Why aren’t any of the candidates talking about this? Very soon the Federal government has to raise vast amounts of additional revenue to pay back the Social Security funds which have been “borrowed”. The crisis comes in less than 10 years; guess who’s going to pay for their lack of fiscal responsibility? (Hint: protect your wallet) A crisis of this magnitude makes the recent mortgage problem look like child’s play.
While the Social Security trust fund will have resources until 2041, the more critical date in terms of government revenues will occur in 2017. In that year, Social Security, which has been providing billions of dollars in surpluses to the government for over two decades, will start having to pay out more in benefits than it will receive that year in payroll taxes.
At that point, the government will have to start replacing the money it has borrowed from the Social Security trust fund. It can do that only by increasing borrowing from the public, raising taxes or cutting other government programs. The elimination of the Social Security surplus is a key reason that experts are projecting sizable budget deficits in future years.
The bottom line is there is no trust fund; it’s all been taken by the Federal government. In 2017 something has to give, and our guess it will be your wallet — giving a lot.
The Myth of Targeted Taxes
This also explains the myth of “targeted taxes” — the idea a special tax is set aside (usually for education, roads, etc) and never ever works. Why not you say? Simple. The government simply reduces the scheduled payment to whatever the “target” is, the special tax fills in the gap and presto! Instant general fund tax increase.
Here’s how the shell game works. In a $100 million budget, suppose $20 million is dedicated to education. But citizens want better schools, so vote for a $10 million special tax dedicated to education. They’re sold this by legal language that will “guarantee the tax funds can only be used for education”. But nothing is ever mentioned about the previous budget of $20 million, and that’s what provides the loophole for this scam.
The politicians simply reduce the education budget by $10 million, give education the “dedicated” $10 million and poof! The slight-of-hand means an extra $10 million in the general fund — the “targeted” tax has become a general tax (to avoid the taxpayers revolting, perhaps they’ll only reduce the education budget by $8 million or so, but you see how the scam works).
Social Security is in a similar boat. It’s not separate from the budget (except on paper). There’s no lockbox, trust fund or anything else (well, maybe IOU’s, but they don’t count). All the money comes from taxpayers, and since the Federal government “borrowed” the money, there’s nothing left to cover the payments starting in 2017 when the Social Security taxes are insufficient to pay benefits. What do you think will happen in 2017 when the vast revenue shortfall becomes reality?
In 2017 the poop is going to hit the rotating air mover.