Social Security will take in less revenue next year than it will pay out for the first time since 1982. Absent changes to the program’s funding structure, the Social Security trust fund is expected to run out in 15 years, at which point retirees would see an across-the-board benefit cut of roughly 20 percent.
FDR instituted the FICA tax to reduce the resource consumption of workers, while retaining their legal claim on those resources in the future, not just their pay. He was functioning in a gold standard economy and couldn’t have dreamed that American workers would one day make very few of the products they purchased. His econ reasoning was sound, as all economics boils down to resources. That reasoning has been turned on its head, especially by global sourcing of goods that disconnected labor from production.
Treasury bonds are an excellent store of value for anyone who isn’t the federal government. They never “funded” any spending at the federal level, instead, drawing down currency that resulted from any deficit spending, which had an entirely different meaning with a gold reserve to defend and a currency that was convertible to gold on demand. The monopoly issuer of the currency has never “needed” to borrow its own currency except to prevent inflation. In fact, if it doesn’t spend in excess of collected taxes there are no excess reserves required to purchase bonds. One can more accurately state that deficits “fund” bond issues than the reverse.
The bottom line is that the “fund” is, and always has been, empty of any real money. As the bonds mature they are recapitalized with new money creation from general accounting, not dug out of some vault at Treasury to be paid to beneficiaries. Only some creative accounting that makes bonds both liabilities and assets covers this, but anyone familiar with Treasury and Fed reports can easily prove it to themselves by looking at the “debt service” category in the nondiscretionary budgets for any period of time. Of the $20+ Trillion of the national debt somewhere south of $15 Trillion is actually owed to non-US government entities. The rest are debt the government owes itself, including Social Security, Medicare, government retirement, etc. They are nothing but accounting place markers.
There were many long discussions in Obama’s cabinet at the time he placed a moratorium on FICA deductions to stimulate the economy around making the moratorium permanent. Reducing the buying power of Americans by 12+% makes no sense now that the fiat currency is available to Congress in unlimited amounts and not dependent upon revenue. Production is now mostly offshored as well, so there is little advantage to taxing Americans to move any portion of that productivity forward in time by reducing present demand.
Given that the fund does nothing to reduce the cost of benefits to retirees it is only political gamesmanship to suggest that seniors should be penalized for propaganda value. Social Security has been in Republican’s sights since the day the program was rolled out and the lower than snakes politicians are now using the very tax that FDR instituted to “protect” his program against it. If the general population understood federal spending and how bonds work there would not be another Republican elected for a generation as punishment for this massive con on the working class.
