History and
Current Status of Social Security (and health) Trust Funds- another root of the
current economic crisis
The Social
Security Program was begun in 1939. President Roosevelt promised and
intended that
the money the participants paid would be put into the independent "Trust
Fund," rather than into the General operating fund, and therefore, would
only be used to fund the Social Security Retirement program, and no other
Government program. Over time the trust fund has accumulated large surpluses,
intended to cover future costs of retirement of growing numbers of people in
the system that have been living longer average lifetimes(1) .
But this principle has been violated by some
subsequent Administrations that found the trust fund a handy means to use
primarily to increase military spending or pet projects without raising taxes.
Starting in 1969 for a period of time(due to action by
the Johnson Administration in 1968) the transactions to the Trust Fund were
included in what is known as the "unified budget." This means that
every function of the federal government is included in a single budget. This
is sometimes described by saying that the Social Security Trust Funds are
"on-budget." This budget treatment of the Social Security Trust Fund
continued until 1990 when the Trust Funds were again taken
"off-budget." This means only that they are shown as a separate
account in the federal budget. But whether the Trust Funds are
"on-budget" or "off-budget" is primarily a question of
accounting practices of the administration in power--it has no affect on the
actual operations of the Trust Fund itself. The administration in power
generally has decided how the trust fund money is treated.
- Since
the time of the Reagan Administration large trust fund surpluses in the
billions of dollars per year have been accumulating, partially due to the
increased payments by the “baby boom generation”. Since the G. H. W. Bush
and Clinton administrations due to demographics, surpluses of over 50
billion per year have been accumulating on paper in the trust fund. By the
end of the Clinton administration the annual
surplus was over $150 billion and the total surplus during the Clinton administration was over $1
trillion. The current SS Trust Fund surplus is over $2 trillion. But this does not mean that this money
will be available to pay out as the large numbers in the “baby boom”
generation retire. Some
administrations have borrowed these funds for other purposes and not paid
the money back to the trust fund. Thus future work generations would have
to be taxed and pay this money back to the trust fund in order to pay the
retirement benefits of those currently retiring. An analogous situation is
true to some extent for other large government health programs such as the
Medicare Health Insurance trust fund, with total
trust fund surpluses converted to IOUs equal approx. $4 trillion. (4) Some
administrations have used these funds to pay for increased military spending
or special priorities of their administration and flagrantly shifted the
debt burden to future generations. The Reagan, G.H.W. Bush, and G.W. Bush
administrations used such means to increase the national debt to over $10.5
trillion dollars(2). The
acknowledged public national debt of $10.5 trillion amounts to a liability
or mortgage of $34,500 per U.S. resident and over $138,000
per family of 4. Other than these 3
administrations, no other administration in the last 40 years has
significantly increased the national debt. On average the first $6000 paid
in federal taxes by a family of 4 goes just to cover the national
debt. Adding
unfunded Medicaid,
Social Security, Medicare, and similar obligations for
existing individuals, this figure rises to a total of $59.1 trillion, or
$516,348 per household.[5] Already these obligations amount to more
than a typical home mortgage for a family of 4.
Under
recent administrations since the 1980s the social security trust fund does not
hold real assets that can be converted to pay for future retirement
expenses. Instead it has become the
practice during some administrations that money is loaned to the government and
the trust fund holds non-negotiable U.S. treasury bonds and government
securities backed by “the full faith and trust of the federal government”. Although some have objected to this practice,
the extent of objection of financially concerned individuals was not enough to
affect the actions of recent administrations. The current president, G.W. Bush
explained his view of the trust funds in a state of the union address as follows(3):
- “Some in
our country think that Social Security is a trust fund -- in other words,
there's a pile of money being accumulated. That's just simply not true.
The money -- payroll taxes going into the Social Security are spent. They're
spent on benefits and they're spent on government programs. There is no
trust.” In other words the Bush
Administration has spent the over $1 trillion dollars in the social security trust fund that
have accumulated during his administration on other things, primarily the
wars in Iraq and Afghanistan. The
“on paper” surplus of trust funds has been converted to a “government
backed obligation” to be funded by a future administration like the
national debt.
This does not include
the additional approx. $1 trillion currently being debated by Congress. Nor does this include the over $750 billion
per year in federal trade deficits, primarily to cover fuel and energy related
purchases, which is resulting in devaluation of the dollar and everyone’s
economic assets.(2)
(1) http://www.ssa.gov/history/tftable.html
(2) www.flcv.com/natdebtS.html
(3) ^ "Disability Insurance
Trust Fund". Social Security Administration (November 9, 2007).
Retrieved on 2008-03-28 , http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
(4) http://mwhodges.home.att.net/deficit-trusts.htm
(5) http://en.wikipedia.org/wiki/United_States_public_debt