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Social Security has never been a "lock box"...

Discussion in 'The Stump' started by brndirt1, May 19, 2010.

  1. brndirt1

    brndirt1 Saddle Tramp

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    Social Security has never been a "lock box", or probably not since 1959 at least. The Social Security/FICA "Trust Fund" has never been anything but an accounting device, it wasn't "cash in a lock box" after 1959, that was political hyperbole from a while ago.

    How the Trust Fund Operates.

    Workers pay their Social Security taxes through their employers. Each employer periodically sends a lump sum payment to the U.S. Treasury that includes all of the income taxes and Social Security and Medicare payroll taxes paid by both the employer and its employees.

    The Treasury both receives the payroll taxes (and income taxes that higher-income retirees pay on their Social Security benefits) and pays monthly benefits on behalf of the Social Security Administration (SSA). The money stays in the Treasury's hands until it is either paid out as Social Security benefits or otherwise spent by the government. In fact, no money ever goes into the trust fund. Instead, the trust fund balance is the result of two accounting entries by the Treasury.

    First, the Treasury estimates how much of the aggregate tax receipts are Social Security taxes and "credits" the Social Security trust fund with that amount. Then the Treasury "subtracts" the total amount paid in monthly Social Security benefits from the trust fund balance. No money actually changes hands; these are strictly accounting entries.

    Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs. In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs. These are also strictly accounting entries, and again no money changes hands. After crediting the trust fund with the proper amount in IOUs, the government spends the extra Social Security tax collections just like any other tax revenue--to finance anything from aircraft carriers to education research.

    See:

    Misleading the Public: How the Social Security Trust Fund Really Works | The Heritage Foundation

    This "accounting device" however hasn’t been always the policy of the FICA (Federal Insurance Contributions Act) fund. That idea didn’t emerge until the late 50s when the FICA funds were spent for the first time on "non-retiree" expenses:

    To cover expenditures for purposes duly authorized by Congress, such as armaments and highway construction, the Federal Government from time to time instead of raising additional taxes borrows money, some of it from the trust funds. (underline mine)

    See:

    Social Security 1959 Council

    And let’s not forget which President with a Repulican Congress expanded the Social Security coverage by the largest amount of eligible people. My (I mean this seriously) absolutely favorite Republican President; "Ike" Eisenhower, he added over 10 million Americans to the program. When first applied this Old Age and Survivors Insurance coverage of 1935 only was for factory workers and other employees of business organizations. Eisenhower expanded it when:

    On August 28, 1954 Eisenhower signed the Agricultural Act which brought 3.6 million farm operators and 2.1 million farm workers Social Security coverage. Four days later he signed the Social Security Amendments Act which brought almost another 5 million people (doctors, lawyers, dentists, architects, accountants and other professionals as well as clergymen, and state and local retirement systems) into Social Security coverage.
     
    See:

    Eisenhower and Social Security

    Then I believe it was Ronald Reagan who added Congressional Employees to those included in the beneficiary mix in 1983.
     

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