioned, the government uses the Social Security surplus as general revenue... in other words it gets treated like any other tax dollar (but does get replaced by that IOU from the treasury, FWTW).

So, when the dust has all settled what has happened. The poor and middle class were taxed on every dime they earn to fund social security and general spending, while the rich were taxed on just a percentage (and the richer they are the lower the percentage) of their income to do the same thing.

Doesn't seem very fair to me...

[sadiesworld]

19. And they give the surplus away to fat cats in the form of income tax

refunds and the rest of us will get longer careers and/or reduced benefits. Doesn't sound very fair to me either. :(

Welcome to DU (belatedly) :hi:

I always like a poster who will bitch w/ me about the the SS theft!

[Curious Dave]

22. Thanks for the Welcome

:)

and since I'm self employed I feel entitled to bitch twice as loud about this subject!

[Yupster]

25. However, due to the social security

system's bendpoints, a person who made an average of 100,000 per year put in four times as much as a person who made an average of 20,000 per year. You may think that's not fair because he should have put in five times as much.

However the benefit the rich guy gets out of the system will only be twice as much as the poor guy, even though he put in four times as much.

The formula is very progressive in its mathematics.

[Yupster]

21. There is no social security fund

Never has been a dollar in it. At it's best, it has had IOU's which it's anyone's guess how they would ever be paid back.