Social Security Trust Fund
[4] The Trust Fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government.
However, due to interest (earned at a 3.6% rate in 2014) the program will run an overall surplus that adds to the fund through the end of 2019.
[7] There have been various proposals to address this shortfall, including: reducing government expenditures, such as by raising the retirement age; tax increases; investment diversification[8] and, borrowing.
[13] The Managing Trustee is responsible for investing the funds,[14] which has been delegated to the Bureau of the Fiscal Service.
[16] Fuller paid $24.75 in taxes during her three years working under the social security program, and drew an aggregate of $22,889 in benefits before passing at age 100.
In 1977, President Jimmy Carter and the 95th Congress increased the FICA tax to fund Social Security, phased in gradually into the 1980s.
[18] The changes to federal law enacted in 1983 and signed by President Reagan[19] and pursuant to the recommendations of the Greenspan Commission advanced the time frame for previously scheduled payroll tax increases (though it raised slightly the payroll tax for the self-employed to equal the employer-employee rate), changed certain benefit calculations, and raised the retirement age to 67 by the year 2027.
[20] As of the end of calendar year 2010, the accumulated surplus in the Social Security Trust Fund stood at just over $2.6 trillion.
According to the projections of the Social Security Administration, the Trust Fund will continue to show net growth until 2022[22] because the interest generated by its bonds and the revenue from payroll taxes exceeds the amount needed to pay benefits.
After 2022, without increases in Social Security taxes or cuts in benefits, the Fund is projected to decrease each year until being fully exhausted in 2034.
[26][27] In June 2022, the Treasury Department issued an updated report for the Old-Age and Survivors Insurance and Disability Insurance Trust Funds with revised projections for their ability to pay scheduled benefits to 2034 and 2057 respectively and by 2035 when hypothetically combined due to accelerated recovery from the COVID-19 recession.
[30][31][32][33] In May 2024, the annual trustees report was released with depletion date projections for the funds estimated at 2033 and 2098 respectively and by 2035 when combined.
[41] In a survey of 210 members of the American Economics Association published in November 2006, 85 percent agreed with the statement: "The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged.
"[42] On February 2, 2005, President George W. Bush made Social Security a prominent theme of his State of the Union Address.
Instead, it holds non-negotiable United States Treasury bonds and U.S. securities backed "by the full faith and credit of the U.S. government".
The trust funds have been invested primarily in non-marketable Treasury debt, first, because the Social Security Act prohibits "prefunding" by investment in equities or corporate bonds and, second, because of a general desire to avoid large swings in the Treasuries market that would otherwise result if Social Security invested large sums of payroll tax receipts in marketable government bonds or redeemed these marketable government bonds to pay benefits.
Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.
The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits.Other public officials have argued that the trust funds do have financial or moral[clarification needed] value, similar to the value of any other Treasury bill, note or bond.
"[43] At a Senate hearing in July 2001, Federal Reserve Chairman Alan Greenspan was asked whether the trust fund investments are "real" or merely an accounting device.
To escape paying either principal or interest on the "special" bonds held by the trust funds, the government would have to default on these obligations.
[46]These comments were criticized as "lay[ing] the groundwork for defaulting on almost two trillion dollars' worth of US Treasury bonds".
[49] In 2011 and 2012, the federal government temporarily extended the reduction in the employees' share of payroll taxes from 6.2% to 4.2% of compensation.
