For the love of God, can we talk about Social Security? The long beloved US program is the cornerstone of American retirement; it’s mostly funded by contributions with overruns paid for by the general fund. It also pays out for disability and pays money to kids who lose parents and some sundry other stuff.
First, let’s stipulate that the Social Security program is a good program. Even with its flaws it provides a dependable safety net for Americans who pay into a system via their employers or, if self employed, via their self-employment tax.
For the next two years, we will be subjected to wildly inaccurate rants by multi-millionaire congresspeople who haven’t bothered to read the basics of how SS works, but since their constituents are financial morons they’re going to try to convince us that it’s about to bankrupt the country…
IT ISN’T.
There are two, massive problems with SS that simply must be addressed:
FIRST: The Contribution Cutoff
The cutoff for making contributions in 2023 is $160,200. This is so dumb as to be inexplicable. Why would we have a government retirement program with a contribution cutoff? Why does your 401k at work have a cutoff? (hint: there are people who sell private plans that want some of your money) Does your pension plan have a contribution cutoff? Who knows, but it’s patently illogical.
The answer as to why is probably obvious, but the reality is far more suspect. There was no cutoff in the original bill — it was quietly and anonymously added by the Ways and Means Committee and made it into the final bill because it didn’t apply to very many people and no one cared. Now, like so much legislative malpractice, it weighs down the system creating an argument for its naysayers that it’s somehow going bankrupt. While the cutoff was a welcome boon to a new dad who had just bought his first house, I would have never known such a thing existed if it continued.
SECOND: The mythical Social Security Trust Fund
Needless to say, the US Congress is want to create problems out of whole cloth, but this one is a doozy. The original bill included a trust fund for deposits and payments for old age and survivors insurance program. To be clear, this is NOT a trust fund, (a trust fund is a protected account with extremely specific laws and rules) it is simply an accounting term used by the US Treasury to track the income and outflow of a program. It is NOT deposited funds in a separate bank account that is earning interest on behalf of its participants.
Using the term Trust Fund to describe this mundane accounting practice is, at this point, just a political football used to mislead constituents into thinking about our government as a family bank that is required to follow the same budgets as normal citizens. IT IS NO SUCH THING.
There is a formula to pay interest to the trust fund, but like all the parts of the government’s accounting practices it is completely fabricated for political purposes.
Starting in January of 2023 we are going to hear a bunch of rantings by right-leaning or wide-right Congressmen that SS is bankrupting the country — this is complete and utter hogwash. Read the links below, ask me any questions you may have, and let us help dissuade you of any fear of financial catastrophe being levied by professional DCites.
Social Security is probably the only actual working program in the US Government. It succeeds in its mandate, it is relatively cost effective (unlike the Pentagon), and it offers the one glimmer of hope for aging Americans. If we’re going to delete some government programs to save a few bucks I have some ideas that might be wiser than what you’re going to hear from Senator Rick Scott (net worth over $300M/committed Medicare fraud) in the next Congress.
To live up to Ronald Reagan’s “Shining City of the Hill” thesis, let’s at least keep one glimmer of hope alive for aging Americans. We’re the richest country in the world — we should be shaming other countries by lavishing our citizens with the benefits of citizenship, not punishing them for the sake of Wall Street.
https://www.deseret.com/utah/2022/9/6/23339213/richest-members-of-congress-mitt-romney
https://www.ssa.gov/oact/progdata/intRates.html
https://www.investopedia.com/terms/t/trust-fund.asp
https://www.ssa.gov/policy/docs/policybriefs/pb2011-02.html
This article assumes some things that obviously shouldn’t be assumed, but it does address the increased income from eliminating the cap. He erroneously assumes the max payout wouldn’t be addressed. And let’s also be real — should people with $50 million in net worth still get SS at all? But I digress…