The downward slide of our Social Security
From my Internet search of "Social Security Trust Fund" (sources: CBS, Forbes, Wikipedia, SSA.gov):
Aug. 3, 2011: President Obama, regarding sequester and its effect on Social Security checks: “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”
If the Trust Fund has the money to cover five times the annual payments, why did the president say there was no money to make the payments? Either he lied or there is no money.
Social Security is “pay as you go.” The government collects Social Security taxes and, from that money, makes payments to us. If more taxes are collected than are paid out, the extra money goes into the General Fund. An IOU for that amount goes into the Trust Fund. Currently, the amount of the IOUs is five times the annual payout to us.
The government pays interest on the IOUs when it takes the surplus for the General Fund. Starting in 2011, SS began paying out more in benefits than it received in taxes, and is projected [by everyone] to continue to do so for the foreseeable future. What’s keeping the program solvent, temporarily, is the interest the government is paying to the Trust Fund.
In 2021, the Trust Fund will begin cashing the IOUs from the government in order to keep up 100 percent of payments to us. All the IOUs will be gone by 2033 – this is the SSA's own assessment of the state of the Trust. At that time, everyone’s SS checks, by law, will be immediately reduced by 25 percent if nothing is done to fix the problem.
So, seven years from now, the Trust begins cashing in the IOUs. And 16 years from now, the IOUs will be gone. When that happens, everyone’s check will be immediately reduced by 25 percent. Clearly, Social Security needs fixing, either through tax increases, delays in eligibility age, means testing, or some other way. And if it needs fixing, it is, in fact, broken.