Yes, I had heard about problems we will have when the full impact of Social Security and Baby Boomers come together, but reading the testimony of Michael Tanner, Director of Health and Welfare Studies, Cato Institute before the Senate Special Committee on Aging, September 24, 1996, really opened my eyes.
We have all heard stories about Social Security not being able to meet it’s obligations in future years, but reading this learned fellows testimony is a real downer! Misery loves company, so if you don’t mind I will share some of his information with you.
Currently, Social Security taxes bring in more revenue than the system pays our in benefits. The surplus theoretically accumulates in the Social Security Trust Fund. It is estimated this situation will be reversed as early as 2012, and SS will begin paying out more in benefits than it collects.
When this begins, we will begin drawing on surplus monies in the Trust Fund. This will then bring out of the darkness, some light, showing the Trust Fund is little more than polite fiction.
For years, the federal government has used the Trust Fund to disguise the actual size of the federal budget deficit, borrowing money from the Fund for current operating expenses; replacing the money with government bonds.
Mr. Tanner estimated these bonds will need to be turned in to the Federal Government, who has no cash or other assets with which to pay off those bonds. Will the government have to raise taxes to make good on the bonds to continue paying promised benefits? How else could they meet these SS obligations if they didn’t raise taxes?
Pyramid schemes are illegal in all 50 states. Social Security’s financing problems are the result of its fundamentally flawed design. Today’s benefits are paid by today’s taxes from the young. Tomorrow’s benefits to today’s young are to be paid by tomorrow’s taxes from, tomorrow’s young.
Sound like a pyramid scheme going amuck? We are living longer, the birth rate is declining; in 1950 there were 16 workers for every SS beneficiary, by 2030 there will be fewer than two.
Glad you were around to share this information with me. Way too much for one man alone to handle.