Thursday, February 03, 2005
A simple proposal for the SS trust fund
The US government currently is spending more than $1.40 for every dollar of revenue brought in "on budget".
Meanwhile, the old age Social Security trust is bringing in $477 Billion of FICA tax revenue and $78 Billion of interest, while old age benefit payments are only $413 Billion. That's a $138 Billion surplus, meaning the old age trust is bringing in more than $1.30 for every dollar spent.
But, we are told, the treasury bonds in the SS trust fund are meaningless. They don't represent borrowing that would have otherwise had to be financed publicly; instead, they are just worthless IOU's.
A simple solution to this problem is to uncap the FICA tax any year between now and about 2030 when the unified federal budget runs a deficit, and apply that tax not only to wage income, but also to capital gains, dividends, and interest income.
That would force the government to really balance the budget so fast that we wouldn't see another penny of red ink for 25 years. Lobbiests would line up pleading with the federal government to stop borrowing and spending.
Meanwhile, the old age Social Security trust is bringing in $477 Billion of FICA tax revenue and $78 Billion of interest, while old age benefit payments are only $413 Billion. That's a $138 Billion surplus, meaning the old age trust is bringing in more than $1.30 for every dollar spent.
But, we are told, the treasury bonds in the SS trust fund are meaningless. They don't represent borrowing that would have otherwise had to be financed publicly; instead, they are just worthless IOU's.
A simple solution to this problem is to uncap the FICA tax any year between now and about 2030 when the unified federal budget runs a deficit, and apply that tax not only to wage income, but also to capital gains, dividends, and interest income.
That would force the government to really balance the budget so fast that we wouldn't see another penny of red ink for 25 years. Lobbiests would line up pleading with the federal government to stop borrowing and spending.
