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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: rich evans who wrote (44946)	8/18/2010 4:07:32 PM
From: TimF	Read Replies (1) \| Respond to of 71588

I think that when the so called trust fund is exhausted that FICA and regular taxes will have to pay SS. No what I said (in different words) was that before its exhausted, when it is in the process of being drawn down, regular taxes pay for part of Social Security (the part not covered by FICA, the part that goes to the "trust fund" for payment). But, assuming no changes of law (despite the fact that the prospect of hard sudden cuts might create political pressure to change the law), once the "trust fund" is at zero, once the Treasury (or any other term you want to use for the non-Social Security, part of the federal government), has "paid back its debt to Social Security", then under current law non-FICA taxes would no longer go to Social Security payments. If FICA isn't enough, then the payments would be cut by the shortage (lets say it covers 3/4s, than the payments would be cut by 25%). That point is pretty much the only way the recorded "balance in the trust fund", has any real world impact. If Social Security would pay out whatever was called for under the formula, and just take whatever money from any federal source it needs to pay it out, then the effect of having a quadrillion dollar "trust fund" is exactly the same as having a 1 dollar "fund". Its just an accounting figure for moving money from one part of the government to another, not a real asset, but assuming no changes in the law, it does have a real impact, because the law is currently written in such a way as to give that accounting figure significance. when the FICA collected is insufficient to pay the current SS, then general taxes will be paying regardless either by repaying the SS notes held or paying directly when the SS notes are exhausted. Only if the law is changed. Currently law says when the nominal trust fund runs out, that SS payments will be cut, so the trust fund, as much as its just an accounting entry, has real significance. If the prospect of large cuts in Social Security payments causes the law to be changed, and allows other sources of revenue to pay for Social Security payouts, regardless of the balance of that accounting entry, then your point would be correct. There is essentially no difference between paying with ordinary income taxes by having them pay down the accounting figure called "the trust fund", or just by allowing Social Security to draw directly on income taxes as a source of funding (other than the fact that currently the later is precluded by law).