Elderly woman rips Jeb in townhall: "I paid into that for years - now you want to take it away?

[D Gary Grady]

154. A technical quibble about trust funds

I very much agree with the core of what you have to say. I have only a couple of minor technical quibbles.

Social Security benefits have always been paid for by current taxes coming in. (This is what allowed meaningful monthly benefits to be paid starting only a few years after the Act was passed; otherwise that would have taken decades.) The Trust Fund serves the same purpose as a reservoir in a water system, i.e., to collect any surplus taxes in fat years and cover shortfalls in lean ones. As you say, in the 1980s the tax rate was raised to build up an even bigger surplus in order to cover projected shortfalls resulting from Baby Boomer retirements. Even so, the Trust Fund is currently projected to run out of money in about 20 years (the latest Trustees' report pushed it an additional year into the future), but since the Trust Fund needed only to make up shortfalls, even without benefits will be reduced by only 20-25 percent or so.

The exact timing and amount depends on the future economy. The Trustees' best guess is that the Fund will run dry, but in their more optimistic economic scenario, the Trust Fund never runs out for the full 75-year planning horizon.

There is a Medicare Trust Fund as well, by the way, and it's in a worse state than Social Security's, but projections for it have markedly improved since the passage of the Affordable Care Act, which (besides the parts we hear about) expanded Medicare benefits and greatly improved its financial state -- pretty much the diametric opposite of what our Republican friends have been telling senior citizens in their effort to get rid of "Obamacare." (For a couple of decades GOP strategists have warned that successful healthcare reform would benefit Democrats politically and seriously damage Republicans.)

Also in passing, Medicare covers only some very limited nursing home stays. Elderly persons in need of long-term nursing care end up spending all their savings until they qualify for Medicaid. Last I checked, more than half the cost of Medicaid goes to caring for the elderly poor, and a good portion of the rest goes toward taking care of children and the severely disabled, though I think most conservatives envision the money being spent on adults to lazy to work.