I understand that there are U.S. Government Treasury securities that are labeled as the "Social Security Trust Fund". What no one has been able to explain to me is how the existence of those securities changes how we will actually get a dollar to pay benefits when they are due.
Let's assume for a moment that the Federal budget was completely balanced, save for the fact that they owe me a Social Security check (at some hypothetical date when I'm retired and drawing Social Security). The money to pay for that check has to come from somewhere.
No problem! The government will liquidate part of the Trust Fund to pay the benefit. Except that doesn't actually generate a dollar to pay me with (assuming that they don't just go print a dollar which would have numerous bad effects), it simply makes an accounting adjustment on the Federal government's books. The actual dollar has to come from somewhere.
To generate a dollar to pay me with, the government has three choices:
Cut spending by a dollar
Raise taxes by a dollar
Issue a dollar of new debt
Ok, now run this thought experiment again, except assume that there's nothing in the government that's labeled "Trust Fund". To generate a dollar to pay me with, the government has the same three choices.
As far as raising the cap on wages, my understanding was that the reason that the cap existed is that benefits are also capped; thus, the amount of tax that you pay relates to the amount of benefits that you're allowed to receive. While we could remove that cap, it starts to convert Social Security from an earned-benefit program to something else. Historically, we've thought would be undesirable.
Re: Social Security
Let's assume for a moment that the Federal budget was completely balanced, save for the fact that they owe me a Social Security check (at some hypothetical date when I'm retired and drawing Social Security). The money to pay for that check has to come from somewhere.
No problem! The government will liquidate part of the Trust Fund to pay the benefit. Except that doesn't actually generate a dollar to pay me with (assuming that they don't just go print a dollar which would have numerous bad effects), it simply makes an accounting adjustment on the Federal government's books. The actual dollar has to come from somewhere.
To generate a dollar to pay me with, the government has three choices:
Ok, now run this thought experiment again, except assume that there's nothing in the government that's labeled "Trust Fund". To generate a dollar to pay me with, the government has the same three choices.
As far as raising the cap on wages, my understanding was that the reason that the cap existed is that benefits are also capped; thus, the amount of tax that you pay relates to the amount of benefits that you're allowed to receive. While we could remove that cap, it starts to convert Social Security from an earned-benefit program to something else. Historically, we've thought would be undesirable.
That could be subject to change.