Saving the Social Security Trust Fund from Washington Politicians
Before Congress passed a budget deal in early August 2011, President Obama expressed concern in a televised speech that the federal government would be unable to pay Social Security benefits without a long-term agreement on the budget. Others in Washington, including President Obama's budget director Jack Lew and Senate majority leader Harry Reid, disputed the president's assertion, maintaining that Social Security is a self-funding program with a $2.6 trillion trust fund that is capable of funding benefit payments for the next 25 years. How could politicians deliver such diametrically opposed reports about the condition of the Social Security program?
Understanding How Social Security Works
Social Security is funded with special payroll taxes, known as FICA taxes, paid by both employees and employers. The government then deposits these funds into a trust and uses them to pay out benefits to those who are eligible. The problem is that the trust fund is currently empty.
Irresponsible spending is the main reason for our current Social Security crisis. For years, the government has raided the Social Security trust fund to pay for a variety of programs. Unfortunately, the government must now either take from the general fund or borrow money to pay out benefits.
The government pays out more in Social Security benefits than it takes in from FICA taxes, which adds to the strain on the program and the federal budget. One of the main reasons that the government has less money coming in for Social Security was that it lowered the FICA tax from 6.2 percent to 4.2 percent of employees' wages for 2011.
What Options Are Available?
Experts have suggested three courses of action to solve the Social Security crisis. First, the government must stop using the Social Security trust fund to pay for programs other than Social Security. Additionally, lawmakers could consider returning the FICA tax to its previous level of 6.2 percent of employees' wages. Finally, lawmakers could eliminate the earnings cap on FICA taxes. Currently, the government only assesses FICA taxes on the first $106,800 of a person's earnings per year. The program could change so that it is the same as Medicare, where people pay taxes on their entire earnings.
