The Truth about the Federal DeficitCongressman Gene Taylor, from Mississippi, has a number of useful links regarding the use of Social Security funds to make the Federal Budget appear to be in better shape than it really is. For example, when the Bush administration recently announced that the budget deficit for 2003 had dropped to "only" $374.2 billion, they conveniently forgot to mention that this figure did not include the $161 billion "borrowed" from Social Security and the $57 billion "borrowed from the Medicare, military retirement, and federal employees retirement plans.
Here's the link to Congressman Taylor's page:
Simple Truths About the Budget and the Debt
Those of you old enough to have been working in 1983 will recall that the Reagan administration, acting on the recommendations of a bi-partisan panel, hiked the "payroll tax" by almost 20%. This money from this tax hike was supposed to fund Social Security in the years to come.
A digression: Bear in mind that you pay this tax only on a portion of your income -- about $87,000 this year. (It was $36,000 back in 1983.) That means that you get a 15% tax CUT as soon as you earn more than $87,000.
This wouldn't be very important if the money had actually been used for Social Security, which is projected to go into deficit in 2018. But the money is actually dumped into the General Fund, after being replaced with a Treasury Note, where it is treated as ordinary revenue.
In a sense, the Social Security "surplus" is being invested. But the reality is that it is being borrowed. When it comes time, in 2018, to start redeeming those Treasury Notes, the government will have to borrow that money all over again.
Meanwhile, the Bush administration is running record deficits, making it all the more unlikely that the government will be able to borrow the money to cover the Social Security shortfall.
In a word, those of us who retire, starting in 2018, will be screwed.