what is the truth regarding SS funding?

[Bluedragon]

Hi all,

Now that the mid-term election is over and all the players are in place, there's been some noise from some members of our legislative body, that social security is one of the programs that is causing such dire financial consequences that affects the budget losses and increased debt. I've always understood that SS was self funded by the FICA taxes paid through payroll deductions, that is separate from the 'income tax' burden that is also found on our paychecks.

So, what's the truth? Are social security payments that the government sends out each month to millions of retirees and disabled really adding to our national debt? Or, is this just another bugaboo that some want to scare the voters into believing that if changes aren't made in the budget process, social security will be effected?

What do you think? Is the SS program adding to our total budget deficits? Or is SS, as has been reported, really self funded and have nothing to do with the increasing national debt?

God bless,
Ted

The dollars go into the general fund. They don't go into a lock box ....One the output outgrows the input .....game over .

 

[miamited]

The dollars go into the general fund. They don't go into a lock box ....One the output outgrows the input .....game over .

Hi Bluedragon

Uh, no they don't!!! SS funds are separate funds.

Social Security taxes that workers and employers pay are credited to the Social Security trust funds. From nasi.org

Social security taxes have always been kept separate from the general funds that keep our nation running. They have their own accounting. The only times that SS funds would go into the general fund is when SS buys U.S. bonds as a place to hold any excess collections. Those funds are invested back into the government to hold until needed. When they buy those bonds, then that purchase money goes into the general fund. But it's only there as an investment. SS can still come back and ask for their money back, which they have been doing now for the last couple of years.

No, it is not true that once the output outgrows the input....game over. SS has outgrown it's expected output several times throughout the programs history. Congress then goes in and changes some of the parameters and everything is fine for a time.

They might up the SS tax rate. In the beginning the SS tax rate was 1%. Now it's 6.5% of worker wages.

They might raise the taxable income ceiling. In the beginning the SS tax only applied to the first $3,000 in wages.
Today it's applied to incomes up to $160k.

They might raise the age at which one might draw their SS. In the beginning it was 65. Now it's creeping upwards to 67.

So, just as Congress has done before, when it looks like output will be greater than input, adjustments are made and the world continues to spin here in the U.S.

The scenario that the detractors are trying to push, that there is a point out there where SS will go broke and some retired group is going to be left with nothing, is not a possible scenario. So long as SS taxes are collected there will always be money in the SS trust fund. It may not be enough to cover current payments, but it will still be there and it will still be doling out monies every month. Right now! Yes, right this very minute. The prognostication for SS is that sometime around 2034 the fund will not be able to pay out full benefits without some adjusting. It is believed that at that time, the SS administration will only be able to pay out 80% of stated benefits.

Now, please understand, that isn't broke. It just means that some changes will happen. Either the SS administration will cut what they are paying individuals, or, I believe the better option, changes made to the other two variables.

As far as I know and understand, that is exactly 'how' SS works. It is a pay as you go program and so long as there is a SS tax, then SS will never be broke.

God bless,
Ted

 

[Bluedragon]

This from the Congressional Research Department

The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds

In other words ....they are not in a second bank account trust account nor a savings account ....

 

[miamited]

This from the Congressional Research Department

The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds

In other words ....they are not in a second bank account trust account nor a savings account ....

Hi Bluedragon

I'm not sure you're reading that paragraph the way it's written. At least one of us isn't.

This is saying that the tax revenues, that's the money that SS collects through FICA taxes, that are 'exchanged' for U.S. government securities, thats when SS takes the excess FICA collections and stores it with the federal government through 'government securities'. Yes, once SS does take their leftover funds and buy the government securities as a place to store that money, then the tax revenues exchanged for the U.S. government securities goes into the General Fund. That is true of any money that anyone pays to the government to purchase a government security.

If I take my granddaughter down to get her very first $25 U.S. Savings Bond and tell her how she's helping to build the nation and all that RA-RA-RA, the money I give the bank teller for that bond will go into the general fund. Yes, if SS invests in any kind of government securities, then that money will go into the general fund. I believe that's what your paragraph is explaining.

Oh, and BTW, yes it does mean that they are in a government secured savings instrument. Now, you argue the word 'savings account' if you like and I'll concede that we don't generally refer to government held bonds as a 'savings account', but it is the same thing. It's where money is put to be saved and earn interest while it's being saved.

God bless,
Ted

 

[Bluedragon]

That bond is not purchased ....it's owned by the same entity that issues them. Who owns that phantom bond? The same entity that supposedly uses it to pay out social security checks. Want a reason to be upset about this? Say a US Citizen pays from the age of 16 each year until he gets to reirement age at 65 and gets killed by a truck walking out the door on his last day at the office. Who gets his Social Security checks that are due? No one ....Yesterday an illegal arrives at the age of 65 and has not paid a dime into the system ......he gets a check for nothing ......

The Baby Boom generation should be almost fizzled out .....Why would Social Security not be on the downhill slide of funds going out and not the other way around? Because there is not a bond security box....

 

[miamited]

That bond is not purchased ....it's owned by the same entity that issues them. Who owns that phantom bond? The same entity that supposedly uses it to pay out social security checks. Want a reason to be upset about this? Say a US Citizen pays from the age of 16 each year until he gets to reirement age at 65 and gets killed by a truck walking out the door on his last day at the office. Who gets his Social Security checks that are due? No one ....Yesterday an illegal arrives at the age of 65 and has not paid a dime into the system ......he gets a check for nothing ......

The Baby Boom generation should be almost fizzled out .....Why would Social Security not be on the downhill slide of funds going out and not the other way around? Because there is not a bond security box....

No one gets a dead person's SS check. But that's all configured in the SS system. Yes, they have dozens of actuaries, who figure out how many people will die and how many people will live longer than 65 and even how many will then die from year to year after they turn 65, although they are just guesstimates, but that's how the FICA tax that's needed to come in is figured.

Yes, it's sad that a man who worked all of his life doesn't get to draw any SS, but trust me, he really doesn't care. But his wife or children can draw off of his record. So, I'm not sure what point you are trying to make, but a lot of people get SS income from a dead person's account.

When Sen. Sanders puts forth his 75 year plan, he's had actuaries figure out how much money SS will need each year in the future based on some standard percentages of how human life expectancy and death rates.

Now, I have no idea what you're getting at in saying that the bond is not purchased. Yes it is! When SS has excess funds, by law, those excess funds must be invested in government bonds until the money is needed. Yes, SS turns over their extra money and they get a bond against the federal government to pay back that money, plus some interest. It's no different than you or I buying government bonds, except that this is in the millions of dollars invested in bonds.

How much does the US Treasury owe the Social Security trust fund?

As of 2021, the Trust Fund contained (or alternatively, was owed) $2.908 trillion The Trust Fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government.

That's the SS excess funds that are invested in U.S. treasury notes/bonds. Now, because we are presently in a place where SS is paying out more than it's taking in, we will eventually use up that excess and that's what is expected to happen in 2034 or so. But if we merely tweak some parameters, and I think Sen. Sanders wants to just up the ceiling on which FICA taxes are collected to make the program equal again between income and outgo. It's been done dozens of times before. When SS first started, FICA taxes only applied to $3,000 of income. Don't we wish we still had those days!!!! Whohee!!! However, the monthly retiree benefit was only a couple of hundred dollars. Oh, well we don't want that, do we? Imagine all of waiting and expecting retirement and all we're going to get is the $300 dollars that retirees got in 1935 because all we're collecting will only pay everyone $300.

Listen, if you don't believe me, look up SS trust fund. Read for yourself 'how' it operates. It's all governed and regulated by law.

God bless,
Ted

 

[miamited]

No one ....Yesterday an illegal arrives at the age of 65 and has not paid a dime into the system ......he gets a check for nothing ......

NO!!!!!! NO!!!!! NO!!!!!!! An illegal is not eligible for SS (period!!!!!) Read the rules for SS instead of making them up as you've heard the pundits tell you what they think is the truth.

https://www.ssa.gov/pubs/EN-05-11051.pdf

Only under certain and specific conditions can a non-citizen get SSI, but an illegal gets nothing!!!!!!! NOTHING!!!!!!

God bless,
Ted

 

[miamited]

https://www.cbpp.org/research/social-security/understanding-the-social-security-trust-funds-0

Maybe this will help with understanding exactly what's going on with SS. This does not need to be a tough process and with little care, the program will continue to function successfully for another 100 years.

God bless,
Ted