AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (15 comments)

  1. The debt owed to as was FICA taxes loaned to govt so they would not have to sell more notes to the public until as needs the money back. What is there to fix?

    At some point without some changes SS will only be able to pay out 75% but it will not get gen fund money by law unless Congress changes that and its ,much more likely that they’ll change FICA. Even then the amt compared to the deficit is a gnat on a dogs butt

    1. That’s like saying that you earned some money and put some of it in your right and and some of it in your left hand. Your left hand spent all of its money, and your right hand spend only a portion of its money, but you then took the money out of your right hand and put it in your left hand to spend. Now, neither your right hand, nor your left hand has any money, but you’re going to pretend that your right hand is solvent because your left hand owes it some money. Problem is that YOU are broke – it is irrelevant which hand is holding the money/debt. YOU are broke and piling up debt.

  2. Why not focus on arguing about how to fix it?

    What’s the rush?

    The CBO baseline (ignoring off-setting receipts) is that Social Security is projected to rise from $0.725 trillion today to $1.35 trillion in 2022, an 85% increase.

    Likewise, Health Care is projected to rise from $0.856 trillion to $1.837 trillion, an increase of 115%.

    The near term priority “fix” is Health Care.

    1. Both results appear catastrophic. And didn’t we just “fix” Health Care with APA? Wasn’t that the whole point?

      1. Both results appear catastrophic.

        No, GDP is projected to rise from $15.5 trillion to $24.7 trillion, a 60% increase. Reconfiguring the nominal data, SS rises from 4.7% to 5.5% and Health Care from 5.5% to 7.4% of GDP.

      2. robert1014

        No, the point of APA was to allow Obama to simultaneously claim he had provided an important “fix” to our health care problem while, in truth, handing a huge gift of a new audience of captive customers to the private health insurance carriers…a boon to them of millions of new dollars pouring in. The whole thing is a scam.

        The only true fix to our health care is to remove private insurers from the process altogether, and implement a national healthcare program, a “Medicare for all,” as it has been termed.

        Anything less is a fraud that serves the interests of the health care profiteers.

  3. by law, social security benefits must be paid out of the trust fund; so they cant have an impact on the federal budget…

    1. correct – SS comes from FICA. but the path is through the Trust Fund. Every penny in the trust fund came from FICA. If it is ‘gone’ – it’s not because social security is unsustainable, it’s the opposite. it generated a surplus and the surplus was taken.

      An unfunded liability is benefits you own but don’t have the money for.

      SS, by law, cannot pay out more than FICA generates (unless the law is changed).

      but there is no shortage of GOP and AEI and allied who insist that SS impacts the budget

      If you dissolved the trust fund tomorrow, SS would automatically reduce to 75% payouts and every penny would come from FICA and nothing would come from the general fund.

      these are not obscure facts. You can find them at a variety of credible websites BUT… one does have to want to know the truth – to seek it actively.

      1. “correct – SS comes from FICA. but the path is through the Trust Fund. Every penny in the trust fund came from FICA”

        That’s not true. The Trust Fund is currently counting over 105 Billion in interest payments annually as income. It also includes some 20 Billion paid as income taxes on benefits annually. I would argue the latter is double counted as I can’t find any citation where the Federal government discounts this revenue from Federal Income tax revenue.

        Greg’s previous post is correct. We are basically kiting. The real tragedy is the same people who are going to be expected to accept lower SS benefits (both in growth and initial age for collecting these benefits) and pay higher payroll taxes (both as a percentage and on a higher wage cap), are also going to be expected to pay the accumulated interest that makes the Trust Fund whole. Any computation of rates of return for future generations should include all these factors and show what a horrible deal SS is going to be for our kids and grandkids.

        1. “correct – SS comes from FICA. but the path is through the Trust Fund. Every penny in the trust fund came from FICA”

          “That’s not true. The Trust Fund is currently counting over 105 Billion in interest payments annually as income.”

          ALL the 100+ trust funds do that – they get paid interest on what they loan the govt, This is nothing unique to SS on this.

          “It also includes some 20 Billion paid as income taxes on benefits annually. I would argue the latter is double counted as I can’t find any citation where the Federal government discounts this revenue from Federal Income tax revenue.

          what “counts”? Are you talking about means-tested SS benefits?

          “Greg’s previous post is correct. We are basically kiting. The real tragedy is the same people who are going to be expected to accept lower SS benefits (both in growth and initial age for collecting these benefits) and pay higher payroll taxes (both as a percentage and on a higher wage cap), are also going to be expected to pay the accumulated interest that makes the Trust Fund whole. Any computation of rates of return for future generations should include all these factors and show what a horrible deal SS is going to be for our kids and grandkids.”

          the TRUST fUNDS ALL WORK THE SAME WAY – There is NOTHING UNIQUE about Social Security.

          ALL pay-as-you-go insurance WORKS THE SAME WAY.

          If you buy auto insurance, your premium goes to pay for someone else’s crash – and if the number of crashes increase the your premiums will increase.

          The Military Pension Fund has the SAME DEMOGRAPHIC issues as Social Security does. There are currently twice as many retirees receiving benefits as active duty.

          Where do you think the money comes from to pay those benefits – from your grandkids?

          this is stupid., Are ya’ll so ideologically opposed to SS that you ignore all the other things that work just like it does … ????

          If you are not stupid but instead ignorant (like all of us are – just on different subjects) – get smart on how SS, trust funds, and pay-as-you-go insurance works – and you’ll see that SS is not unique at all. It’s just another pay-as-you-go program that temporarily keeps premiums received in a “interest-bearing account (private) or trust fund (govt).

          If you want to oppose SS as a concept then be educated enough to oppose in on principled grounds and reject the AEI propaganda .. think for yourself don’t be gullible to propaganda.

          1. “ALL the 100+ trust funds do that – they get paid interest on what they loan the govt, This is nothing unique to SS on this.”

            You claimed all the money in the trust fund came from FICA. I just pointed out that wasn’t true. What difference does that make to how other trust funds work?

            “If you want to oppose SS as a concept then be educated enough to oppose in on principled grounds and reject the AEI propaganda .. ”

            I’ll let my previous post stand for itself. Which fact or statement in it was false?

          2. re: FICA and Trust Fund

            ALL Funding is FROM FICA guy. The interest paid is on the FICA money.

            and it’s that way for the military trust fund, the gasoline tax trust fund, etc.

            they all work the same way. They all have dedicated funding streams and if they loan money to the govt, they get interest on it.

            I’ll say again. Get educated. Know the facts. And if you opposed SS then do so on principle not propaganda and misrepresentations.

            Much of the problems that we have on the SS issue is just plain ignorance.. some of it willful and other just gullibility of those too lazy to get the facts.

          3. “ALL the 100+ trust funds do that – they get paid interest on what they loan the govt, This is nothing unique to SS on this.”

            Are you really claiming all trust funds, collect taxes (via a payroll tax or some other dedicated tax) as does SS, and then lend excesses collected by these taxes back to the government?

            SS/Medicare are unique in that they generate their own revenue. All other trust funds are set up to simply account for their obligations. They have no excess, neither to lend nor invest.

            “what “counts”? Are you talking about means-tested SS benefits?”

            See ssa.gov. The accumulated trust fund includes FICA taxes, interest earned and INCOME TAXES collected on SS benefits.

            “If you are not stupid but instead ignorant (like all of us are – just on different subjects) – get smart on how SS, trust funds, and pay-as-you-go insurance works ”

            The pot calling the kettle black?

            BTW, are you going to admit the SS trust fund derives revenue from sources other than FICA or not? I realize admitting so kind of ruins your argument about all trust funds being the same.

  4. If you dissolve the trust fund and set SS outlays to intake, then it wouldn’t affect the budget. But if you don’t, then the money from the trust fund has to be paid out and that affects the budget because that money has to come from tax receipts or new federal debt. I know that you think that it is possible to owe yourself (or your left hand to owe your right hand) money, but it’s not. These are not obscure facts.

    1. If you actually read how trust funds work – more than 100 of the INCLUDING the Military pensions and health care – then you’d know that this is not unique to Social Security at all.

      The govt gets revenues from more than 100 other sources than general taxes. each one of these revenue streams goes into it’s own trust fund (including FICA which goes into 3 separate trust funds).

      The govt set up ALL of these trust funds to work THE SAME WAY – there is nothing UNIQUE about SS.

      Why do folks say that SS is causing the deficit and want to reform it but ignore the other 100+ trust funds including the military .. no need to get rid of them because they are also involved with “deficit spending”?

      give me a response to that.

      all of these funds were set up to loan money to the Govt when the govt was spending more than it was getting in revenues – deficit spending.

      the govt prefers that – to owe itself – rather than selling more t-bills to cover the debt. ultimately, when these funds reclaim their loaned money they govt then has to sell T-bills to cover the transaction.

      This is the way ALL of those trust funds were set up to function – on purpose.

      Why is the focus solely on Social Security which is just one of over one hundred similar trust funds?

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