Social Security: Why is it in Trouble?
There are basically 2 answers to this question. The first is purely demographic. More people are collecting benefits (more money goes out) than people are paying into benefit programs (money coming in). Over time, the amount of money collected will not be sufficient to cover future payouts, and the future amounts collected will not cover the future liability.
The second answer is a bit slipperier. In 2011, so far, the trust fund held 2.5 trillion dollars, all in government backed securities. The problem is this: when the fund needs more money to pay out than money that comes in, it has to sell the securities. And if the markets for the government borrowing money to redeem the securities are weak or gone, the trust fund is in deficit.
Insolvency will occur if all the bonds are redeemed and not enough money comes in to pay current recipients. This date is somewhere between 25 and 75 years in the future. To fix it the congress must either cut benefits and/or raise the payroll tax to produce more income.
I started hearing about this problem TWENTY FIVE YEARS AGO!!! Since then, a few minor fixes have been done, but congress has kicked the can down the road. Now it is a budget/political issue. The government must buy the bonds it sold to the trust funds so the funds can pay their bills. The government is in a deficit mode now, so money for something must be borrowed.
The poor of the nation are the easiest target and the least likely to win a court battle. So answer me this: How would you like to try to live on ten or fifteen thousand dollars a year, total income? Including paying for health care, food, housing, etc. How big a cut would you be able to take and still eat, get medicine and have a roof over your head? Oh yeah, I forgot. Medicare will take care of your health. Not.
Image: http://4.bp.blogspot.com/-zMSMQXhHoQY/TaOIQWiRWUI/AAAAAAAAF9U/yGUt1Di9pqo
There are basically 2 answers to this question. The first is purely demographic. More people are collecting benefits (more money goes out) than people are paying into benefit programs (money coming in). Over time, the amount of money collected will not be sufficient to cover future payouts, and the future amounts collected will not cover the future liability.
The second answer is a bit slipperier. In 2011, so far, the trust fund held 2.5 trillion dollars, all in government backed securities. The problem is this: when the fund needs more money to pay out than money that comes in, it has to sell the securities. And if the markets for the government borrowing money to redeem the securities are weak or gone, the trust fund is in deficit.
Insolvency will occur if all the bonds are redeemed and not enough money comes in to pay current recipients. This date is somewhere between 25 and 75 years in the future. To fix it the congress must either cut benefits and/or raise the payroll tax to produce more income.
I started hearing about this problem TWENTY FIVE YEARS AGO!!! Since then, a few minor fixes have been done, but congress has kicked the can down the road. Now it is a budget/political issue. The government must buy the bonds it sold to the trust funds so the funds can pay their bills. The government is in a deficit mode now, so money for something must be borrowed.
The poor of the nation are the easiest target and the least likely to win a court battle. So answer me this: How would you like to try to live on ten or fifteen thousand dollars a year, total income? Including paying for health care, food, housing, etc. How big a cut would you be able to take and still eat, get medicine and have a roof over your head? Oh yeah, I forgot. Medicare will take care of your health. Not.
Image: http://4.bp.blogspot.com/-zMSMQXhHoQY/TaOIQWiRWUI/AAAAAAAAF9U/yGUt1Di9pqo
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