It is amazing how many people have bought into the silly notion that politicians are “stealing” Social Security funds.
It is all over social media how the money has been looted from the so-called trust fund.
As the lady on the TV commercial said, “That’s not how any of this works!”
It is a testament to how the government misrepresented the program from the start.
Today, you can go to a government site and find an accurate history of the program.
However, millions of people still believe the money taken from their paycheck is put into a special account in their names in Washington, where it gains interest and is repaid to them upon retirement.
In fact, workers pay a payroll tax. It is immediately doled out to retired people. When those workers retire, people still working will share their paychecks with them based on the retiree’s work history. (We’re setting aside the disability, Medicare and SSI portions for now. Those are other sad stories.)
The system began running a cash deficit eight years ago. In about 12 years, the IOUs in the trust fund will be repaid from the general fund and something will have to change. Either benefits will have to be reduced or the payroll tax will have to soar. The children and grandchildren of today’s workers will be soaked.
It sounded wonderful when proposed by President Franklin D. Roosevelt in the 1930s, as one of his New Deal policies.
Indeed, as with Ponzi schemes, it was great – for those in first. The first retiree had paid $24.75. She got $22,888.92 back (by living to 100).
But there were a couple of catches.
One is that even FDR admitted it was never intended to be anyone’s sole source of post-retirement income. In other words, people who counted on it would be foolish not to invest their own money.
(This after FDR had poisoned the idea of banking, saving and investing in “evil” corporations.)
In addition, the official government retirement age was set at approximately the median age of life expectancy. The government fully expected half the population to pay into the system but never receive anything.
But a funny thing happened on the way to Utopia. People began living much longer, and politicians found out you could hand out benefits, get votes in return and it wouldn’t cost them a dime.
Over the years, the system was played with, taking it “off-budget” and “on-budget,” neither of which has much meaning. The trust fund is an accounting mechanism.
Then because of demographics, the system created surpluses – more money than was needed to pay retirees.
So, the politicians spent it.
A lot of people moan and groan about this, but what else should they have done? Invest it? Do anyone really want politicians playing the stock market with trillions of dollars?
The alternative, since they were going to spend money anyway, would have been to borrow it or raise taxes. There is no free lunch.
The money was replaced with IOUs, totaling some $2.6 trillion.
It is being repaid with interest. But it is only taking money out of one pocket and putting it in the other.
Watch their hands, not their mouths.
In their most recent report, trustees of the fund warn: “Lawmakers should address these financial challenges as soon as possible.”
Neither party is doing anything about a looming crisis, following the first rule of Washington: When a crisis looms, kick the can down the road and let someone else take the heat.