Social Security
I have been hearing that Social Security is going broke my whole life. I think most Americans hear it, know it, but think we have time to address it “later”. I have known since I joined the workforce about 20 years ago that Social Security has problems, so that is at least 5 presidential terms…both sides of the aisle. What I didn’t know or understand was the magnitude. I, like most Americans thought that when the Baby Boomers retired, they would use up the whole trust fund. If only that were the case…the situation would be so much better than it is now.
This is the way it works. The “Trust Fund” isn’t part of the budget, it is one of those “off-Budget” items. (For details see the OASI Trust Fund Data.)
Let’s start with the 2008 numbers for Social Security:
- Receipts: $695 billion ($589 billion from taxes, $105 billion from interest)
- Outlays: $516 billion
- Surplus: $179 billion
When you pay your Social Security tax that money is supposed to go into a trust fund that will then assist you late in your life. Looking at the 2008 numbers above you can see that even that late there was still a surplus that should have been going into the Social Security Trust Fund.
First tricky part… The surplus cash collected for the Social Security Trust Fund was invested in Federal Government issued Treasury Securities which were issued off-budget.  In other words that surplus cash meant for your retirement was spent on other Federal Government programs. The trust fund just has an IOU from the government for that money and interest.  Which means that the Federal Government owes the Social Security Trust Fund over $2 trillion (yes, that’s trillion, with a “T”). Let me write that out, $2,000,000,000,000.  Those securites are not included in the public debt number in government reports, they are off-budget (intragovernmental obligations).
Next tricky part… the Social Security Trust Fund has started collecting on that debt. With so many people out of work and therefore not paying taxes, due to the current economic situation, Social Security is costing more than it is collecting and therefore needs this money. This means that instead of the $179 billion cash from the sale of treasury securities we had in our budget in 2008 we will have to pay $80 billion back to the trust fund in 2010:
- Receipts: $635 billion
- Outlays: $715 billion
- Deficit: $80 billion
Final tricky part… we’ll pay off this debt in 2037. After that point Social Security will no longer have the benefit of that trust fund (our debt to it) and will run out of money. This “unfunded liability” is money that we have promised to pay out in benefits but haven’t covered with taxes. How will they continue to provide the benefits they have promised us?
Tags: budget, debt, deficit, off budget, Social Security
April 3rd, 2010 at 3:55 pm
This is a very well written and accurate article. The only thing I can see that is missing is the Why!
When FDR pushed for the establishment of SSI, he had it set-up so that the monies collected were deposited into a lock-box type trust account and plainly worded so that the only withdrawals from that account were to be for the stated purpose of assisting participants in their retirement.
In 1967, LBJ pushed through legislature to move the S.S. monies into the general fund in order to have access to help pay for the Viet Nam war. The problem with this was that he never moved any of the S.S. monies back to the Lock-box from the General Fund. Since 1967, every President and every Congress has tapped those monies to fund every pork-barrel project to come down the pike. This is not a reflection or one side of the aisle or the other . . . both have misused these funds with sickening regularity. The Democrats and the Republicans both point fingers at each other but the truth of the matter is that they are both equally guilty. To make these offenses even more heinous, the career politicians responsible for draining our retirement funds do not have to rely on those funds themselves. We would give our eyeteeth to have the retirement plans they have.
The bottom line is this: The career politicians believe we work for them rather than the other way around. Since we will never get term limits past them, we have no alternative other than to create term limits via our vote at the voting booth. The problem with this approach is one of organization and teamwork. Can we do it?
April 3rd, 2010 at 8:57 pm
Bob,
Thanks so much for that information. I didn’t know when it started, there is so much information to wade through. I agree that both the Democrats and the Republicans are to blame for the situation we find ourselves currently in. I am trying to make the information accessable, and easy to understand without “flaming” or offending anyone. I think the most important thing that we can do as citizens is educate each other. It is a grim picture indeed, but one we face with courage.
April 3rd, 2010 at 9:17 pm
Hi Holly:
Your positive attitude is encouraging Holly. I too believe we can take America back from the career politicians on both sides of the political aisle. Some of us may have to issue reminders of “how we arrived at where we are” to others from time to time but it would certainly be an effort that is well worthwhile. Please keep doing the research and posting what you find. Your posts are a pleasure to read and they give me hope.
I retired at 62 years of age just a bit over a year ago. To think that a group of individuals who do not even contribute to the plan has squandered the money I contributed makes me more than a bit upset . . . it makes me irate. You will notice that while those of us on S.S. did not receive a COLA increase this year and will not receive one next year either, congress has voted themselves a $10,000 increase over that same period which they have designated as barren for us. There is no end to their audacity or their tendency to view themselves as being above the common American. It is almost as if we were commoners that must bow to the Royalty we elected. It is no wonder that so many Americans have gone the way of the “Tea Party†groups. Isn’t that exactly what instigated the first Tea Party?
Bob
April 4th, 2010 at 6:05 am
Bob,
I hope to be able to research a topic once a week for this site. Many of the facts that I uncover are simply unbelievable. That is why I am taking the time to back up my facts to a .gov site, Which isn’t always easy! I would very much like to do that with your no COLA increase, and the $10,000 increase facts. That way anyone, like myself, that thinks “They wouldn’t dare!” can go see for themselves.
Chin up Bob! More and more people are getting interested and involved in the situation. What I got sick of was the news coverage playing as advertisements. I decided to do my own research, and present the facts to anyone that was interested. Pass the link on! The more people that are aware of the situation the better. Knowledge is Power!
July 29th, 2010 at 12:52 pm
I check in on your website at least once a week. It certainly causes one to take pause. I have passed it on to everyone in my address book. Knowledge is to be forarmed. I shake my head in amazment at many of the issues. Your research is much appreciated. It is an easy and interesting, although frustating read.