Is the Social Security Trust Fund Failing?

Reading Ronni Bennet’s excellent blog on aging recently, Times Goes By, I recalled a piece I wrote last summer, prior to the 2010 election on the strength of the Social Security System.  I did so because, as is the custom of conservative politicians during political campaigns, they are driven to disparage one of the most effective social programs this country has produced.  As many times as the evidence has concluded that Social Security is relatively sound and will be solvent for decades to come, those pandering to the financial interests in this country begin their henny penny shrieks about how it is doomed and will become a tax burden to us all.

Sadly the GOP was able to win back the majority in the House and their clamoring for “fixing” Social Security will be elevated to new heights.  This concern has brought many of  us who have retired and rely on social security to stay on our toes and watch for any sign that the bonds that hold this safety net in place are not untethered by the monied interests seeking to advance their vast fortunes even further at our expense.

Seeking to work with the new majority in the House, President Obama has indicated he may be willing to negotiate away some of our benefits that are already weakened by a tough economy and a stock market that’s as volatile and uncertain as ever.  This goes against everything that he promised us during his campaign; promises that led many of us to throw our support behind this political new comer over more seasoned candidates like Hillary Clinton, Joe Biden and Christopher Dodd.

I sincerely hope that this is only a head-jerk motion on the part of the President to see if he can expose some Republicans to their constituents back home who depend upon these benefits to literally survive.  But we mustn’t assume that Mr. Obama will not fall into the political trappings that all well-intentioned politicians inevitably do – breaking campaign promises.

U.S. Senator Bernie Sanders of Vermont

Image via Wikipedia

Bernie Sanders, Independent Senator from Vermont, has sent the President a letter (read it here) to not only remind the President of his promises but educate him about its true solvency and its beneficial contribution to people whose life-long income never allowed them to stow sufficient amounts away for their retirement  years.

Sanders’ letter essentially speaks to much of what my writing on this did 5 months ago.  It’s good to know that my efforts parallel that of a man whose expertise on this subject is of the highest caliber.  What follows then are my comments from last summer on a subject that most Americans, especially those over 50, should be knowledgable about and concerned to the point that they adamantly make their congressional representative aware of it.



Like the misinformed premature rumors of Mark Twain’s death a century ago, the demise of Social Security is greatly exaggerated. Depending on who you listen to, Social Security is already bankrupt or will be in less than 10 years. This uninformed rumor has reared its ugly head nearly every election cycle over the last 30 years. The truth is not so negative and not as complicated as many whose wishful thinking for this Great Depression era program to end would hope.

Social Security: Public Health nursing made av...

Image via Wikipedia

The economic collapse of 1929 wreaked havoc on American fortunes across the board. 1 in 4 people lost their jobs and savings accounts were wiped out. Especially hard hit were the elderly whose limited resources disappeared as over 10,000 banks went into failure, robbing them of what little they had set aside for their late years in life. It has been estimated that in 1934 over half of the elderly in America lacked sufficient income to be self-supporting.

Social Security in its early days was set up as a hedge against the inadequacies of an economic system that failed to provide a living wage and allow many workers to set enough aside to provide for their needs as they became removed from the work force. As our more urban and industrial society moved away from an agrarian economy, the extended family that took care of their aging parents started to disappear as children moved away from home to seek independent lives. Many elderly became renters rather than owners and relied on the services of strangers to provide the resources they had been able to provide for themselves on their small farms and ranches.

As the ability to fall back on assistance from family and a close-knit community disappeared, the elderly had no real resources to generate the revenue it required to buy the food, clothing, housing and heating fuel they needed. Many European countries had already been addressing the needs of the poor, especially the elderly. Theodore Roosevelt was an early champion of a system in this country that would fend off the “crushable elements at the base of our present industrial structure” that robs the elderly from “the human wreckage due to its wear and tear, and the hazards of sickness, accident, invalidism, involuntary unemployment, and old age”.

Roosevelt Signs The Social Security Act: Presi...

Image via Wikipedia

But it was not until Teddy’s cousin Franklin came along and made The Social Security Act of 1935 part of his New deal agenda did this serious issue finally get the attention it needed.

It’s a self-sustaining program that over the years has collected over $13 trillion while paying out $10.6 trillion in benefits. During lean years when revenues shrank due to high unemployment the surpluses that Social Security has acquired and earned interests on covered not only a growing number of recipients but was able to provide cost of living increases over the years. According to an Op-Ed piece by Nobel Prize-winning economist Paul Krugman, “Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.” (Attacking Social Security, by Paul Krugman, NYTimes, 8/15/10)

So where does the notion come from that Social Security is failing? In part it is due to the misunderstanding about how the social security funds collected from our payroll checks affect the larger U.S. economy. Social Security, along with Medicare and Medicaid make up the largest share of the government’s total outlays. But as a stand-alone entity SS outlays are no bigger than current Defense Dept. outlays. According to the CBO Social Security is considered to be an “off-budget” Treasury account. It is the rising health care costs in this nation that affect Medicare and Medicaid, impacting future deficits and by default dragging the SS program into the fray.

The anti-tax crowd within conservative ranks wants to eliminate this program as a part of their overall campaign to keep “big government” out of our private lives. Yet as an insurance program, the plan pays for itself much like it would in the private sector. The benefit for a federally insured program though is that costs are kept low and benefits high because overhead expenses are minimal and there is no profit motive to eat away at the premiums workers pay into this program.

Social Security will face some rough times in the coming years because a large segment of society known as the port WWII baby boomers are retiring and the demand for benefits will increase. Also, in these tough economic times older people are being laid off or forced to retire due to a shrinking economy, creating an even greater burden on SS benefits as many of these people choose to opt-in to the system early. The impact of this though as Paul Krugman points out is that it will only “cause the cost of paying Social Security benefits to rise from its current 4.8 percent of G.D.P. to about 6 percent of G.D.P.” – over the next 20 years. This is less than what the rise in defense spending has been since 2001 and yet there has been no hue and cry from conservatives about cutting defense spending to get the deficit under control.

Even though there will be a higher proportion of retirees vs. work force over the next decade or so, past SS surpluses that were set aside should help to adjust for this for at least until 2037. After this, until some corrections are made, the system will still be able to pay out about 75% of previous benefits for another 20-30 years. Had the previous Bush administration not taken such a cavalier approach towards deficits by cutting taxes for the wealthiest 2% or engaged in an unnecessary war in Iraq funded by loans from China and others, the budget surplus that existed prior to 2001 would have been enough to offset the strain on a system caused by a large increase of retirees.

However, if current CBO projections for reducing the deficit are correct from savings we can gain from reducing health care costs as a result of the recently passed health care legislation, there is a good likelihood that there will be adequate funds for retirees well into the future. An additional $300 million in savings will begin March 1st, 2011 as paperless payments are initiated – direct deposits into your checking account or through a government Direct Express Debit MasterCard. Further deficit reductions can could have occur occurred too if the Congress had been wise enough to allow the deficit-raising Bush tax cuts to expire at the end of this year, especially for the wealthiest 2%.

We can make some simple adjustments to make sure that future generations are not going to be rejected when their time comes to cash in on what they have been contributing to all their working life. As life expectancy increases and the technology we develop keeps older people healthier and living longer, it may be necessary to increase retirement ages for collecting SS benefits. It may also be necessary that as wealthier retirees enter into the system that their benefits be reduced at a rate commensurate to private retirement benefits they have been able to set aside. A report released in May this year by the Senate Special Committee on Aging found “that relatively minor tweaks could put the trust fund back on sound financial ground” through 2085.(“Ten Things You Should Know About Social Security” by the U.S. News & World Report)

The economic hardship for many families to help their aging parents is reduced significantly by the benefits paid out to our senior citizens through the social security system. The benefits have prevented many people from living in squalor and dying earlier deaths had they not had this safety net in place. These government secured benefits are literal life-lines for a segment of society that are at the tail end of an economic system where being able to save for the future is extremely difficult. People need to feel secure in their old age that after working hard all of their lives there is a safety net out there they’ve contributed to and will not disappear as a result of insecure risky investments in a volatile free market.

The program serves as a stick in eye for the anti-government crowd that insists that “the government is not the solution to the problem, it is the problem”. It’s a program that is alive and well and has been for 75 years. Its trust fund must be safeguarded to insure it is not raided for self-serving purposes that take the dedicated contributions to it and spend it on corporate wish list items, widening even further an income gap between the haves and the have-nots.


Ten Things You Should Know About Social Security

Historical Background and Development of Social Security


Originally published at Associated Content for Yahoo! by LB Woodgate


6 responses to “Is the Social Security Trust Fund Failing?

  1. Yeah, real “awesome,” lbwoodgate.

    Except you forgot to mention that Social Security is only sound for the next 26-years. Why the hell should I be forced to prop people up who had every opportunity to prop themselves up? (Disability SHOULD be a separate program, in my opinion.)

    If you didn’t succeed financially in life, that’s your fault – not mine. I shouldn’t be forced to fund your life (I would help but of my own volition). By the time I’m old enough to collect, and by the time my children are old enough, Social Security will be completely insolvent – and yet you decry the Republicans for trying to fix it!

    • Good Morning Terry. I see you are your bright-eyed and bushy-tailed self this morning.

      “Except you forgot to mention that Social Security is only sound for the next 26-years”.

      I think you failed to read my article and just jumped into this discussion feet first with your pre-conceived notions and without reading the points I made about this very view. Go back and do that and then tell me where I was wrong.

      “Why the hell should I be forced to prop people up who had every opportunity to prop themselves up?”

      Were you not aware that you could opt out of this program if you so choose? Of course when you do retire and if social security IS around, which it most likely it will be, then you will be an odd man out. I know that what comes out your payroll taxes actually now helps fund those who are eligible now but in affect you are not propping up anyone other than a resource to help yourself when you do retire. Just curious too, who do you see and in what numbers do you see them, those that you think are being “propped up” The elderly who HAVE been paying in on this all their lives, or children whose grand-parents that have replaced their parents to raise them?

      “If you didn’t succeed financially in life, that’s your fault – not mine.”

      I think your perception of this is slightly flawed Terry. My Mom and Dad worked hard all of their lives and raised us with many of the things they never had. They divorced later so when m dad was injured by a work-related accident that crippled him for life his ability to contribute to any further retirement fund vanished.

      My Mom was a bit better off and re-married someone who,when he died, left her small pension fund. But even with that and a home paid for, her ability to meet her financial obligations including increased health expenses were too much for the meager survival pension she received. I really don’t think you have a true picture of how some people are gamed by the system, especially if they have families and their savings are constantly being eaten away by economic conditions beyond their control. Not everybody works for wages that make it easy for them to save – despite what you may think.

      By not assisting these people and allowing them to wither away through failure to prevent health issues or wounding up as homeless people, your tax money still goes to addressing their needs to at least give the appearance that we are a compassionate “Christian” society. You may still have a problem with that but most people can’t honestly write their less fortunate brothers and sisters off that easy.

      By the time I’m old enough to collect, and by the time my children are old enough, Social Security will be completely insolvent – and yet you decry the Republicans for trying to fix it!

      This a specious argument that disregards the fact that small adjustments can be made to keep the system solvent for the next 100 years and YES I do attack the Republicans for their silly notion to privatize the system. Only the wealthy are virtually unaffected when their IRAs are negatively impacted by a volatile stock market. The meager sums many lower income people would have in their IRAs under a privatization scheme would be dramatically impacted when bear markets are in play for long periods of time. Just yesterday I watched my IRA drop $1200 out of stock market fears about some issue that tends to give them the jitters. Who wants to rely on such a system that many feel is manipulated anyway by those in the financial markets to help them game the system to their advantage. Does ENRON ring a bell?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s