Social Insecurity

by Elaine Schwartz    •    Apr 3, 2010    •    750 Views

Is there a “lock box” with surplus social security funds? Sort of.  

In 1983,  when we had inadequate funding for the social security program, a commission led by Alan Greenspan suggested extra sources of revenue for a Social Security trust fund. As a result, primarily through higher payroll taxes, more was collected for social security than they needed then and the money was put aside.

Here is where you can imagine a lock box. Theoretically kept in the lock box, U.S. treasury securities were purchased with the social security surplus. As a result, social security surplus revenue became available to the U.S. government to spend until the social security administration needed the money.  

Fast forward to now.  In a recent NY Times article, we learned that this year social security benefits exceeded social security revenue.  Because the recession was the likely cause, all should return to normal soon. But what is normal? Normal means that in 2016, the program will face a tipping point and pay-outs will consistently exceed revenue.

Are you concerned about the future of social security? Comments?

The Economic Lesson

Hoping to give “ownership” to all of us, the creators of Social Security designed a universal pay-as-you-go program in 1935. When we “pay-as-you-go”, we are giving today’s workers’ payroll tax dollars to today’s social security recipients.

One Response to Social Insecurity

  1. Anonymous says:

    I think that its’s interesting you bring up this point. B/c America has been so dependent on the government to provide for retirement and social security. But if we could just find a way to make it all for ourselves and set our lives up to our fullest possibilities we wouldn’t worry about depending on any one or any program. It’s still every man for themselves.

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