Lately I have been seeing a lot of people writing and complaining that Social Security should not be lumped in with the rest of the national budget and debt for cuts, because it has its own trust fund and so is separate from the rest of the national budget.
This is true to a certain extent. However, what these people aren’t saying is that all of Social Security’s trust fund has been lent to the rest of the federal government. Therefore, it is only available for Social Security in the event that the federal government does not default on its debt. In a hypothetical situation as was being discussed at the end of July, if the federal government runs out of money because Congress does not raise the debt ceiling, there is no separate pot of money for Social Security to tap for its checks. In that event, the only money Social Security would have is the current money being paid in by current workers, which would not cover its obligations to retirees.
I hate to tell this to the baby boomers who believe that nothing is wrong with Social Security, but if nothing is done about it, the trust fund will be exhausted by 2036. In a 2011 report, the trustees of the fund wrote, “(a)nnual cost is projected to exceed non-interest income in 2011. … However, total income, including interest earnings on trust fund assets, will be sufficient to cover annual cost until 2023. The dollar level of the combined trust funds is projected to be drawn down beginning in 2023 until assets are exhausted in 2036.” After the trust fund is exhausted, then obligations to retirees must be met by current worker payments, which are insufficient due to the size of the baby boomer generation and increasing longevity.
If nothing is done to fix Social Security (e.g. making income over $250,000 subject to payroll tax as Sen. Bernie Sanders has suggested), there is no way it can pay to the baby boomers’ children the money they have been promised. By closing your eyes to the future, you are sponging off your children and destroying any hope they have of getting back the money they are paying into Social Security.
This column was first published in the (Idaho Falls) Post Register on September 1, 2011.
- Social Security Disability running out of money … is there any wonder? (quinnscommentary.com)
- Retirees Increasingly Depending on Social Security (money.usnews.com)
- Understand the Right’s Attack on Social Security (charlog.wordpress.com)