Congress Q&A: Social Security
By Frances Symes
http://www.congress.org/news/2011/02/28/congress_qa_social_security
"Has Congress ever borrowed funds from the Social Security trust fund since Social Security was originated? If yes, have any of those funds been paid back to Social Security?" — Richmond, Va.
The funding stream for Social Security has once again entered the limelight as political leaders discuss changes to mandatory spending, particularly Social Security, Medicare, and Medicaid, as a necessary part of reviewing government spending. Social Security was set up to be self-sustaining. According to the Congressional Research Service, Social Security benefits are funded from two linked but separate trust funds- the Old-Age and Survivors Insurance trust fund and the Disability Insurance trust fund. When people talk about the Social Security trust fund they often assume the merged operations of the funds, treating them as if there were one collective fund. The primary source of income for the trust funds is the Social Security payroll tax. They also receive income from interest on the trust funds’ assets and from the taxation of Social Security benefits. However, the benefits program has traditionally brought in more than it pays out. In fact, the nation has been supplementing its budgets with surplus funds from the program in recent years. What about the trust fund, you ask? Why aren’t the surpluses, left over after the costs of the program are covered, squirreled away for safekeeping ?
They are … sort of.
By law, if the trust funds take in more income from payroll taxes and taxation of benefits than they spend in a given year, the cash-flow surpluses are invested in interest-bearing U.S. government securities. In other words, the government uses the money for other purposes, such as tax cuts, spending, or repaying debt, while promising to repay it with interest. Income is deposited on a daily basis and invested in "special-issue" securities. The Social Security trust funds in turn hold IOUs "backed by the full faith and credit of the U.S. Government."
If the trust funds have a cash-flow deficit — spending more than they have received in tax income — Social Security can redeem any bonds, including interest, accumulated in previous years. Assets are then transferred from the Treasury’s general fund to the Social Security trust funds. However, this means that the Treasury goes further into debt in order to pay Social Security benefits if the government is already running a deficit, unless spending cuts or tax increases are put in place. According to the 2010 Summary of the Trustees Report, Social Security expenditures were expected to exceed tax receipts in 2010 for the first time since 1983. The report also projected that the combined Social Security trust funds are expected to be exhausted in 2037, at which point tax income will not be sufficient to pay the full scheduled benefits. The CRS points out that the Social Security Act does not include a specific “fail-safe” provision in case of trust fund exhaustion. It may be worth noting that Social Security has survived crises in the past. The Social Security Administration points out in an online Q&At hat the assets of the OASI trust fund, from which retirement benefits are paid, were nearly depleted in 1982. Congress enacted temporary emergency legislation permitting beneficiaries to continue to receive funds and later enacted legislation to strengthen the trust fund's financing.
Editorial : Let me see, If I have this correct ? I pay into a trust fund for payments of Social Security and Medicare. If there is a surplus, congress can buy US Securities,then borrow it to pay off debt and cut tax`s for the rich. I see no where in this report where it is, or has been paid back ! However, if they/ our politicians pay it back, it increases our indebtedness. What a terrible way to do business. Have we all gone nuts ? I also now know, why the Republicans call it an entitlement program. It is OUR MONEY ! Keep your hands out of the fund ! Problem solved ! It is not foreign Country`s or leaders we must fear, but our own Congress !
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