'Social Security does NOT add to the deficit'

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YoLaDu

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"Social Security does NOT add to the deficit"

i have heard the above said a lot when discussions of budget deficits and solutions are bandied about. I honestly have no idea if this is just a Dem political talking point that is a half truth OR is it more fact.

Thoughts?

I obviously know that those who collect a paycheck pay into SS, so it is not exactly an entitlement, per se. What are the truths? what is fiction? Is more going out than coming in? Can that change with 1) demographics and 2) the overall health of our economy? Both positively and or negatively?

Does it not technically add to the deficit, but modifying it could help offset some of the deficit we currently have?

Secondly, and this is a more partisan question. Similar to the push to defund NPR and Planned Parenthood, does the Right target Social Security even though it is relatively small potatoes when it come to a deficit creator. Is it even small potatoes compared to other budget busters?

So what's the scoop on Social Security? Thanks in advance for the serious and sincere responses.
 
I think there are 2 challenges for the future solvency of SS.

It is correct that the SS trust fund currently takes in more money in payroll taxes than it gives out in benefits. That will end within the next 5-10 years, I believe. And over the next 40-50 years, especially with the baby boomers retiring, SS will continue to have to rely on transfers from the general fund to make good on its obligations. I think the present value of this "unfunded liability" is about $17 trillion. That means if no changes are made to the program, we would need the equivalent of $17 trillion more today in the trust fund in order to make good on the benefits promises. The Link

The second challenge facing Social Security IMO is the whole ponzi scheme nature of it. Since its inception the SS trust fund has accrued surpluses since it takes in more from current workers than it pays out in benefits. But Congress spent all these surpluses on other goodies and left treasury bonds in the trust fund. Actually not a terrible investment for the SS trust fund to make, but if our deficit spending isn't addressed then we will end up inflating our way out of debt and the bonds will be repaid to the trust fund with worthless money which will then be passed on as worthless "benefits" to retirees.

All this is small potatoes compared to Medicare, though. With a current unfunded liability of almost $90 trillion (!), that is what will bankrupt our government, resulting in a combination of inflation, higher taxes, and reduced benefits aka death panels.
 
Over the past 20 years or so, Social Security ran a surplus. The taxes collected were used to pay out benefits and the surplus was simply added to general revenue (and spent) which made our deficits appear smaller than they actually were. In fact, without the additional revenue from Social Security, the Clinton surpluses would have been deficits and the Bush deficits would have been even greater.

Last year, less revenue was collected from Social Security than was paid out. I don't think Social Security will ever take in more than it pays out again (until changes are made). In order to pay out benefits not covered by revenue from Social Security tax, the Treasury has to sell additional bonds which of course adds to the deficit.

Even though the official unemployment numbers have improved over the past year, the total number of Americans in the workforce (actually working) has not increased during this time period, nor have wages increased significantly. This implies that revenue collected will not increase even as the number of people eligible to collect benefits increase. Also, consider that this year, 2011, the Social Security tax has been decreased from 6.2% to 4.2%.

The overall health of the economy is much weaker. Yes, there has been some modest recovery, but the cost of that recovery is quantitative easing by the federal reserve. End that and the recovery is over. Continue, and essential commodity prices (food and oil) continue to go higher. The fed is in a lose-lose position.
 
There is no trust fund or "lock box". $$ is collected and put into the general fund. The Treasury then issues an IOU to SS. Does it add to the deficit....under the above, I'm not sure. But its an obligation to pay with $$ that are being spent elsewhere.
 
I want the choice to participate if I want or not.

I have made my own plans for retirement and healthcare. I don't like to be forced to do something that I don't need or want.
 
The problem is that back in the 60's under Johnson they changed it from having it's own fund to putting all the money in the general fund. If they had left it alone, there would be no problem with payments.
 
SS currently funds itself. That is true. If the SS fund were not used for other expenditures there would still be the fact that within a certain time frame SS wouldn't have enough money collected to pay out. As stated that is because there is a big population of baby boomers.
When SS started 65 was actually about the average life expectancy in the US. Currently, the life expectancy is about 78. The age to draw what should be called SSI (Social Security Insurance) was originally when you lived longer than was expected. Now, the expectation is that it is to be retirement income to live off of. That is a radically different thing.
Personally, I can't see that SSI is Constitutional. I know there are cases that say otherwise. If that is the case, then I would be in favour of gradually raising the SSI draw age up to 78, and then index it with life expectancy. That way you only are paying out to those who live longer than expected.
Also, that should enable the government to lower the rates taken out of SSI, because the number of people drawing will become much less, rather than the massively exploding size of those drawing from it.

Those are my two cents. It really isn't about current deficits, it is about the future and what will be unsustainable without massive changes.
 
HHD,
The issue really isn't 'retirement age.' I plan on retiring, or at least refocusing my career, long before 65. The reason I would be able to do that is I should be debt free, including mortgage by my early 50s with a good amount of savings, and my kids paid through college.
All of that plays into a decision to retire. How much money the government will 'pay me back' isn't. 65 isn't 'retirement' age, or wasn't when SSI was instituted. It was insurance against one living longer than was expected. That way the government, and the citizens, were in essence trying to prevent reasonable people from outliving their savings.
SSI has turned into an entitlement as a source of retirement income, something it was NEVER intended to be when implemented.
 
msdw,
how do you feel about some sort of support for those who live longer than life expectancy?
I don't know that that would be Constitutional, but I do understand the intent and the end to be a noble one. This isn't about people thinking they have a government provided income for retirement, but rather people who outlive reasonable savings for retirement.
I have no idea how to run the numbers to see how that would reduce SSI costs for the workforce, but I am sure that it would decrease dramatically.
 
When SS surpluses were given to the Treasury, the Treasury gave back Special Issue (SI) "bonds" in return. Some argue that the Trust Fund is real, that these bonds are secured by the US government and really no different from a private pension fund holding T bonds.

That's not quite true. The SI bonds are only issued for SS, and are not traded. They have nothing to do with the US' credit rating, as the global investment community is far more concerned with how certain we are to repay everybody else than we are to repay our own government. If the US didn't repay a single SI, our credit rating would be unaffected.

What does this mean? It means that when SS starts running huge annual deficits, the government will have to repay the SI's, or default on the benefits. If we have a large overall deficit at that point a few years from now (we will), the government will then have to reduce SS benefits (means testing) and/or raise taxes.

There are a lot of people saying that we can avert a painful disaster now through simple means. Others (Harry Reid, notably) want to campaign in 2012 against evil Republicans trying to cut your SS. Let's hope the grownups win.
 
One issue that isn't talked about is that for some time now the government has received tirllions of dollars in SS and spent it on other stuff and still couldn't come close to balancing the budget. What happens when that money is no longer available? It pretty much just goes to show that no matter how much money you give the government, it is always not enough. Look we just shot a few hundred million worth of missiles yesterday without even blinking an eye and with only one person needing to say let's do it.
 
last year SS paid out more than it received in revenue. I know of nowhere where that is not adding to the deficit. They do play a nice littel trick to make it look more solvent than it is. They print up some money and send it to SS fund as "other interest income" to cure a big portion of the gap that congress created by spending the fund. Bottom line is it is no longer in the black.
 
frankly, i think the members of congress that approved taking money out of ss and using it for the general fund should all be arrested for embezzlement because they had no real intention of putting it back.. of course, this is what happens to all taxes created for a specific purpose. it gets stolen by the keepers and used for something else.
 
the statement, "social security doesnt add to the deficit," would normally be true if the funds remained untouched. the only problem is that the money has been stolen by congress so it is now underfunded making it now a part of the deficit since the money needs to be put back.
 
Resolved: That the federal government should implement a comprehensive program to guarantee retirement security for United States citizens over age 65.

HS Policy debate topic from 1989. I concluded it was in trouble then, goes without saying, it's much worse it is now.
 
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