The Golden Horn of Plenty

Now Running Dry.

Almost seventy-five years ago President Franklin D. Roosevelt asked for, Congress passed and he signed into law the Social Security Act, officially called the "Federal old Age and Survivors Insurance Act". This program was financed by a small FICA (payroll) tax on employees and employers alike which was paid into a special fund within the Federal Treasury to be used exclusively to pay benefits to the elderly, disabled and in some cases their survivors. Being quite young at the time, I don't know exactly what controls were put into place to ensure that this money would be there when needed but I'm sure there must have been a plan.

Not knowing what that plan was caused me to try to envision, how it might have worked then and why it is so maligned today. If you will bear with me now and picture in your mind a large Golden Horn of plenty, large enough to hold many years of deposits from that payroll tax, with an overflow pipe connected directly to the Federal Treasury Department.

In 1965, as part of President Lyndon Johnson's "Great Society" program a bi-partisan Congress passed and he signed the Medicare bill as an amendment to the "Social Security Legislation" and raised the FICA (Payroll) tax to 7.68 percent on employers and employees alike with 1.45 percent going to Medicare and the balance to Social Security. By this time the Horn of plenty was beginning to fill up and may have been near the point of overflowing. By 1990 the surpluses were overflowing into the Treasury Department with no real plan as to how to handle it so Congress created the "Social Security Trust Fund" as a depository into which the Treasury Department can deposit the "Special Government Securities" (IOUs) which represent the surplus or overflow money from the Golden Horn of Plenty. Now that Horn only holds operating capital, just what it takes to pay Social Security and Medicare benefits along with a part of Medicaid with the other two and a half trillion dollars being in the Trust Fund in the form of securities or IOUs.

A few years ago the Social Security Trust Fund was due to reach the break even point, when the income would equal the outgo in benefits, about 2012 but in December of 2010 in the process of extending the President Bush era tax cuts for all taxpayers a compromise was reached which included the cutting of two percentage points from the payroll tax, which would amount to about 143 billion dollars. Now that break even point will probably be reached this year. It is my opinion that the reaching of that break even point is causing most of the fear mongering today. Social Security and Medicare are not, at this time, taking any money, other than payroll tax money, from the Federal Treasury and does not contribute to the budget deficit or the balooning of our national debt. Whenever the time comes that Social Security needs more money to pay benefits than is coming in from the payroll tax then the Treasury will be forced to borrow money to buy back some of those IOUs. That will add to the National debt.

To sum it all up, just picture this; A giant Golden Horn of Plenty with money flowing in from all directions. It can not hold it all and is overflowing into a pipe which carries it directly into the Federal Treasury Department where it is exchanged for IOUs. These IOUs are deposited into the Social Security Trust Fund where they will remain until the amount of money needed to pay all Social Security and Medicare benefits passes the amount coming in from payroll taxes. At that time Treasury will have to borrow money to buy back some of those IOUs and someone will have to explain where and why that money was spent with nothing to show for it. Well, that time has come and many politicians and some news people don't know how to explain it so they just blame us old people for living so long. I'm sorry but I just don't think it is my fault

Thanks for your time and input. Stay tuned, - William