Month: February 2016

Social Security Mythology

| weaver1888

Social Security generates more unintended confusion and deliberate misinformation than any other issue.  Political candidates of both parties accuse their opponents of “raiding” the trust.  Some writers disparage the trust funds as “funny money,” “IOUs,” or a “fiction.”  All these claims are nonsense.  The Trust fund reserves stand at $2.73 trillion.  The reserves are expected to grow each year until 2020 according to actuaries.

 

Social Security’s financial operations are handled through two federal trust funds — the Old-Age and Survivors Insurance (OASI)(monthly income for seniors) trust fund and the Disability Insurance (DI) trust fund.  They are legally distinct, although commonly referred to collectively as Social Security.  All of Social Security’s payroll taxes and other earmarked income are deposited in the trust funds, and all of Social Security’s benefits and administrative expenses are paid from the trust funds.

 

In years when Social Security collects more in payroll taxes and other income than it pays in benefits and other expenses — as it has each year since 1984 — the Treasury invests the surplus in interest-bearing Treasury bonds and other Treasury securities.  Social Security can redeem these bonds whenever needed to pay benefits.  The balances in the trust funds thus provide legal authority to pay Social Security benefits when the Social Security program’s current income is insufficient by itself.

 

Social Security has run a surplus in every year since 1984, as was anticipated when Congress enacted and President Reagan signed new legislation based on the recommendations of the Greenspan Commission in 1983.

 

Under current projections, the combined Social Security trust funds will continue to run annual surpluses until 2020.   Actually, the DI trust fund faces exhaustion in 2016, and the much larger OASI fund is projected to last until 2034.  Congress must therefore take action before late 2016 to replenish the DI trust fund.  Increasing the share of the payroll tax that is allocated to DI (and reducing the OASI share) would assure that both the OASI and DI programs pay full benefits through 2033.  Congress has reallocated payroll tax revenues many times in the past, and doing so has not been controversial.

 

At that point, if nothing else is done, Social Security could still pay more than three-quarters of its scheduled benefits using its annual Social Security tax income.  Contrary to a common misunderstanding, benefits would not stop.  Of course, paying three quarters of promised benefits is not an acceptable way to run the program, and Congress should take action well before 2033 to restore long-term solvency to this vital program.

Source:  Annual Report of Board of Trustees of Social Security to Congress           Michael Smith

The POWHATAN ARROW

| weaver1888

Recently, a friend was visiting me from Maryland and wanted to go to the Virginia Museum of Transportation.  I was keen on doing that since I had heard Bev Fitzpatrick speak of the museum a few months earlier.  We went for our visit on a cloudy Saturday afternoon.  There were a fair number of folks wandering through the exhibits, but not so many that it seemed crowded.

The O-gauge model trains brought back some memories—I sold my Lionel train to buy a baseball glove I had admired at Jennings Shepherd.  The bus and car collection was terrific and I imagined the street car was the one I used to ride with my mother.  The story about the Claytor bothers was fascinating.

But the memories came flooding back when I saw the refurbished 611 engine.  I was standing in the old train station looking east toward The Shops, hoping for an early view of the Powhatan Arrow.  The train would take me to the farm of my beloved grandparents, John Weaver and Dora Perdue Hager.  It was in Brush Fork, West Virginia, a little spot between Bluefield and Princeton.  I loved it there and I rode The Powhatan Arrow every summer to Bluefield, where my grandfather would pick me up and “carry” me to the farm.  “Here it comes! I see it!  It is great! Look how big it si!”

Can you imagine that my Mother felt comfortable putting me on that train and sending me by myself at age 7?  She did—it was a different time, a truly lovely time.  She put her trust in the Conductor, who promised to faithfully watch over me, a promise he kept. I made the trip for 6 summers and a few time at Christmas, although my parents went along on those trips. Those gave me an opportunity to display my knowledge of train conducting.

My mother often came for the last two weeks of my summertime on the farm.  I was always a little disappointed because it meant summer was coming to an end and, more importantly, I would not get to ride home on that wonderful train. Somehow my father’s Buick was not that much fun.

 

  1. Michael Smith