Social Security and Baby Boomers

Yes, I had heard about the problems we will have when the full impact of Social Security and the Baby Boomers come together, but reading the testimony of Michael Tanner, Director of Health and Welfare Studies, Cato Institute before the Senate Select Committee on the Aging, September 24, 1996, really opened my eyes.

We’ve all heard stories about Social Security not being able to meet its obligations for years to come, but reading this fellow scholar’s testimony is truly depressing! Misery loves company, so if you don’t mind, I’ll share some of her facts with you.

Currently, Social Security taxes generate more revenue than the system pays out in benefits. The surplus is theoretically accumulated in the Social Security Trust Fund. It is estimated that this situation will be reversed in early 2012 and SS will start paying more in benefits than it collects.

When this starts, we will start using the excess money from the Trust Fund. This will then bring some light out of the darkness, showing that the Trust Fund is little more than polite fiction.

For years, the federal government has used the Trust Fund to disguise the true size of the federal budget deficit by borrowing money from the Fund for current operating expenses; replacing money with government bonds.

Mr. Tanner estimated that these bonds should be delivered to the Federal Government, which has no cash or other assets with which to pay these bonds. Will the government have to raise taxes to meet the bonds to continue paying the promised benefits? How else could they meet these SS obligations if they didn’t raise taxes?

Pyramid schemes are illegal in all 50 states. Social Security’s funding problems are the result of its fundamentally flawed design. Today’s benefits are paid with today’s youth taxes. Tomorrow’s benefits to today’s youth will be paid for by tomorrow’s taxes from tomorrow’s youth.

Sound like a pyramid scheme gone haywire? We are living longer, the birth rate is declining; in 1950 there were 16 workers for each SS beneficiary, by 2030 there will be less than two.

I’m glad you were here to share this information with me. Too much for one man to handle.