Archive of Social Security reform

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Sustainable Social Security

by Bradley M. Smith, 2011-12 SOA President Social Security was designed as a pay-as-you-go system.  The 1983 reform resulted in increased taxes and decreased benefits to assure the 75 year “solvency” of Social Security.  The resultant tax revenue in excess of benefit payments “accumulated” in the Social Security Trust Fund.  The federal government “borrowed” this excess revenue to pay current expenses.  It also contributed to a reduction in the government’s current deficit and external debt. Nonetheless, the federal government owes this money to the Social Security Trust Fund which now sits at approximately $2.6 trillion. In the near future, absent reform, Social Security benefit payments will permanently overtake Social Security tax revenue, resulting in an increase in the government’s current deficit calculated on a unified basis. Given the level of the government’s deficit this has led some politicians to call for the reform of Social Security.  However, we know that any reform of Social Security will not affect the government deficit over the long run as Social Security taxes must be used to pay Social Security benefits.  It is a zero sum game.  (more…)

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