The President's budget contains four Social Security benefit reductions that would save $2.2 billion over five years and $6.3 billion over ten years. (In addition, the President's budget shows that the private accounts it favors would add $712 billion to the deficit over ten years, an amount that would grow substantially larger over time.)
One troubling proposal in the budget would eliminate Social Security's lump sum death benefit. Under current law, surviving spouses or children are entitled to a one-time payment of $255 in the event of the death of a beneficiary. This money can be used for any purpose, including helping to defray the costs of a funeral. Although the reform or elimination of the death benefit might be part of a balanced plan to address the deficit or Social Security's financial imbalance, it is difficult to justify asking vulnerable families to give up what might be a meaningful sum to them at the same time that the President is proposing hundreds of billions of dollars of tax cuts for the most affluent.
Another Social Security proposal would require children age 16 or 17 to be in school in order to collect Social Security dependent benefits. Under current law, children of retired, deceased or disabled workers can be eligible for such benefits. Encouraging children to stay in school is a worthwhile goal, but it is not clear if the Administration's approach would be too broad and result in problems. For example, it is unclear if the proposal would allow exceptions for certain very vulnerable children who have difficulty remaining in school, such as some children with severe mental illness.
You have heard the predictions of crisis from the administration so I will not add them here, but are you aware of these statements? The Whitehouse says: “There is no trust fund, just IOUs that I saw firsthand, that future generations will pay.” -Bush, April 5, 2005 .
“We take your payroll taxes; we pay out the benefits to the current retirees; and with the money left over, we pay — pay for other programs. And there's nothing left but file cabinets with IOUs.” -Bush, April 26, 2005
Why do some people describe the “special issue” securities held by the trust funds as worthless IOUs? What is SSA's reaction to this criticism? As stated in the answer to “What happens to the taxes that go into the trust funds?”, most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.
Far from being “worthless IOUs,” the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.
Many options are being considered to restore long-range trust fund solvency. These options are being considered now, over 30 years in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds' securities will need to be redeemed on a large scale prior to maturity.
Just the Facts:
The national debt is borrowed from many sources and always has been. Once borrowed the money is spent-that's the point of it. But the U.S. government has always honored its debts and is still the safest investment. So the $1.6+ trillion the government borrowed from Social Security Trust Fund should be there when we need it.
There are several people out there who are playing on our fears and promoting different ways to save Social Security...one of them being a lockbox....however money in a lockbox will not draw interest so check out the group who is running the campaign and also decide whether that campaign is a good idea.
Sources: Center on Budget & Policy, facts, and the Social Security Administration
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