[Speed Gibson,
Sunday November 28, 2004 at 4:38pm]
Social Security (1 of 2)
The Star Tribune today (Sunday 11/28) decided to discuss "Privitization" of Social Security. I'm hoping King at SCSU Scholars will take a more detailed poke at this, as a couple of the numbers seem suspect. In any case, the Star Tribune clearly doesn't understand the Social Security system. But that doesn't stop them from characterizing those who would fix it as liars.
Social Security (FICA) comprises two separate systems, for collecting taxes and paying benefits. There is no fiduciary link between them. Your earnings history is used to calculate your benefits, but the money you pay in goes entirely to others. The money you receive comes entirely from others.
Even if you retire tomorrow, every dollar of what you will receive has yet to be collected from the taxpayers. This represents a huge unfunded liability, about 12 billion dollars according to Steve Forbes. "Oh, but the money is in Treasury Bills!" they say. But until one of those T-Bills has your name on it, they are just IOU's from one branch of the federal government to another.
As Forbes notes, if we temporarily raise that unfunded liability to 13 billion as we transition, this isn't much of a difference, none that will threaten the overall system.
Part 2 will be in Monday's paper, how to restore solvency. We know what it will be: raise taxes!
Social Security (FICA) comprises two separate systems, for collecting taxes and paying benefits. There is no fiduciary link between them. Your earnings history is used to calculate your benefits, but the money you pay in goes entirely to others. The money you receive comes entirely from others.
Even if you retire tomorrow, every dollar of what you will receive has yet to be collected from the taxpayers. This represents a huge unfunded liability, about 12 billion dollars according to Steve Forbes. "Oh, but the money is in Treasury Bills!" they say. But until one of those T-Bills has your name on it, they are just IOU's from one branch of the federal government to another.
As Forbes notes, if we temporarily raise that unfunded liability to 13 billion as we transition, this isn't much of a difference, none that will threaten the overall system.
Part 2 will be in Monday's paper, how to restore solvency. We know what it will be: raise taxes!