How is social security in the US at risk of running out of funding, if every tax payer pays into it?
In: 1004
There are nothing but wrong answers here.
All talk of “social security running out” is just a political shenanigan.
Most government expenses are paid for from the General Fund of the Government (usually just called the general fund). If social security was treated like just about every other taxpayer program, there would be no difference between the social security program running out of money and the US government running out of money. It would be one and the same.
Politicians use what are called “earmarked funds” to financially separate programs that they want to see fail without harming the government as a whole. If the program’s earmarked fund runs out of money, the program has no more money and would have to cease operating. Social security and the US post office are notable examples of programs that use earmarked funds and are explicitly disallowed by law from using the general fund. When the general fund does not have enough taxpayer money to cover spending obligations it issues bonds to raise money. Earmarked funds like social security are typically legally disallowed from issuing bonds.
Social security payments are made from an earmarked fund called the Social Security Trust fund, which is funded exclusively by the social security payroll tax. If payment obligations exceed social security payroll tax receipts then payments will cease.
It’s also notable that in years when social security payment obligations have been well below receipts, congress has had no problem raiding those funds and placing the extra cash in the general fund. You’d think it would be best if the fund invested the extra money broadly in the US economy and used returns to cover payments, but they can’t do that.
This is how “social security can go bankrupt” while the rest of the government would just keep humming along.
Latest Answers