Republicans Stealing From Social Security Again
In case you lot haven't heard, America's top social program isn't on the best financial basis. According to the latest report from the Social Security Board of Trustees, Social Security is staring down a $13.9 trillion cash shortfall between 2035 and 2093, with the expectation that its $2.nine trillion in nugget reserves will be completely exhausted in fifteen years.
On one hand, there is solace in knowing that Social Security isn't going broke, which is a function of two of the programme'south revenue sources being recurring (the payroll tax on earned income and the tax of benefits). On the other hand, there's no sugarcoating the worry that would follow if benefit cuts of upwardly to 23% are passed forth to and so-electric current and future retired workers, equally of 2035. Remember, more than three out of 5 current retirees lean on Social Security for at least half of their monthly income.
How did Social Security get into this mess, you ask? That's a source of contentious debate, and it's also a country mine of misinformation.
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Did Congress really raid Social Security?
One of the more than common theories equally to why Social Security is facing a huge long-term cash shortfall is that lawmakers in Congress accept pilfered cash from the program and never returned it.
This idea goes all the mode back to 1968, when then-President Lyndon B. Johnson made a change to how the federal budget would exist presented. Prior to 1974, before Congress had an independent budgeting process, the President'southward Commission on Budget Concepts had 3 separate budgets, all of which had differing deficits. To simplify things, Johnson called for Social Security and its trust funds to be included in the annual federal budget.
In 1983, the Reagan administration voted to undo this modify and once once more remove Social Security from the federal budgeting process. This was done to ensure that changes made to the programme are done solely on the merits of the program, and non to balance the federal budget.
Where the idea comes into play that Congress stole from Social Security is, during this 1968 to 1990 period (1990 is when Social Security was completely off-budget again), it'southward believed that lawmakers commingled Social Security's asset reserves (i.e., its amass annual net-greenbacks surpluses built upwards since inception) with its Full general Fund to pay for wars and other line items. The belief among some folks is that Congress has stolen trillions of dollars from Social Security, and that if this money were simply returned to the program, it wouldn't be in such dire fiscal shape.
But the real surprise, upon excavation deeper, is that Congress hasn't stolen a dime from Social Security.
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Here'due south the truth about Social Security'due south Trust Funds and Congress' "stealing"
There are two important aspects of the incorrect notion that lawmakers stole from Social Security which need to be addressed.
Beginning of all, there's the period between 1968 and 1990, which is believed to exist when Congress pilfered America's top social program. What needs to be understood hither is that, while Social Security'south 2 trusts (the Quondam Age and Survivors Insurance Trust and Inability Insurance Trust) and its nugget reserves were technically "on-upkeep," funding for Social Security and payouts remained entirely carve up entities from the federal government'south General Fund. In plainer English, think of coin within Social Security'south sphere equally being completely untouchable by other money in the federal budget. This ways at no betoken over this 22-year menstruation where Social Security was on-budget did a dime of Social Security income, benefits, or asset reserves get commingled with the federal government'southward General Fund.
The second thing to realize here is that Social Security's nugget reserves are required by constabulary to be invested into special-issue bonds and, to a far lesser extent, certificates of indebtedness. I'm going to repeat that, in case you were skimming. Social Security $2.9 trillion in net-cash surpluses that have been built upwardly over time aren't immune to sit in a banking company vault collecting dust. They're required to be invested in bonds by law.
Are these bonds sold by the federal government? Yes. But this doesn't equate to stealing. Rather, the federal government is borrowing capital that would otherwise be losing money to inflation and paying interest into the Social Security program on its borrowing. Yep, you read that correctly. Not only is every cent the federal government has borrowed from Social Security accounted for, simply the regime is paying interest into Social Security, thereby improving the health of the plan. In 2018, $83 billion in interest income was nerveless by Social Security. If the folks who believe that Congress stole from Social Security got their way, and the federal government repaid every cent information technology borrowed, Social Security would accept lost out on this $83 billion in interest income in 2018.
Image source: Getty Images.
Desire to blame something? Blame congressional inaction
If you lot yearn to indicate the arraign for Social Security's imminent cash shortfall on Congress, get right ahead. Only make sure you're blaming lawmakers for the right issue.
What Congress hasn't done is steal from Social Security. Nevertheless, lawmakers have known of the plan's shortcomings since 1985, and have nevertheless to discover a heart-ground solution to fix it. If you want to point the finger at lawmakers, do so because bountiful solutions exist, but political hubris appears to be getting in the fashion.
As you probably know, Democrats and Republicans each have a primary prepare for Social Security that works. Democrats wants to meet the payroll tax earnings cap raised or eliminated, which would require the well-to-exercise to pay more than into the programme. Meanwhile, Republicans favor a gradual increase to the full retirement age, which would lead to a reduction in long-term outlays from Social Security. Although both solutions become the job done, neither has the votes to pass in the Senate.
Peradventure even more than baffling, the perceived weakness of each solution is perfectly addressed past their opposition. For instance, the GOP'due south program to reduce outlays takes decades before lower expenditures are realized. This is remedied past the Democrats' plan to immediately boost tax revenue. Comparatively, the Republicans' plan helps to tackle lower birth rates, rising longevity, and lower cyberspace-immigration rates that the Democrats' solution fails to account for.
If yous want to blame Congress for something, let it be their lack of action to resolve the program's imminent greenbacks shortfall when then many solutions are on the table.
Source: https://www.fool.com/retirement/2020/02/15/the-surprising-amount-of-money-congress-has-stolen.aspx
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