Social Security Trust Fund - Essay Example

A high amount of publi has revolved around the Social Security Trust fund in the recent months and years. Much of this attention has been due tothe politicization of the issue and the fact that even though a large number of individuals within the country may not understand the unique level for economic hardships that face the nation, they can however understand that a limited bank account that houses funding for one of the most important social safety nets that exists is soon to be depleted; becoming an “unfunded liability”. For this matter, understanding the Social Security Trust fund and the means by which it operates, manages debt, and has evolved over the past years to represent what we see today is extremely important facet of understanding the future of governmental finance, taxation and prospects for retirement both for the current generation of retirees as well as our own generation. When one discusses the Social Security Trust Fund, it is almost always assumed that this means the fund that is responsible for paying out benefits to those individuals who have paid into the system and are now drawing a form of retirement from it. However, this is only part of the equation. The fact of the matter is that the Social Security Trust Fund is comprised of two separate funds. The first of these is of course the OASI Trust Fund (Old Age and Survivors Insurance Fund); whereas the second is that of the DI Fund (Disability Fund). Whereas the first fund is the one that is of course the largest and is most referenced within the media and concerns over budgeting etc, the second one is lesser known and is primarily responsible for providing payments to those individuals who had been working at one point but due to injury or illness are no longer capable of performing work. Combined, both programs owe the American people approximately 2.93 trillion dollars as of the end of 2011. The fact of the matter is that in order to fund a single Social Security recipient, it requires several payees due to the fact that but a small percentage of the salary is deducted and earmarked for Social Security taxes. Such an eventuality is one of the reasons that the death of Social Security, at least under the given constructs, is all but assured (Aaron 391). Due to the fact that the need that Social Security seeks to provide is virtually unchanging, a safety net for retirement-aged individuals who have paid into the system their entire lives and have planned their financial affairs in later life on the premise that Social Security will at least supplement the other forms of retirement they may have, the need is unaltered. However, the fact that ultimately changes Social Security and the level to which it can continue to be provided for is the shift in the demographic alongside the high liabilities and level of borrowing that the federal government has already engaged upon with respect to funding other programs from the seeming largesse that the Social Security Trust Fund represented. The issue of intra-governmental borrowing is also a reason why Social Security is estimated to run out ahead of schedule. These different forms of borrowing cannot be blamed on any one particular president or particular party. The fact of the matter is that Social Security has been viewed by both parties and many different congresses as a means to rapidly provide a level of funding to any number of pet projects or current goals that exist. Naturally, such a practice has been short sighted to say the least. The end result has been that due to the fact that such a high level of borrowing from the fund has taken place, no project or governmental action is necessarily better off. The level of intra-governmental debt has remained the same. Moreover, the worst part of this type of borrowing is the fact that due to the way in which the laws that govern the use and utilization of Social Security “surplus” has meant that no meaningful level of surplus has been allowed to accrue. With respect to the way that Social Security surplus funds are allocated and distributed, the government considers a surplus as anything over current liabilities. However, the problem comes when actors within the government purposefully target these surpluses as a means to fund a variety of projects that would otherwise need to traditionally borrow funds from other funding sources. In effect, what has taken place with borrowing from the Social Security Fund is actually just a very advanced form of shifting debt from one part of the government budget to another. Obviously, although a great deal of damage has already been effected on the Social Security Trust Fund, one of the means by which the level longevity of the fund could be preserved would be to place a legislative lock on the funds; meaning that no money could be borrowed from the fund for whatever reason that might present itself. Although the combined effect of such a plan has already lost a great deal of effectiveness, it would nonetheless at least help to preserve the fund for a much longer period of time than current projections see as feasible. A further unfortunate fact is that if the surpluses that have existed for several decades already had been saved in such a manner and left untouched, the level to which the Social Security Trust Fund could hope to fund the liabilities it engenders would necessarily greatly exceed the level of funding that is currently available within the fund. Retirement age is another issue that is also highly unpopular but must be discussed. When Social Security itself was founded in 1935, the average life expectancy was approximately 60. As one is fully aware, the benefits of Social Security are not available to the individual until the age of 65. The fact of the matter is that demographically the nation itself has grown and developed in the 77 years since Social Security has been in place. Since individuals are now living longer healthier lives than ever before, it no longer makes logical sense to provide Social Security benefits to individuals who will have the possibility and likelihood of drawing these benefits for a period of 15 years. Although such a change to the eligibility requirements would be highly contested and ultimately unpopular, it remains an avenue by which the government could seek to ensure that the fund maintains solvency within the coming years; as life expectancy is only slated to rise within the intervening 2 decades until the fund itself becomes unable to fund its liabilities. As has been demonstrated within this analysis, the level to which the Social Security Fund is able to exist at the current and project rate of payouts is terminal. However, with the correct policy and some painful policy, legislation, and taxation mechanisms, the case for Social Security is not nearly so bleak. Of course the greatest difficulty with any of the issues that have been discussed is finding broad based support among politicians that only seek to maximize their own personal gain and do not have a thought for the best ways to ensure that the system continues to exist long after their term in office has expired. As a means of understanding this, it is with a level of apathy that most policy makers and citizens alike face the given situation; assuming that the next generation, next congressman, or the next taxpayer will have an ingenious scheme to fix some of the latent issues with Social Security. However, the fact of the matter is that there is no magic bullet and the only means whereby the given system may be rescued is by implementing several of the difficult policy changes that this analysis has indicated. Work Cited Aaron, Henry J. "Social Security Reconsidered." National Tax Journal 64.2 (2011): 385-414. Business Source Complete. Web. 29 Oct. 2013. Read More