David McCormack

Minot

This letter is in response to the AP article (As Budget Deficit Balloons…) in the March 10 MDN. Social Security was listed as one of the causes of the deficit. If you check the facts at www.ssa.gov, you will find that Social Security is not a cause of deficit spending. In the following, I’m using simple (but not exact) numbers to explain that Social Security is using only its own funds and it is not being subsidized by other government taxes.

To begin, note that Social Security benefits have always been paid only by the Social Security taxes taken from every paycheck and matched by employers. The first recipients had not paid taxes into Social Security. This worked because the working population was large in comparison to the receiving population. In simple numbers, in the beginning, of every $100 paid into the Social Security Trust Fund, $94 was paid out to recipients. The extra $6 was by law invested in US securities and over time a large balance grew in the Social Security Trust Fund.

The population ratio changed over the years (longer lifespans and fewer children per family) so that we have reached the point at which for every incoming $100, more than $100 is being paid to recipients. The Social Security Trust Fund is now cashing in on its investments in order to pay current recipients. If no changes are made to current laws, all of the investments will eventually be cashed in and the Social Security Trust Fund will have a balance of $0. If the actual outflow has risen to $120 per $100 of income by then, the recipients will no longer be able to receive the $120 but only the incoming $100. Thus, recipients will see a significant cutback, but not a complete drying up of payments.

There are solutions, but as the article stated, politicians and those who elect them are currently unwilling to act on the facts. One solution involves increasing the full retirement age in correspondence to longer lifespans. This has been done in recent years (from 65 to 67) and a further gradual increase should be considered again. A gradual increase in the Social Security tax is another solution. This also has been done in the past and should be considered again.