Let’s talk about the Social Security Trust Fund.
By law those of us in the system must pay 6.2% of our paycheck up to $110,100. Our employer must pay an additional 6.2%. Congress reduced the employee portion to 4.2% as part of the financial “recovery” effort. The 2% reduction is scheduled to be terminated on January 1, 2013 and we will be back to 6.2%.
The money gets deposited primarily into two accounts–one for retirement and the other for disability. The law calls these “Trust” Funds.
Most of us think of a bank or financial institution when we think of a trust. Indeed the people at Oxford Dictionaries define trust as ” an arrangement whereby a person (a trustee) holds property as its nominal owner for the good of one or more beneficiaries”. The word “holds” says a lot — we do not expect our trustee to spend or sell our property and then pay us off when we want our value — we expect the trustee to hold our money.
Sadly, the use of the word trust here is a deception. The law allows the United States government to borrow money from the funds with the promise that they will pay it back when the funds need money. Right now more money comes into the funds than gets spent on benefits. The remaining money we deposit gets spent right away by the government. At the end of 2011 the government had borrowed about $2.7 trillion dollars of our money with the promise (“the full faith and credit” of our government) to pay us back.
Sure, and the check is in the mail. They have already spent the $2.7 trillion dollars. There are only a few ways that the money can be recovered:
- Increase the number of payers and/or the amount that they pay. This is a Ponzi scheme that requires younger people to pay for older ones.
- Decrease the benefits paid out. Lower payments, introduce means testing (“you paid in but you don’t need it”), make you wait longer before you can start to draw benefits.
- Pay with general revenue funds. Tax more or spend less. Either way it is still a Ponzi scheme.
Then again maybe they will not pay us back. I doubt that Congress would openly default on the loans. More probably they will come up with some new program and just dissolve the program that you and I paid into.
They never intended to put our money in trust.
If you don’t agree with my analysis, read this from a former President’s state of the union speech:
“Some in our country think that Social Security is a trust fund – in other words, there’s a pile of money being accumulated. That’s just simply not true. The money – payroll taxes going into the Social Security are spent. They’re spent on benefits and they’re spent on government programs. There is no trust.”
You and I would go to jail for implementing such a scheme.
The price of liberty is eternal vigilance.
elpasospeak 
Ouch! Can you say “lock box”? I would be happy to waive my social security benefits if the govt would simply return all of the money I have paid in — with interest.
I suggest you now address the vast government pensions and benefits paid to members of congress et al (not sure what members of our state legislature receive). How do we get rid of those expenses? Most of those folks don’t really need the pensions and benefits. They do quite nicely with the money they make by leveraging their power (votes) while in office and their residual influence after they leave office.
Those in government — both representatives, appointees and employees — are now the privileged class. Nice work if you can get it.
LikeLike