Tell me again, how does Social Security increase the deficit??

[kentuck]

I thought it was in surplus for several more years and that the government was borrowing the money from the SS fund to pay for some of their programs?? Now, Medicare and Medicaid are problems to be dealt with, but Social Security? How does it increase the deficit?

Can someone explain?

Morning Joe was going on and on that we had to cut SS and the defense budget if we want to get control of the deficit. Does that mean if they cut SS, then the government will not have the money to borrow and the deficit will go down by default? What do they mean?

[stevebreeze]

1. that money they borrowed from SS to pay rich people's tax cuts?

They don't want to have to pay it back to working people.

[kentuck]

3. So, if they can write it off...?

..the deficit will magically shrink?

[Statistical]

8. No but those repayments won't contribute to the deficit.

[Statistical]

18. Er the above post shoulld say "will contribute to deficit".

[Statistical]

2. It will (in the future) contribute to the deficit. Eventually that surplus will need to be repaid.

Starting in 2016 SS is projected to go cashflow negative (benefits + cost > taxes + interest). To make up the difference the SSA will begin redeeming bonds in the SSA Trust. Selling rather than purchasing bonds will mean a net deficit rather than a net surplus.

There is $2.5T in the trust fund. The bonds *SHOULD* be repaid but they will contribute to the deficit when repaid.
When it does those repayment will contribute to the deficit. One way to look at it is the value of the trust fund represents the future deficits that repayment will cost.

Some here (not you) would like to pretend that isn't the case. You can't repay the trust fund without contributing to the deficit.
Today SS provides a surplus to the budget.
In the FUTURE it will provide a deficit to the budget.

[Angry Dragon]

4. All it means is that not all the neurons in a

radical republican right brain fire correctly.

SS has nothing to do with the deficit

[kentuck]

7. Since the money was taken directly from the American workers...?

shouldn't it be the first thing they pay back??

[Angry Dragon]

12. There is a republican in congress that says

any money to be paid to anyone should go to the Chinese first
and not sure of his reasoning ......... hard to figure those people out

[Javaman]

5. It won't. nt

[Make7]

6. The previous surplus funds from S.S. were invested in U.S. Government bonds.

When S.S. starts to take in less money than it pays out, those bonds will be redeemed to make up for the S.S. shortfall. The funds to pay off the bonds will come out of the General Budget, thus increasing the deficit.
 

[kentuck]

9. But isn't that 15-20 years down the road??

They need to address the present problems, not future problems.

[Statistical]

10. The SSA trust fund will be exhausted in 26 years (2037) but SSA will run deficit LONG before that.

It is the running of deficits which will exhaust the fund.

Example:
you have $10,000 in savings. You draw $500 per year for 20 years (more like maybe 26 with value of the interest). You are running an annual deficit now (-$500) your savings account will be exhausted in 26 years.

Of course that assumes no changes to cap, contribution rate, or participation (some govt employees are exempt).

[kentuck]

11. Will it be exhausted or only able to pay 75% of benefits?

if there are no changes?

[Statistical]

13. It will be exausted and THUS only pay 72% of promised benefits.

In essence the payroll tax in 2037 will be able to pay 72% of promised benefits.

This is similar to 2036 projection. Current year payroll taxes pay for roughly 74% of promised benefits and the SSA Trust fund pays the remaining 26% or so.

In 2037 with no more funds in SSA Trust fund benefits can and will still be paid they would simply need to be reduced to roughly 72% of promised amount. To pay more (a higher % of promised benefits) would require higher contribution rate, more participants, raising the cap, or some prior year changes which result in a larger surplus which won't be exhausted until a later date.

[kentuck]

14. That seems worthy of doing...

to save such a valuable program. It's a minimal sacrifice.

[Make7]

17. Well, it sort of depends on when the economy recovers.

Current projections of the Social Security Administration indicate that income (excluding interest from current trust fund holdings) will fall short of outgoing payments every year after 2014. If interest income is included (which it should be), the shortfall doesn't start until 2024 (under current projections). Of course, if the economy stays stagnant for much longer than projected, those dates may come significantly sooner.

So I agree this isn't an immediate problem, and the solutions aren't at all difficult - raise income taxes slightly on the highest bracket, raise the capital gains taxes slightly, and close many of the corporate tax loopholes to generate the income to pay off the trust fund.

The two problems with addressing the issue are that people attacking S.S. will say that the shortfalls start in a few years because they neglect to include interest payments made to S.S. on the current trust fund holdings. But the larger issue is trying to get wealthy people to pay slightly higher taxes when the government tends to serve their interests at the expense of the people who actually need Social Security. If rich people didn't make the laws to benefit rich people, we probably wouldn't even be having this discussion.
 

[Skink]

15. The republicans think SS is a ponzi scheme and thus they could borrow as much as they wanted.

[hfojvt]

16. if you just look at payroll taxes

for 2010 http://www.ssa.gov/oact/trsum/index.html

revenues
social security - 570.4
disability - 96
medicare - 190.9
total = 857.3

expenses
social security - 564.3
disability - 109.3
medicare - 242.5
total = 916.1
medicare part B - 209.8

total = 1125.9

net deficit = $268.6 billion

the trustees report also includes a) interest income and b) taxes on benefits
the taxes on benefits were only $34.3 billion
and interest income was $133.7

which still leaves a deficit of $100.6 billion

more to the point, the $133.7 billion in interest income is not revenue that the government gets, it is revenue that the government must pay, so it should really be added to the deficit instead of subtracted making a deficit of $368 billion.

Much of that deficit currently is from medicare and medicare part B. The sociail security part is projected to have surpluses of over $100 billion a year through 2019, but much of those surpluses probably come from interest "income", which actually adds to the deficit/debt.