Social Security Funding--I am worried

We are both receiving SS.  If it is gone, it becomes a serious, serious threat to our financial stability.

This is from today's Dallas Morning News, business column by Scott Burns.

If you want to eliminate the employment tax, you need a plan to replace it.
The president is casually talking about eliminating 36% of all federal revenue, but the tax supports Social Security, which sends checks every month to 69.1 million people.
The payroll tax supports Social Security, a program that sends checks every month to 69.1 million retirees, dependents and people who are disabled.


By Scott Burns

6:00 AM on Aug 29, 2020

Honk if you think summer is when things slow down.

Sorry, you’re dreaming.

Just last Sunday, you saw my column about the things affecting whether we should or shouldn’t defer taking Social Security benefits. I wrote it because many trends now suggest it might be better to abandon calm, lucid calculations about longevity.

Instead, the prudent path is looking more like don’t defer — take the money and run.

The notion was confirmed the next day.

That’s when Stephen C. Goss, the chief actuary for Social Security, released a letter providing an analysis of when Social Security would no longer be able to pay benefits if the payroll tax were eliminated.

The last sentence of his letter, a true bottom line, reads:

“We estimate that OASI Trust Fund reserves would become permanently depleted by the middle of calendar year 2023, with no ability to pay OASI benefits thereafter.”

Call it the bald truth. Without the payroll tax, Social Security is kaput.

The chief actuary was responding to a request by four senators, all Democrats. They wanted the actuary to estimate the financial consequences if President Donald Trump were re-elected and made good on an almost offhand promise he made to permanently eliminate the payroll tax. He made the promise while announcing his executive order for payroll tax deferral.

The payroll tax supports Social Security, a program that sends checks every month to 69.1 million retirees, dependents and people who are disabled.

The Washington Post reported Trump’s promise this way on Aug. 8:

“If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said at a news conference in Bedminster, N.J. “I’m going to make them all permanent.”

Fox Business News reported another detail a few days later on Aug. 12:

“At the end of the year, on the assumption that I win, I’m going to terminate the payroll tax,” Trump said during a press briefing at the White House. “We’ll be paying into Social Security through the general fund.”

The problem here is what’s in the general fund. Nothing. Zilch. It’s an astonishing black hole of deficit.

According to the most recent report from the Treasury, the net budget deficit through the month of July was $2.807 trillion. It would have been larger, $2.837 trillion, but for the slight surplus, $29 billion, in the off budget. The off budget is where Social Security and the payroll tax live. Separate, on its own, Social Security runs a small surplus.

That’s kind of important.

In fiscal 2019, according to the Congressional Budget Office, payroll taxes brought in $1.243 trillion. That’s 36% of all federal revenue in the same period, which was $3.462 trillion.

So think about that. The president is casually talking about eliminating 36% of all federal revenue to give everyone a tax break. As an afterthought, he mentions that Social Security benefits will be paid from the general fund, a place where no money exists.

Eliminate the payroll tax, and you’re talking about a fiscal heart attack. It’s a Treasury heart no longer receiving its life-giving blood:

Cash.

Since its creation, Social Security has been treated as a separate and independent part of the federal government. I think this is some evidence that we once had some wise people in government.

Long ago, our elected representatives saw that Social Security was too important to be put in the same spending hopper as, say, proposals for bridges to nowhere. It was too important to have to battle, year after year, against powerful lobbies that wanted to spend federal revenue on, well, everything we can imagine and a lot we can’t imagine.

Can an argument be made for ending the payroll tax?

Yes, I think so.

It’s the largest tax most Americans pay. It comes out of every dollar of labor earnings — unless you earn more than 94% of workers. It makes debates about the federal income tax silly because the blowhards in Congress — I’m referring to both parties here — never talk about the combined burden of the employment tax and the income tax.

Replacing the payroll tax with a value-added tax, for instance, would broaden the base of the tax and reduce the direct burden on worker paychecks. Think of it as our Social Contract Tax.

We could talk about this a long time.

But the important thing, for a country desperate for a few moments of stability and calm, is that the employment tax doesn’t just end. Any change should start with a plan. The plan starts with an idea for replacement.