Friday, March 04, 2005
The FICA Tax and the Solvency Issue
Democrats and Republicans Have Been Ripping Us Off
This is what really gets me. For years the Social Security system has had a massive surplus, as working baby boomers paid into the system, supporting a smaller number of retirees. Of course politicians (from both parties I might add) swarm over money like flies on sh...er...like moths to a flame. So for years, the FICA tax, which is supposed to go to pay out and support social security, has brought in 100s of billions of dollars, which the politicians have promptly spent on other government programs. In exchange for using this money now, they've purchased special government bonds (IOUs) which are held by the government, pay interest and will start coming due around 2019 when the system starts to pay out more that in brings in.
When politicians talk about the system going broke in 2019, it bugs me. What they are saying is that ...'Oops, we spent your retirement money and really don't have the will to pay it back.' This isn't a Bush thing or a Democrat thing...it's a politician thing and they've been spending our retirement accounts for the last 40 or so years. Those IOUs will keep the system afloat until at least 2042, but unfortunately, the members of Congress will have a smaller and smaller FICA pie to spend between now and 2019, and after that, have to find money to pay back the IOUs, with interest, out of general revenues. Keep in mind that our good old Congress is already spending $600 billion more than the bring in every year ($500 billion or so if you don't count the FICA revenue they spend) and you get the picture.
And yes, in 2042 there is a statistical funding problem, but the bankruptcy date has consistently proved to be inaccurate. More over under the current projections, even if nothing is done today...the system will still be able to pay out 75% of promised benefits. So, I again turn a jaundiced eye toward the crisis mongers, as for too long the FICA monies coming in have allowed both Democrats and Republicans to spend more than they should.
This is what really gets me. For years the Social Security system has had a massive surplus, as working baby boomers paid into the system, supporting a smaller number of retirees. Of course politicians (from both parties I might add) swarm over money like flies on sh...er...like moths to a flame. So for years, the FICA tax, which is supposed to go to pay out and support social security, has brought in 100s of billions of dollars, which the politicians have promptly spent on other government programs. In exchange for using this money now, they've purchased special government bonds (IOUs) which are held by the government, pay interest and will start coming due around 2019 when the system starts to pay out more that in brings in.
When politicians talk about the system going broke in 2019, it bugs me. What they are saying is that ...'Oops, we spent your retirement money and really don't have the will to pay it back.' This isn't a Bush thing or a Democrat thing...it's a politician thing and they've been spending our retirement accounts for the last 40 or so years. Those IOUs will keep the system afloat until at least 2042, but unfortunately, the members of Congress will have a smaller and smaller FICA pie to spend between now and 2019, and after that, have to find money to pay back the IOUs, with interest, out of general revenues. Keep in mind that our good old Congress is already spending $600 billion more than the bring in every year ($500 billion or so if you don't count the FICA revenue they spend) and you get the picture.
And yes, in 2042 there is a statistical funding problem, but the bankruptcy date has consistently proved to be inaccurate. More over under the current projections, even if nothing is done today...the system will still be able to pay out 75% of promised benefits. So, I again turn a jaundiced eye toward the crisis mongers, as for too long the FICA monies coming in have allowed both Democrats and Republicans to spend more than they should.
