Cut federal spending now instead of stealing the Social Security fund with more reforms.
In recent presidential elections, candidates reform Entitlement programs like Social Security: To be clear, Social Security will never go bankrupt, but politicians use the threat of “bankruptcy” to get all the spending they really want. (Related article: Brian Rive: “Too many politicians have been in power for decades. Term limits can get rid of them.”)
Don’t be fooled – the original 1983 Social Security Reform In practice, it meant taking money from excess Social Security payroll taxes to fund the rest of the welfare state.If you don’t believe me, ask yourself: Why are politicians so keen to “reform” a program that will take a decade before benefits need to be adjusted?
The Social Security system will not “go bankrupt.” Once the accumulated trust fund balance is depleted, the Social Security system will essentially revert to a cash-in, cash-out system. Benefits cannot exceed benefits. Thus, if the money flowing into the system does not cover the projected costs of benefits, benefits will be reduced. Past reforms have Raise Retirement age and taxation advantage This was clearly a diminished return for those affected.
Would extending the life of Social Security prevent the federal government from responding to its spending appetite? Office of Management and Budget (OMB) Historic Social Security data.
The main trust fund was the first and largest. Old-age and Survivors Insurance Trust Fund (OASI). Funding From 1937 to 1983, the fund brought in $1,312 billion and paid out $1,303 billion, meaning it had a slight cash surplus of $9 billion during those years.
However, between 1976 and 1983, the government had a negative cash balance, spending $30.8 billion more than it received. 1983 Social Security ReformThe reforms raised the retirement age, increased contribution rates and began taxing some benefits.
From 1984 to 2023, OASI received about $2.7 trillion more in cash contributions than it paid out in benefits, the report said. data From OMB.
This excess cash was used by the US Treasury to cover annual deficit spending and replaced the cash with intergovernmental debt, meaning the Treasury gave the OASI Trust Fund an IOU of approximately $2.7 trillion. These funds that the Treasury owes to Social Security are commonly referred to as Trust Fund Balances. So when you hear that the OASI Trust Fund will be “depleted within 10 years,” this is the money that is provided if Social Security’s contributions cannot cover benefit payments.
Starting with the 2021 federal fiscal year, OASI has had a string of negative cash flow years. Annual payments to beneficiaries have again exceeded total cash contributions from workers, employers, and interest income. (Note that reserves were negative in 2018, but increased in FY19 and FY20.) This situation is expected to continue until all dollar accumulations are depleted, around 2033.
Ten years may seem like a long time from now, given the delays Congress typically takes in putting together its annual budget, and you’re not wrong. What Social Security reformers want to prevent isn’t the depletion of the trust fund. What they want is for Social Security to generate a positive cash flow for the Treasury each year, making all other programs, like Medicaid, less vulnerable to the financial pressures of cuts.
How? Go to the official Social Security website and OASI Datawe can see that the trust fund is declining by about $170 billion from 2020 to 2023, from $2.812 trillion to $2.641 trillion. This is not a relatively large amount, given that the federal government’s annual deficits over that four-year period amounted to about $9 trillion.
However, instead of contributing the excess to the Treasury, the Treasury had to repay its debt to OASI in cash.
So when our nation’s politicians talk about reforming Social Security (increasing Social Security contributions, deferring benefits, etc.), we know what the game is now: cut benefits slightly for recipients, increase taxes on current workers, and take the surplus and use it to fund existing programs.
Reliance on borrowing to expand government (including borrowing from Social Security contributions) is one of the reasons the US government is facing a debt crisis with the federal debt approaching $35 trillion. Stop embezzling from the Social Security Trust Fund. Cut spending on all other programs first, because we can’t wait 2 years, let alone 10, to prevent a debt crisis.
Fred Birnbaum is director of legislative affairs for the Idaho Freedom Foundation and Idaho Freedom Action.
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