My comments in italics, your replies in bold. Just trying to keep things straight.

"For at least 40 years, Social Security taxes have taken in more than what has been paid out to retirees."

Yup, I think everyone is in agreement that the system will continue generating a surplus until sometime after 2040.

No, that's completely wrong. The latest estimates are that the surplus of SS taxes will end in 2018, just 13 years from now. Simply put, the SS taxes paid in will no longer be sufficient to meet the payments going out in 2018. After that point, the deficit will require additional revenues, either from the general revenue to repay those Treasury bonds (IOUs), higher SS taxes, and/or some reduction in benefits such as means testing. By sometime after 2040 (I think the latest number is 2046, but that's open to a wide range of variables about the economy), all of those IOUs will be exhausted.

"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"

Not trying to be rude here, but yeah. I think we are on the same page WRT understanding how the system works.

Actually, while you may understand how the system works, your first reponse proved that your understanding of the problem was flawed.

The various following phrases are more or less misleading WRT how the system works, and people who use them too much don't understand how the system works or are trying to scare everyone into a course of action they want:

"the government has spent all of your social security money"
"Lock box"
"Bankrupt"
"The system will be exhausted/Insolvent sometinme after 2040"

A. The surplus SS taxes have been spent, replaced with Treasury bonds (IOUs).
B. There is no lock box nor a trust fund, other than the collection of promises to repay those bonds.
C & D. Sometime after 2040 (depending on demographics and economic projections), those IOUs will be exhausted. At that point if nothing changes, the only money dedicated to paying SS benefits would be the SS taxes collected from people working at the time. That tax won't be nearly sufficient to pay the promised benefits to retirees.

"Simply raising the tax ceiling as David suggested will do little more than increase the number of IOUs in the system."

I don't think that is strictly the case. the IOU's would still probably be less than the input to the system (IE, I don't think the person making a cool mil a year would get back an amount entirely porportional to what he put in). We'd have to get out the green-shaded hats and the calculators to really be sure. Regardless, the answer is to simply put a cap on total benefits that you can get in a tax year.

Perhaps I wasn't clear with my previous statement. Under current law, any SS surplus has to be invested in the Treasury Bonds (IOUs). Simply increasing the SS taxes now will mean that the surplus will be larger, meaning the number of IOUs in the system will increase. That does little to change the long term problem.

As for the other portion, it isn't a linear situation where increasing someone's SS taxes will result in a linear increase in their SS payouts. I don't have the exact numbers, but I heard this morning that a worker gets something like a 90% credit for money paid in below a certain income level. That credit decreases with higher income levels to the point that someone with an SS income of over $45,000 only gets credit for 15% of the taxes paid in. Still, unless the payout is changed, taxing people at a higher level would result in them being eligible for larger SS checks when they become eligible. It won't be a 1-1 relationship (not even close).

I still fundamentally disagree with the language "structural problem". This is an implementation detail, not a foundational or structural issue.

It's an implementation detail that would lead to more money being paid out - not exactly the kind of thing that makes the situation better.

"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"

One thing is entirely certain: whatever the fix, someone will not be happy.

That is certain.

". 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? "

I think everyone pays into SS.

When she worked for the city government, she did not pay SS. I know, it surprised me, too. I'm not saying that all government employees are exempt from the SS program (I paid SS when I was in the military), but I've learned that some are exempt. Some say the number of government workers who are exempt might be in the neighborhood of 3 million people. For example, teachers seem to be exempt in many states. A quick Google search found this statement from the Teacher's Retirement System of Georgia

Is my TRS benefit affected by my Social Security benefit?

Your TRS retirement benefit is not reduced, or affected in any way, by a benefit you are eligible to receive from the Social Security Administration (SSA).

However, during your employment history, if Social Security taxes were not withheld from your pay, or you are eligible for Social Security benefits as a spouse or widow(er), your Social Security benefit could be reduced based on the pension you receive from TRS.

Note the first sentence in the second paragraph. If they were required to pay into SS as a teacher, why wouldn't SS taxes be withheld?

More to the point, here's some clarification from the SS Administration website:

Beginning July 2, 1991, Social Security and Medicare Hospital Insurance (HI) coverage is mandatory for State and local government employees unless they are members of a public retirement system or covered by a Section 218 Agreement.

For the record, I'm not trying to take away their options - I'd like for everyone to have the same choices. As for federal employees hired after 1983, they do pay into SS.

as more of an aside: I don't think even at the inception, SS was ever visualized as the ONLY or even main funder of retirement (SS alone is a miserable existence!), nowdays it helps do what welfare and the minimum wage does/used to do: define a minimum line under which people can not sink in our society, not much better in most cases than a lean subsistence lifestyle with few amenities.

Any changes to SS should keep the goal in mind. False promises of riches, or the revision to some magical system that will bo so great it will completely fund anyones retiuremtn comfortably is very wishful thinking.

I agree - you can go back to the statements of FDR about SS not being intended to be someone's sole support in retirement. He also foresaw the day when people could have private accounts.

Bush's proposals don't do away with SS, they just give workers more options. Bush proposes that those who choose to participate (entirely optional) can direct up to 1/3rd of their SS taxes into private accounts with the remainder of the taxes going into the current system. The difference between the rates of return on traditional SS and other investments is substancial. Those who're retired today have gotten a good return on their money. As recent as the early 1970s, the maximum anyone paid into SS was $250 a year (5% on the first $5000 of income). However, those in their 20s and 30s today will likely get a return of 1-2%. Even investing conservatively, one can average much higher rates of return, on the order of 7-8%. Over a working career of say 40 years, the difference of 5% or more higher rate of return can be very substancial. At a 2% rate of return, the money contributed in any year takes about 35 years to double, almost their entire working career. A return of 7% doubles every 10 years, meaning that first year money doubles 4 times in the same 40 years.

I'm 47. At the rate they've been dragging this debate out, I don't know if I'll benefit from changing over to private accounts. There simply wouldn't be enough time to amass enough money to make it worthwhile. For private accounts to work, they need time for compound interest to become a factor. However, my stepsons are in their early 30s (and my grandchildren are less than a year old). I want something better for them. Under the current system, they're getting royally screwed.