|Subject:||RE: PolitiFact Texas Query|
|Date:||Thu, 14 Jul 2011 18:16:13 +0000|
|To:||Gardner Selby <firstname.lastname@example.org>|
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., has written about your question for the Center for Economic Policy Research at:
Some of his points, which the Alliance for Retired Americans agrees with:
1) Under the law, Social Security is financed by a designated tax, the 12.4 percent payroll that workers pay on their first $106,800 of income each year. The money raised through this tax is used to pay benefits. Any surplus is used to buy U.S. government bonds. All funding for the program comes either from this tax or from the bonds held by the program’s trust fund. (The Social Security system is also is credited with a portion of the income tax paid on Social Security benefits.)
Social Security is prohibited from spending any money beyond what it has in its trust fund. This means that it cannot lawfully contribute to the federal budget deficit, since every penny that it pays out must have come from taxes raised through the program or the interest garnered from the bonds held by the trust fund.
The one exception to this rule is the roughly $120 billion being credited to the Trust Fund in 2011 to offset the lost payroll tax revenue due to the 2 percentage point reduction in the payroll tax. Apart from this special 1-year exception approved by Congress at the end of last year, Social Security is literally prohibited under the law from adding to the deficit.
2) Every single budget document put out by the government also includes the “on-budget” budget that treats Social Security as the distinct program it is under the law. This budget would show that Social Security has no effect on the deficit (except due to the payroll tax cut for 2011), since it is a self-financed program.
Moreover, Social Security has a $2.6 trillion surplus and is projected to pay out 100 percent of benefits until 2037. After that point it is projected to pay out about 80 percent of owed benefits unless changes are made to the program.