How is social security in the US at risk of running out of funding, if every tax payer pays into it?
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An oversimplified explanation is this: social security is a glorified take-a-penny-leave-a-penny system. The problem is right now there are far more takers than leavers.
On top of that, low wages equals lower contributions while at the same time inflation is reducing the effectiveness of the payouts.
The government is spending your tax money on whichever pork project they want instead of in a lot of cases what the tax was passed to actually pay for. One of the many reasons they keep having to pass new highway maintenance bills to come up with the money to actually pay the bills to maintain the roads even though people have been paying tax for that purpose since the 1940s.
“The Government Has Borrowed $1.7 Trillion From The Social Security Trust Fund. The government has borrowed the total value of the Trust Fund to pay for other government spending. Beginning in 2017, the government will have to begin backing up these paper promises with real money.”
They have not. Do not let them tell you it doesn’t work or is flawed. They’re pulling money out of it without returning it.
The person who received the first social security payment, paid $0 into the system. It’s been flawed from the start
When SS “runs out”, it just means you’re only able to payout what you take in.
It doesn’t mean everyone gets zero.
There’s less people getting born and more people growing old, so less people are paying into SS while more people are being paid by SS.
Congress has raided the fund for years to pay for other stuff, so that they have always projected that funds will run out in the future but never does. Don’t be too alarmed.
Because the government decided to take money out of the social security fund without putting it back in. It was set up in many different trusts and interest bearing accounts to be able to withstand a lot of people getting money from it.
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.
Answer: It is NOT at risk of “running out of funding”. It may, at some point in 10-30 years, require that we budget money from the federal budget other than the dedicated payroll tax unless we make changes to that tax.
Social security was designed to be a redistribution from the currently working to the formerly working. However, when originally set up, the ratio of retired person to working persons was much lower. So, 1 retired person had 10-20 working people’s contributions to fund their retirement “pension” payment and this created a surplus that went into the social security trust fund.
That fund has grown over the decades from surplus and interest.
Now (2023), people are living longer (Yay) and having fewer kids and those kids are working fewer social security eligible jobs (ick, that’s not great).
So, at some point, variously forecasted in the 2030s to 2050s, the trust fund will start having to “pay out” because the social security taxes coming in will no longer cover the social security payments paying out. This is the “tipping point”
At some point 10ish years from the tipping point, the trust fund would be depleted and the federal government could either simply fail to send checks to retired persons who are eligible (extremely unlikely, given that it would be both a huge scandal and retired persons vote much more reliably that working and young folks) or they could find an alternative source of money from the wider government budget.
In short, Social security will never “go bankrupt” because social security is not a person or a business. It’s a government program. If America exists, it could choose not to fund social security of the current funding mechanism proves insufficient (as it is currently projected to be sometime in the next 10-30 years) BUT there are very real, reliable, and influential political reasons that no politician would let that happen. So, if America exists and old people exist and we still have voting, social security is here to stay.
If it goes away, it will not due to “bankruptcy”, it will be due to a polical choice not to fund this policy and to either fund something else (discretionary spending is the word) or the give out a tax break to wealthy/younger people.
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