Social Security, which celebrates its 79th birthday on August 14th, is one of our most successful federal government programs, paying out every benefit owed since 1935 and keeping many seniors and disabled out of poverty. And that’s why Republicans and their Wall Street overlords want to drown the beloved program in a bathtub.
The next time someone tries to convince you that the Social Security trust fund is empty, show them this accounting statement. Notice how in 2013, the trust fund earned $103 Billion by loaning the surplus back to other parts of the U.S. government. That's a 3.75% annual rate of return and makes more economic sense than stuffing the money under the mattress (or in a lock box) where it earns no interest and gets eaten up by inflation.
Also note that the outlays for Disability Insurance (DI) exceeded income by $32 Billion so that amount of treasuries had to be sold by the Disability trust fund. How could all this happen if the trust fund were empty? On the contrary, as I illustrated in an earlier diary, the Social Security Trust Fund is America’s largest creditor:
According to the recently released annual report of the Social Security & Medicare Boards of Trustees, the Old-Age & Survivors Insurance (OASI) program can pay out full benefits until 2034. After that, even if nothing is changed, it can still pay out 77% of benefits from its dedicated payroll tax.
A 23% cut to seniors is a terrible thing, but it’s hardly a 100% cut as if the Old-Age fund were completely empty. The Trustees specifically define “solvency” to mean the program can pay out full benefits for the next 75 years! That is a very high bar and not the common definition of “solvent.”
The Disability Insurance (DI) fund is a much more urgent matter. Its trust fund will be depleted late in 2016 — just two years from now! After that, if nothing is changed, it will only be able to pay out 81% of benefits owed. By law, the OASI and DI trust funds are two separate accounts and cannot pull from each other. In 1994, however, Congress temporarily reallocated the payroll tax to make up a shortfall in DI. Normally, OASI gets a payroll tax of 10.6% and DI gets 1.8%, with the employer and employee each paying half.
There is an easy, permanent fix to all this — just scrap the wage cap and collect payroll taxes on earnings over the arbitrary $117,000 (in 2014). Back in 1983, 90% of all income in the U.S. fell under the cap and was subject to the Social Security tax. With growing income inequality and more income going to the top, now only about 83% of all income falls under the Social Security cap. So we could either raise the cap to $180,000 to make sure the tax once again reaches 90% of total U.S. income, or even better, just scrap the unfair cap all together. The Medicare payroll tax (for Part A Hospital portion) has no such wage cap.
And let's not forget that getting unemployed and underemployed folks back to full employment, as well as raising the minimum wage, will bring in more payroll taxes and further improve Social Security projections.
I’ll take a look at the Medicare books in my next diary.
If you would like to compare the 2013 Social Security finances to the 2012 finances, follow me below the orange squiggle...