This article examines the trust fund reserves and cash flows and their interrelationships with the treasurys cash management operations and the budget of the rest of the federal government. Blame democrats and republicans for disastrous social. The following table provides historical data concerning the income and expenditures of the oldage, survivors and disability insurance. The fiction of social security bonds mises institute. Stocks are too risky to save social security marketwatch. Should it take low income dothraki four years to get a hairbraiding license. Planet money for years, the baby boomers have driven a social security surplus. Mar 28, 2008 i agree with you that the looming crisis is in the general fund.
To reduce the need to raise taxes or cut benefits, some have proposed investing the social security trust funds in stocks. This book is a must read for all who care about the future of social security and the. This is an archival or historical document and may not reflect current policies or procedures. The trust funds congressional research service summary the social security program pays monthly cash benefits to retired or disabled workers and their. You cant say that for the last 25 years, when social security ran surpluses, well, that didnt mean anything, because its just part of the federal government but when payroll taxes fall short of benefits, even though theres lots of money in the trust fund, social security is broke. Current social security benefits arent affected, and the trust fund builds up binding ious just the same. Investing the social security trust funds in equities. Who was the first president to start borrowing from social. Much of the public is convinced that a perfidious congress is rifling a trust fund where our social security taxes are held in trust to pay future benefits, that this is why social security is headed for trouble, and that all congress has to do to fix social security is put this stolen money back. Even if the entire trust fund was plowed into stocks, it would account for only a fraction of the market.
Nov 19, 2010 are social security trust funds a mirage. About the raid of our social security trust fund the. There was to be no corresponding loss of benefits to american workers who enjoyed this funding cut. The practice of using every dollar of the surplus social security revenue for general government spending continues to this day.
Its job description, according to its website, is to administrate the national pension scheme. This shortfall has been met by interest income from the treasury bonds held by the trust fund. For comparability with other historical years, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment in each year. Such claims just distract from the real issue of the need to manage the. Should the social security trust fund be allowed to invest in stocks. The social security trust fund has never been put into the general fund of the government. Which political party took social security from the independent trust fund and put it into the general fund so that congress. Treasury account that funds social security benefits paid to retired workers and their. From its inception, the trust fund has always worked the same way. At the same time, the trust funds fund only a tiny portion of outstanding obligations. And many americans believe that this surplus will be used to fund social security as the baby boomers enter retirement.
The social security trust fund was always an accounting fiction. In essence, theres the belief that congress raided the social security trust funds to finance government activities, ranging from education and healthcare to the ongoing vietnam war. Reagan started the rape of the social security trust fund. About the social security trust fund the new york times. Make it voluntary, legalize alternatives such as iras. Raiding the social security trust fund was a precedent set in 1968 by another progressive president, lyndon b. Smith is a professor of economics, emeritus, at eastern illinois university. The social security trust fund was established in 1939 to receive monies collected for social security through payroll taxes.
The myth of the social security trust fund foundation. Instead, they merely represent a first claim on future revenues. Max richtman writes that both parties need to bury the myths about the financial insolvency of social security, otherwise they threaten to undermine the programs impressive record. It was intended to fund only about 40% of retirement needs. The social security trust funds and the federal budget. Oct 14, 2011 once printed, the document is carried across the room and placed in a fireproof filing cabinet. Whats happened to westeros social security trust fund. I see from comments on an earlier post, plus some of the incoming links, that the whole there is no trust fund, so the system will be in crisis in 2017. In january 2019, 68 million americans received some social security. If there are real assets in the trust fund, then social security can mail the checks, regardless of what congress does about the debt limit.
Its funny, people blame presidents reagan and obama the most. The social security administrations efforts to promote employment. The social security lock box hoax and the national debt. This plan has come in for criticism on both economic and political grounds. Far too soon, payroll taxes will be insufficient to pay all of the promised. The day after i retire there will be some whiney congressman like anthony weiner declaring that to his delight the social security fund will be dedicated to paying benefits to the millions of illegal aliens that have crossed over and need to collect,todays 99ers will still be unemployed and the democrats will need to take care of. The social security trust fund is merely an accounting device filled with ious that future taxpayers must repay. Jul 06, 2016 lets debunk this social security myth. The social security trust fund invests surpluses in united states treasury bonds and u. In other words, a formal trust fund was established for the social security program and the credits already on the treasurys books for the social security program were to be transferred to this fund, along with all future revenues raised for the program. But the fact that social security is financed with a highly regressive tax, and that the social security trust fund has been borrowed against by the general fund to partially offset the deficit, to make tax cuts more politically feasible.
As a result of these 1986 changes, the social security trust fund began to accumulate a surplus every year. By social security trust fund every american interested in the subject knows that in reality means debt owed to social security recipients for money borrowed from the system. The oldage and survivors insurance trust fund is a u. The social security system is primarily a payasyougo system, meaning that payments to current retirees come from current payments into the system in 1977, president jimmy carter and the 95th congress increased the fica tax to fund social security, phased in gradually into the 1980s.
How much money has the federal government borrowed from. Everything you need to know learn about the social security trust fund, a critical part of the program that supports millions of people. Dec 08, 2015 originally, social security was designed to build a reserve of cash. Should the social security fund be invested in the stock. The scam known as social security trust funds lewrockwell. The social security trust fund was created in 1939 as part of the amendments enacted in that year. The peoples pension separating fact from superstition. Should the social security trust fund be allowed to invest in. Great barrington, massachusetts, in a book 11 wrote that the fund thus far. Only congress can put money in or take money away from social security. In so doing, the trust owns major amounts of stock in ghanas principal companies, and is an important part of ghanas economy. Some members of congress feared that any such reserve would not be truly saved.
Social security trust funds are real and hold real treasury securities for which the federal government has an obligation to pay. If there are real assets in the trust fund, then social security can mail the checks, regardless of. In return for the borrowed funds, the social security trust fund was credited with treasury bonds. Social security is largely a pay as you go program.
Social security, medicare face insolvency over 20 years. Did lyndon johnson steal from the social security trust. The libertarians have the correct approach for social security. Apr 18, 2017 second, no one wants the social security trust fund to control the stock market. The trust fund will be depleted in 2034 and social security will no longer be able to pay its full scheduled benefits unless congress takes action to shore up the programs finances. The only way a surplus can be created is by lowering taxes and cut spending. But the trust funds created with the surplus are actually debt the. Where did all the social security trust fund money go. Aug 21, 2012 both social security and medicare have trust funds, but the social security trust fund is telling a bigger lie than medicares. Its important to remember some history on social security. The social security trust fund cash flows and their effects on the budget of the federal government have received considerable attention in recent years.
Aaron of the brookings institution, keynote, was there to unveil a new plan hes devised to solidify social security s funding for the next 75 years, if not beyond. The names of the two funds are the oldage and survivors insurance and the disability insurance trust funds. The national academy of social insurance hosted a decidedly unusual trio of luncheon speakers at its annual conference last week. Social security will be able to pay full benefits until 2036, after which it can pay about threequarters of scheduled benefits. Raiding the social security trust fund jack rasmus. He is the author of seven books and has been researching and writing about social security financing for the past ten years. Obamas raid on social security ends with a whimper. Oldage, survivors, and disability insurance oasdi program. A couple reports by the congressional research servicemaintaining financial balance after trust fund insolvency would require substantial reductions in social security benefits, substantial increases in income, or some combination of the two.
Some members of congress were outraged by the practice and tried to nip this misuse of social security revenue in the bud. The more firmly people believe that the social security trust fund really is a trust fund, the angrier they will be at stories of congresss looting it, and the more they will be inclined to believe that this is the reason that social security s financial prospects look shaky. The first section gives an overview of the historical and projected trust fund. These bonds are backed by the full faith and credit of the federal government and they earn interest, but these bonds are not real assets with cash value. Sep 02, 2004 the social security trust fund is merely an accounting device filled with ious that future taxpayers must repay. One of the most pervasive legends in the social security debate suggests that president lyndon johnson lbj stole the trust fund in order to pay for vietnam the social security administration responds directly to this claim. The social security myths you should know before the. The federal oldage and survivors insurance trust fund and federal disability insurance trust fund are trust funds that provide for. For a detailed explanation of the federal budget processwith historical. In the guise of a socalled balanced budget amendment, 233 members of the house of representatives. The truth about the trust fund destroying social security to destroy the two party system by thom hartmann page 1 of 2 pages view how many people read this 4. When the program runs a surplus, the excess funds increase the value of the trust fund. Dont forget that reagan and greenspan raised fica taxes dramatically to build up the ss trust fund for the boomers retirement. Hey i already know my future with regards to social security.
Beneficiaries do not trust ssa to make appropriate and timely decisions. The argument that social security will not cause a serious drain on general revenues until 2042 presupposes that the bonds in the fictitious trust fund memorializing the spent surplus somehow have value either for the u. A lot of people like to blame lbj, and quite a few blame the second president bush. The trustees project that following insolvency of the combined funds in 2034, congress could restore balance by. The myth of the social security trust fund mises institute. The myth of the missing social security trust fund. How much money has obama taken out of the social security. Members of both political parties have agreed to promote the idea that there is a surplus in the social security trust fund. Social security trust fund is required by law to be invested. It also disburses benefits for the blind and disabled. Jun 22, 2016 the report also showed that the social security trust fund has enough cash to pay full benefits for another 18 years, the same timeline as last year. Good history here, especially if you lived through the 80s and were not.
The social security trust fund is americas retirement fund. They reflect any accumulated excess of social security taxes plus other revenues, such as interest received, over expenditures. One way to explain how youll know its a lie is by looking back at what happened in the summer of 2011. That the last half of this article has become a disembling apologetic to ideologues hurts, not helps, its credibility. So im just going to reprint what i wrote about this three years ago. Everytime social security has been raided it has been a democrat president and democrat congress. It was a raid of social security funding a cut in the social security tax on employees from 6.
Purpose the objective of this paper is to identify the advantages and potential pitfalls of investing some of the social security trust fund reserves in corporate equities. The myth of the social security trust fund foundation for. In january 2019, 68 million americans received some social security benefit. The money was used to pay for wars, tax cuts for the rich, and other government programs.
That filing cabinet is the closest thing to the mythical social security trust fund that exists. The social security and national insurance trust, is an agency of the government of ghana. Smith explains the history of social security from its inception in 1935 to the present, including the enactment of the 1983 social security tax increase. Defenders of the current social security system claim that huge future deficits in the program are not a cause for concern because money in the social security trust fund can be used to finance. Apr 17, 2014 it was established by a 1939 law that is still in effect, which declares, there is hereby created on the books of the treasury of the united states a trust fund to be known as the federal oldage and survivors insurance trust fund. The social security trust fund was part of the social security reforms enacted in the early 1980s in response to the recommendations of the national.
His son, the other president bush borrowed severely from the social security fund and brought us to where this country is today. Munnell of boston college argues that it would reduce the need for benefit cuts or tax increases. The social security administration collects payroll taxes and uses the money collected to pay oldage, survivors, and disability insurance benefits by way of trust funds. Congressional research service reports and was provided by unt libraries government documents department to unt digital library, a digital repository hosted by the unt libraries. Nov 17, 2019 the social security trust fund has no direct connection to the stock market.
Congress didnt raid the social security trust fund any more than it raided tbills, mutual funds or money market funds. The federal oldage and survivors insurance trust fund and federal disability insurance trust fund are trust funds that provide for payment of social security benefits administered by the united states social security administration. The ideological argument made to justify the payroll tax hikes was that it would be needed when the 78 million baby boomers began to retire after 201012. The social security amendments of 1983 laid the foundation for 30 years of government embezzlement of social security funds. Benefit payments from the di trust fund increased by 10. Mar 01, 2000 the more firmly people believe that the social security trust fund really is a trust fund, the angrier they will be at stories of congresss looting it, and the more they will be inclined to believe that this is the reason that social securitys financial prospects look shaky. In other words, a formal trust fund was established for the social security program. As for social securitys most pervasive and borderline irritating myth, that goes to the belief that the federal government raided social securitys coffers and never put the money back. On a daily basis, funds left after payment of all benefits are invested in specialissue government bonds. Using social security money to fund tax cuts for the rich. To be sure, most americans would rather pay down the debt than use social security s surpluses to fund pork barrel projects. Social security administration, oldage, survivors, and disability insurance trust funds, 19572014, accessed july 28, 2015.
These 7 social security myths just arent true, no matter. Which political party took social security from the. Social security is a government program supported by a dedicated tax, like highway maintenance. All of social securitys payroll taxes and other earmarked income are deposited in the trust funds, and all of social securitys benefits and administrative expenses are paid from the trust funds. Social security, medicare face insolvency over 20 years, trustees report new projections show that the programs will begin to spend more than they earn by the end of this decade. Did lyndon johnson steal from the social security trust fund. Jun 05, 2019 although legally distinct, they are often referred to collectively as the social security trust fund. Pensions, then more prevalent than now, were the second leg. This includes the social security trust funds that hold nonmarketable treasury securities.
Social security has been effective at keeping americans of all ages out of poverty. Apr 11, 2017 social security faces a financial shortfall. Unlike private pension funds, the social security trust fund does not hold any marketable assets to secure workers paidin contributions. The social security act provides that the funds are maintained on the books of the. Abuse of the social security trust fund began in the 1980s. When congress saw that big pot of money in the social security trust fund, they got greedy and couldnt keep their hands off of it. As long as the social security trust fund has existed, congress hasnt been able to keep. The debate about social security reform contains a certain amount of myth which has been accepted mostly through volume rather than fact. Mar 22, 20 social security was the first and primary leg for many people. Mar 06, 2020 the social security trust fund is americas retirement fund. In the table below, the main summary indicators of trust fund financial transactionsincome, outgo, annual deficit or surplus, and net accumulated size of the trust fund reserveare presented for each year since the beginning of payroll taxation and benefit payment in 1937. No, no one is stealing from social security opinion cnn. Many of the same mistaken ideas regarding the trust funds that the council was. However, this is not cash locked up in a bank account somewhere.
During the recovery from the great recession, there was a 2 percentagepoint reduction in. Social security trust fund, its history, solvency, and how to fix it. So the social security system was specifically changed over the 1940s to a payasyougo method in which there wouldnt be a large reserve to spend on other federal initiatives. Using social security money to fund tax cuts for the rich 9780990303664 by smith. In theory, we had a tax that was classified as set aside for social security and reinvested in government bonds. This is not my math, its what the latest social security trustees annual report states.
1123 122 886 283 1080 180 1235 180 727 607 923 1348 961 137 105 1438 735 161 739 860 811 965 810 1572 728 1008 212 643 593 1044 734 461 593 955 1279 331 332 901 127 1165 934 142