Issue #100

by Art Kelly

1. At the end of June, the IOUs in the Social Security Trust Fund (old age and survivors & disability) amounted to more $2.605 Trillion, according to the latest report from the U.S. Treasury Department’s Financial Management Service.

So far this fiscal year, $100.982 Billion has been “borrowed” from the Trust Fund and used for the general operations of the federal government.

Up until recently, it appeared Social Security would have enough money to be able to continue to send out checks until 2016. However, a recent issue of this newsletter reported that the day of reckoning for Social Security could be a lot sooner than expected.

As this is written, the Social Security Trustees have still not issued their annual report, which usually comes out in March. It is likely they were hoping the economy would improve so that their projections would not be as alarming regarding the date when payroll taxes would no longer produce enough revenue to pay full Social Security benefits.

In theory, the IOUs from the Treasury could be redeemed to supplement the inadequate revenue from the payroll tax. But these IOUs are not real assets. They are completely meaningless, since Congress would have to appropriate the money, just as if there were no Trust Fund.

In light of the enormous deficits and precarious economy, Social Security could face a serious crisis--which conservatives have been warning about for many years.

Now that payroll tax receipts have increased a little, the Social Security annual report could be released in July or August. But it is also possible that no annual report will be released this year at all.

The two bills in the House that would stop the raid on Social Security, HR 219, the Social Security Protection Act by Congressman Ron Paul and 18 cosponsors, and HR 1712, the Savings for Seniors Act by Congresswoman Marsha Blackburn and 21 cosponsors.

Both bills are still awaiting hearings in the House Ways and Means Committee.

2. Because of the significant problems facing Social Security, both House Minority Leader John Boehner (R-OH) and House Democratic Majority Leader Steny Hoyer (D-MD) have indicated it may be necessary to raise the retirement age and means test the benefits.

The Washington Times reports that Boehner said, “We need to look at the American people and explain to them that we’re broke.”

Boehner said the retirement age should be raised to 70 for those persons who are now 50 and younger. In addition, he advocated providing benefits only to those in need.

“If you have substantial non-Social Security income while you’re retired, why are we paying you at a time when we’re broke? We just need to be honest with people,” he said.

Hoyer also stated it was time to be honest with the public.

“We could and should consider a higher retirement age,” Hoyer said. In addition, he suggested that Social Security and Medicare should be made more “progressive,” i.e. available primarily for low-income seniors.