Since the 1980s the Social Security Administration (SSA) has been collecting more in taxes than it pays out. This is a good thing because it allows the administration to build up a surplus that will be needed later. The 80s and 90s were when the Baby Boomers were making the good money, and paying into Social Security. Now they’re old, reaching retirement age, and ready to start drawing on that surplus they build up.
But, the government couldn’t keep their paws off the SSA trust fund and started borrowing from it. This was a better alternative than going to foreign investors to raise money for government spending. But, like any borrowing, it must be paid back. Starting this year, the SSA is going to be calling in those loans. That’s because this year the SSA starts paying out more than it takes in, about $29 billion worth.
These IOUs are in the form of Treasury bonds and they are kept in a physical location. The Bureau of Public Debt in Parkersberg, WV houses a safe that contains all the post-it notes bonds. This is a different method of bond tracking because most bonds issued by the government exist only in electronic records. Supposedly the government printed these bonds to show a commitment to repaying them. Thank goodness, this of course means they aren’t committed to paying back all the other debt.
This is an important milestone in the eventual bankruptcy of the US predicted financial issues of the future. 2010 is the first year we really start the process of supporting the Baby Boomer generation. The government is going to have to borrow more money than before to keep all programs afloat and pay back the SSA. I do not know whether current deficit estimates include the increased borrowing to pay back the SSA, I hope they do.
News like this raises the question again of what is going to be done to fix Social Security? Right now you get full benefits at 66 (67 if born after 1960). There are only two realities with Social Security, you must either increase the tax or increase the age limit to ever balance this thing again. My expertise in the area is limited, so I don’t know what will be best. All I’m doing is assuming that I’ll pay into Social Security for my entire career and never see a thing back. Unless you’re a boomer, you shouldn’t assume you’ll get anything either.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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I felt the same, but somehow I’m able to collect my benefits.
You may be able to collect yours.
Raising the age is necessary. But, what’s more necessary is legislators with backbones. Those are in very short supply
Regards
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