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Social Insecurity

Apr 3, 2010    •    217 Views    •    EST. TIME TO READ: 1 minute

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.

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