BY J. ARTHUR RATH–Do you enjoy card trickery? That’s when a magician-type tells you: “Now you see it, now you don’t?”
In Hawaii Reporter Sven Larson states: “As this is written, in
August 2010, the Social Security system is running a deficit. Its
ability to support future retirement benefits for Americans is
rapidly withering away. Fixes have been offered, but they all
center in on postponing the inevitable: neither higher taxes nor
cuts in benefits will save the system from its demise.”
Scary. However: In 2007, the cumulative excess of Social Security
taxes and interest received over benefits paid out stood at $2.2
trillion. That’s because Social Security taxes are paid into the
Social Security Trust System maintained by the U S. Treasury.
Current year’s expenses are paid from current Social Security tax
revenues. When revenues exceeds expenditures, the excess is
invested in special series, non-marketable U.S. Government bonds.
The Social Security Trust Fund indirectly finances the federal
government’s general purpose deficit spending. Quite a pile built
up while the government spends, spends, spends thanks to
deductions from our paychecks.
In 2009 the Office of the Chief Actuary of the Social Security
Administration calculated an unfunded obligation of $15.1 trillion
for the Social Security program. (The unfunded obligation is the
difference between the present value of the cost of Social
Security and the present value of the assets in the Trust Fund and
the future scheduled tax income of the program.) Therefore, Social
Security’s ability to make full payments, once annual benefits
exceed revenues, depends in part on the federal government’s
ability to make good on the bonds that it has issued to the Social
Security trust funds.
As with any other federal obligation, the federal government’s
ability to repay Social Security for the money it spent is based
on the power to tax and the commitment of the Congress to meet its
obligations.
Can Sven tell us the rest of the story so it doesn’t appear that
old-timers are sucking blood out of the system that ought to be
flush?
J. Arthur Rath III is a Hawaii-based writer who once headed Rath
Seniors’ Research. Reach him at imua@spamarrest.com