Here’s how Social Security has worked for the last few decades:
Every year, the Social Security tax receipts are used to pay out that year’s Social Security benefits. Because of the positive ratio of contributors to beneficiaries so far, the system takes in more money every year than it pays out. The excess is then borrowed by the Fed.gov for other purposes, in exchange for a shiny IOU that goes into the “trust fund”, a big-ass filing cabinet full of IOUs. This has been going on for decades now with monotonous regularity—the government has been treating the SS surplus as a consequence-free loan, kicking that particular debt-laden can down the alley for future administrations to worry about.
Well, the good times have come to an end. This year, the Social Security payouts will exceed receipts, an event that the Congressional Budget Office predicted for the year 2016 at the earliest. From now on, the SS administration has to start cashing in all those IOUs to make up for the difference (which is only going to grow in the future.) The government, in turn, has to pay back those IOUS out of the general fund as needed.
The really fun event is going to be that day when even those IOUs in the trust fund are going to run out. The CBO estimates that blessed event to occur sometime around 2030, although the economic downturn has no doubt brought that date closer to maturity as well. At that point, Social Security will be hopelessly upside down, with obligations (checks to be written) vastly exceeding receipts (collected SS taxes), and no more IOUs to make up the gap.
Anyone with more than rudimentary math skills can see that the entitlement payouts are going to cause a fiscal meltdown at some point not too awfully far into the future. Almost half our budget already goes into Medicare and Medicaid—and that’s not even counting the new health care reform expenditures or Social Security payouts (which don’t count against the general budget at present, because they carried themselves until this year.) Unless the government raises taxes and drastically cuts back on entitlements, the Fed is going to be slap-ass broke by 2030 at the latest. This is not wookie-suit alarmism, it’s simple math.
(You want to see some major social unrest? See what happens when the government starts issuing crayon-written IOUs instead of Social Security, welfare, military and civic service payroll, and tax refund checks. That’s what’ll get the majority of the electorate out into the streets with bricks and molotovs.)
What’s needed is for the folks in charge to get some fiscal responsibility and make some hard choices, and for the electorate to stop the “I got mine, Sonny” attitudes. Both are about as likely to happen as a fleet of Zorbonian spaceships landing in D.C. tomorrow with their cargo holds full of money to make up the little shortfall we’re facing. People don’t want to hear that the music may be about to stop with no more chairs for them to sit on when it does, and politicians want to keep their jobs, so everyone is going to spend all their brain power looking for ways to just kick the can down the alley again for another generation or two.
Me, I don’t expect to see a single red cent out of Social Security on that day in 2036 when I reach the eligible age, because that particular fiscal house of cards will have long collapsed by then. I’ll just have to finance my retirement the old-fashioned way: by putting away enough cash while I can work to buy my Alpo and Fancy Feast when I can’t (or don’t want to) work anymore. I’ve already resigned myself to the fact that all the SS contributions I have ever paid in, and all the ones I will pay in until SS goes bankrupt, have already been pilfered by the preceding generations.
Our system went down the shitter the moment the people in charge discovered they could borrow money by promising that someone else’s kids and grandkids would pay back the loan. What we are experiencing right now is just a prolonged demise, with all the players having a vested interest in keeping the whole thing going for just a little while longer. Après moi, le déluge, and all that.