Here is a quote from an op-Ed in Des Moines Register: “A reminder on how Social Security works: Money comes in through payroll (FICA) contributions from about 178 million workers. The money coming in is used to pay monthly benefits to over 64 million Americans. The surplus is used to pay the administrative costs of running the program (salaries, buildings, equipment, etc.) and the rest is saved and invested in special issue Treasury bonds.”
That’s how Social Security worked in the past. Today there is no surplus. Today there is no “rest is saved.”
The op-Ed implies that the Trump suggestion to defer and then forgive the Social Security payroll taxes for some lower income workers will destroy Social Security.
Only Congress has the power to forgive or permanently change the Social Security taxes.
To continue paying benefits, beginning in 2021 the Trust will start redeeming its Treasury bonds. That’s because running the program will cost more than all its revenue from payroll taxes, income taxes on SS benefits and interest income on the Treasury bonds.
Redeeming the bonds means the federal government must come up with the cash to provide the SS trust.
When you read that Social Security is running out of money it means that around 2034 all the Treasury bonds will have been redeemed and used to pay benefits, the interest income on those bonds is gone and what remains to pay benefits is the revenue from payroll taxes and the income taxes on SS benefits.
That’s why only 76% +- of earned benefits can be paid at some point.
But here is the thing, Congress has been told all of what’s coming through the annual Trustee reports for over a decade … and one Congress after another has ignored the warnings and the Trustee urgings to act sooner rather than later.