Current Events — HabitableZone

Current Events » in reply to Thats actually a pretty good idea, IMO

The system is currently overfunded as it is
Larry J — (archived)

For at least 40 years, Social Security taxes have taken in more than what has been paid out to retirees. By law, the surpluses are "invested" in Treasury bonds, meaning they've been spent by Congress and covered with a government IOU. This is why, despite the government supposedly running a surplus during the late 1990s, the national debt increased every year. The surpluses from the SS program were used to balance the books, but at the expense of incurring new debt. The late Democrat Senator Moynahan proposed cutting SS taxes years ago because the surpluses were being used to fund more government spending, but he was completely ignored by politicians of both parties who wanted to keep the spending going.

Simply raising the tax ceiling as David suggested will do little more than increase the number of IOUs in the system. It might push back by a couple years the point where SS revenues are no longer adequate to cover expenses. However, unless other changes are made to SS, it won't come close to fixing the structural problems.

1. SS payouts are based in the taxes one has paid into the system. Removing the cap on SS taxes will only increase the amount that has to be paid out unless the payout plan is modified.

2. At present, there is no means test for SS, meaning Ross Perot and the like are eligible for payments just the same as any other senior citizen. Democrats and the Clinton Administration raised taxes on retirees back in 1993, but that money went into the general revenue stream. Means testing a program that has always been sold as a common benefit to everyone won't be easy, politically. My guess is that they'll give out the check with one hand and tax it back with the other. At what point does someone get means tested out of SS, if they have a pension or 401K? If that happens, then the people who paid the most into the system are basically screwed over, raising fairness issues.

3. Private accounts are common in several government pension programs. As I've mentioned before, when my wife worked for a city-owned hospital, she didn't pay any SS taxes. Instead, the money that would've gone to SS was put into a private account invested in her choice of mutual funds. I've read that some 3 million government employees participate in similar programs. Here's a question (and I don't know the answer), do employees of the Social Security Administration actually pay into the system? If SS was such a great deal, you'd have government employees demanding to be allowed into the program. That isn't happening because they know they have a much better deal. Why should only government employees have such options?

Perhaps we could help "save" Social Security by redirecting the government pension plans into the SS program and only pay them what other retirees would get. /sarcasm

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