Social Security- Bankruptcy
One of the worst fears surrounding the Social Security program is the possibility of bankruptcy. The views regarding bankruptcy vary from one expert to another. Some economists and policy makes predict that the program would have to face bankruptcy within the next 2 decades.
The Washington Post, the Henry J. Kaiser Family Foundation and Harvard University have conducted surveys related to the future trends of Social Security. The US President has always expressed serious concerns regarding the direction in which the program is headed.
The surveys have revealed that 7 out of every 10 Americans share the President’s apprehension about the eventual bankruptcy of the Social Security program.
The surveys also reveal that a majority of the US citizens are not in favor of increasing payroll taxes or reducing retirement benefits, except in the case of wealthy individuals. The strong opinion of the American citizens has made the US government jittery about introducing new policies for Social Security.
If adequate measures are not implemented to increase the flow of revenue into the system or to decrease the benefits paid out, the promise that Social Security holds is bound to dissipate sooner than expected. As more and more baby boomers join the list of American retirees, the pressure on Social Security is likely to increase.
What is the Trust Fund Myth?
The trust fund myth suggests that the surplus Social Security amount is lent out to investors which include businesses and individuals. It is believed that the money held in the trust fund is likely to reach $ 5.7 trillion by the year 2018. It is often predicted that by 2018, the Social Security program is likely to enter into deficit. The trust fund myth also indicates that in 2018, investors and businesses will start repaying the amount of money borrowed from the fund. That is expected to avert a crisis situation in Social Security till the year 2042. But then, the trust fund myth is just a myth! It has never been proved that the surplus amount has been lent out to investors. In fact, the surpluses have been lent out to the US Treasury and were used to execute defense, education and welfare programs. The US Treasury gets money from taxpayers. The US Treasury is likely to make repayments to the Social Security Administration through money obtained from tax collections.
In this scenario, the year 2018 is likely to see tax payers bearing the brunt of the US Treasury costs involved in making repayments to Social Security. That is likely to bring into effect tax increases or huge cuts in the federal budget. The US defense, homeland security, education and health programs could get seriously affected.