What Exactly is the Social Security Trust Fund and Why is it so Important?
With Social Security facing a severe funding shortfall in less than 10 years — at which time it will be forced to cut benefits — there’s been a lot of talk about its trust fund. While that term may conjure up images of uber-wealthy families, Social Security’s trust fund is not a special savings account. In fact, the CATO Institute describes it as “a figurative piggy bank that holds only IOUs issued by the Treasury to the Social Security Administration, not actual money.”
In the article, the CATO Institute said the trust fund “essentially consists of IOUs or promissory notes that represent claims on future tax revenues.” The Social Security solvency issue stems from the fact that its annual expenses (the benefits it must pay) exceed its annual income (the money it receives in payroll taxes). To resolve this imbalance, the government can raise taxes, increase borrowing, or cut spending to fund promised benefits.
Long-Term Solvency
The Seniors Trust believes the key to long-term solvency is to lift the wage cap. This would be a much more equitable way to beef up the Social Security trust fund than to raise taxes.
That idea is actually one of the tenets of The Social Security Expansion Act. This landmark piece of legislation calls for lifting the cap on Social Security taxes to ensure that the wealthiest Americans pay a fairer amount in relation to their income. The bill’s sponsors say doing so could extend the solvency of Social Security for the next 75 years. A study by the Center for Economic and Policy Research supports the theory that by lifting the wage cap we could strengthen the long-term solvency of Social Security.
In addition to strengthening the Social Security program, the Social Security Expansion Act also calls for increased monthly benefits of about $200 for retirees and enacting an annual cost-of-living adjustment (COLA) that is fairer to seniors and their unique spending habits.
The Seniors Trust is working to pass The Social Security Expansion Act. Please, sign our petition to Congress and join us as we strive to improve the lives of senior citizens.
