Many claim that Social Security must be: reformed! Fixed! Saved! Most do not intend just minor modifications, as suggested by the National Commission on Fiscal Responsibility and Reform, which would minimize the reduction in benefits while avoiding the 25 percent reduction necessary around 2037 when Social Security trust funds are exhausted
The reasons are different: “Save the economy from greedy old geezers,” “No new taxes” or “Rewrite the social contract,” but the method is the same: Prevent Social Security from using its Federal Old Age and Survivors Insurance trust fund. This fund consists of treasury securities currently worth $2.6 trillion.
Under current law, the FOASI program operates independently from the regular federal government tax-and-spend process. Social Security revenue, primarily payroll taxes, may be used only to pay Social Security benefits. Benefits may only be paid using Social Security revenue. Any excess revenue must be invested in U.S. treasuries. The principal and interest from maturing securities may be used only to pay benefits when necessary, otherwise, they must be reinvested in new securities.
To prevent using trust funds, benefits cannot exceed revenue. While I have not yet found the numbers, the benefit cuts necessary to achieve this are certain to be considerably greater than those proposed by the national commission and likely greater than the possible 25 percent cut after 2037.
If the trust funds are not going to be used to pay benefits, what happens? They are legal obligations, part of the total debt and growing because of interest. Remove restrictions on their use and they can be disposed of easily.
The stake in the heart of Social Security would be to remove the restrictions on the use of revenue. Payroll taxes become just another income tax and benefits just another welfare handout.
I’m convinced the safest plan for Americans is to not change Social Security, use the trust funds to pay benefits or risk a 25 percent cut in 2037.
This may also be the best course for our economy. Let our elected officials know that Social Security is the third rail of politics.
Charles Lee Kirby