Removing the SS cap and not paying interest on Trust Fund bonds

[Kaleva]

According to some estimates I've seen dated 2008, removing the SS cap would generate approx. 120 billion a year (estimates vary a few billion depending on the source). As 94% of working Americans make less then the current cap, removing same will affect only 6% of workers. The US govt. will pay about 116 billion this year in interest on the money it has taken from the Social Security Trust Fund. This payment on interest will rise to slightly over 160 billion a year in less then ten years.

Social Security shows it will run a 72 billion surplus this year but that includes the 116 billion interest payment. Without the interest, SS will pay out about 49 billion more then it takes in. The Trust Fund is about 2.4 trillion.

What I propose is to convert the special bonds the Trust Fund holds to non-interest bearing bonds. Along with that, the cap on SS tax be removed. What this will do is save the govt. some 1.25 to 1.5 trillion over the next ten years by not paying interest and removing the cap will keep SS revenue in the black until about 2021 by which then money in the Trust Fund will have to be drawn upon to make up the shortfall. By my very rough calculations, adopting this proposal will not change the projected lifespan of the Trust Fund and reserves will still run out by about 2036. However, saving over a 100 billion a year is a step in the right direction in helping to reduce the deficit and thus the projected national debt. .

One can also look upon removing the cap as a defacto tax increase on the most well off 6% of the working population.