The Social Security Trust just estimated that they will run out of funds by 2035.
Fear not. They are not going to cut your payments.
Let’s be clear. There is no trust fund. It’s an accounting gimmick. The Federal Government has been systematically diverting (stealing) your Social Security Taxes to the general revenue. As they do that they simply increase their IOU to the fund. There is not one single penny in the so called fund. Never has been, never will be.
Right now Social Security taxes exceed beneficiary payments, so it’s not a pressing problem for a Congress that operates on the IBG principle (When it hits the fan, I’ll Be Gone). But at some point they will have to stop stealing from the taxes and pay for benefits out of general revenues.
If they don’t pay the difference between Social Security Taxes and beneficiary payments from general revenues, they project that they can continue to pay about 75% of the present benefits. In the real world that won’t happen because Grey Panthers vote. Every member of Congress, no matter how dull, knows that Social Security is the third rail of politics. For a Congressman, that’s a sure path to unemployment. Actually, they will end up as lobbyists but that’s another story.
Meanwhile, if Congress were suddenly to become responsible there are plenty of things they could do to keep the system solvent. Granted, none of these things would generate many thank you letters.
- Increase normal retirement age. This only makes sense because we are all living longer and most of us are healthy enough to keep working a couple more years.
- Increase the Social Security Tax. Never popular, but probably not a bad idea.
- Raise the earnings cap for Social Security Tax. Right now it’s $132,900. The 1% probably could get by if the limit were raised.
- Fully tax the benefits. Right now, part of the benefit escapes taxation for all tax payers no matter how wealthy.
- Means test the benefits. Do the top 1% really need a Social Security benefit? Probably not.
- Find other sources of revenue: Carbon Tax, Value Added Tax, Estate Tax all pop into mind.
This is not rocket science. All that is necessary is the political will. It would be hard to find a Congressman that doesn’t know the solutions. But, it’s even harder to find a Congressman that has the courage to act. Good luck with that.