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by Don Azarias
January 1, 2013
According to the trustees who oversee the retirement and disability program, the trust funds that support Social Security will run out of money in 2033, unless Congress acts. At that point, Social Security would collect only enough tax revenue each year to pay about 75 percent of benefits. That benefit cut wouldn’t sit well with the millions of older Americans who rely on Social Security for most of their income. And, of course, we all know that if Congress, indeed, act, its only option of funding the Social Security program is through borrowing which, in the final analysis, would only add to more U.S. debt and deficit. What gives?
For the readers’ information, Social Security is currently paying more in benefits than it collects in taxes. This could mark the beginning of the end for one of the greatest pieces of legislation ever enacted by Congress during President Franklin Delano Roosevelt’s administration.
Social Security serves as the primary lifeline for millions of retired and disabled workers. It’s all they have to live on, even though monthly benefits are barely enough to keep their heads above water. Monthly payments average $1,237 for retired workers and $1,111 for disabled workers. A vast majority of them rely on it for 90 percent or more of their income. It is already the largest federal program and it’s getting bigger as millions of baby boomers reach retirement age. More than 56 million retirees, disabled workers, spouses and children get Social Security benefits. That number will grow to 91 million by 2035, according to congressional estimates.
Despite the program’s long-term problems, Social Security could be fixed and preserved for generations to come if only those lawmakers on Capitol Hill—with a forceful prodding from the White House—would try to find a common ground. Some options could affect people quickly, such as increasing payroll taxes or reducing annual cost-of-living adjustments for those who already get benefits. Others options, such as gradually raising the retirement age, wouldn’t be felt for years but would affect millions of younger workers.
Political leaders in Washington, D.C. know that fixing Social Security won’t be easy. All the options carry political risks because they have the potential to affect nearly every U.S. family while angering powerful interest groups. Liberal advocates and some Democrats oppose all benefit cuts; conservative activists and some Republicans say tax increases are out of the question. And we have to remember that bipartisanship is not a political mantra during an election year like the one we had this 2012. .
For the elderly and the disabled, their concern about losing their benefits or seeing them cut is justified. It behooves the White House and Congress to act sooner rather than later because the crisis that the Social Security faces is getting closer and closer to reality and would only get worse the longer they wait.
Those Social Security recipients must be made aware, if they don’t already know, that Social Security has built up a $2.6 trillion surplus over the past 30 years and that Social Security benefits are entirely self-financing. I’m almost certain that there are some people who have no idea that the federal government is using Social Security funds, not currently being used to pay recipients’ benefits, to finance other government spending.
Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets (very liquid securities that can be converted into cash quickly) to secure workers’ paid-in contributions. Instead, it holds non-negotiable United States Treasury Bonds and U.S. securities backed “by the full faith and credit of the government.” In short, the government owes the money, which is collateralized by non-negotiable U.S. Treasury Securities. The Trust Fund cannot resell these government bonds on the secondary bond market. These bonds can only be sold back to the government at face value, which is to its advantage when interest rates rise. The whole deal is so ridiculously one-sided in favor of the U.S. government that it’s almost unbelievable to say the least.
These are the facts that are being overlooked, intentionally or otherwise, by the White House and Congress. They seem to forget that the money in the trust funds has been spent over the years to help finance other government programs.
Advocates for Social Security say the program is being unfairly blamed for the budget deficit. The federal government had, for years, been using and abusing the Social Security’s assets as if there’s no tomorrow in funding those unaffordable and wasteful federal spending and those Congressional lawmakers’ pork barrels. The Social Security did not cause the nation’s fiscal problems. For the past 30 years, the Social Security has been generating big surpluses to finance the federal government’s spending spree. The program actually reduced the government’s borrowing on high-interest public debt markets. The federal government has been running up big budget deficits in recent years. The national debt now tops $16 trillion, including the $2.6 trillion owed to Social Security.
The Social Security’s financial shortfall is being exacerbated by the economic downturn. Payroll taxes that finance the program are down and applications for benefits are rising because of the high rate of unemployment. The growing number of baby boomers are starting to retire and applying for benefits and, thus, putting further strain on the system’s precarious financial position.
All of us, retirees and every American taxpayer, who contribute to the Social Security must now take the cudgels in order to preserve its very life and viability. We can’t trust those politicians in Washington, D.C. to work for our cause. The benefits we receive from Social Security are so miniscule compared to what those White House and Capitol Hill occupants will get when they leave office. But still, our Social Security benefits are all we got and that’s our lifeblood when we retire. If we don’t do anything, ours and our children’s children’s retirement days will be consigned to a life of poverty.