Not that I disagree about SS being a time bomb, but I think you're slightly mistaken about where SS revenue comes from (or I could be mistaken; anybody out there who knows for sure should please correct me). What most Americans think of as "federal tax" is actually several separate taxes, and which ones any given individual actually pays varies depending on their employment situation.
There's a specific tax that workers (either self-employed or otherwise) pay that goes to social security (as opposed to the general federal income tax), and as far as I know, those specific funds go to the central social security trust fund rather than the federal government's general fund. Funds used for invading other countries, paying off interest payments, etc. etc. comes from other revenue streams.
As I understand it, the reason SS is potentially in trouble is that, the baby boomers are beginning to retire and draw on the system. This represents a simultaneous large decrease in the number of people paying into the fund and increase in the number of people extracting money from the fund. The precise financial implications of this seem to be up for debate- some people say that there will be sufficient money to cover everybody, while others say that there won't be.
I personally don't see how it can possibly work, but I'm certainly not an economist so what do I know? At any rate, I don't expect to see a dime of it when my time comes. At this point, I view the whole thing as basically a charity for baby boomers, and from that perspective it kind of makes sense- unless we want to let them die/starve in the streets, we're going to end up paying for them one way or another; we may as well make use of the existing infrastructure for helping to support elders.
Again I could be mistaken and would really appreciate correction from someone who knows better by I am much more cynical about the SS trust fund.
As far as I can tell the really scary thing is that that "trust fund" has been largely "invested" in treasury bonds. That is the source of the massive "intragovernmental holdings" portion of the national debt. i.e. the excess income from SS tax has actually been spent on other government needs.
http://www.dailyfinance.com/story/retirement/social-security...
Fair enough, but if those treasury bonds don't end up being worth what they're supposed to to be worth, it seems to me that we've got bigger problems than SS going under.
However, I heartily agree with your request for correction by someone who knows better- this is about the full extent of my knowledge on the subject, and I'd love to hear from somebody with expertise in this field.
"Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury. Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they have in most years, the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust Fund indirectly finances the federal government's general purpose deficit spending."
There's a specific tax that workers (either self-employed or otherwise) pay that goes to social security (as opposed to the general federal income tax), and as far as I know, those specific funds go to the central social security trust fund rather than the federal government's general fund. Funds used for invading other countries, paying off interest payments, etc. etc. comes from other revenue streams.
As I understand it, the reason SS is potentially in trouble is that, the baby boomers are beginning to retire and draw on the system. This represents a simultaneous large decrease in the number of people paying into the fund and increase in the number of people extracting money from the fund. The precise financial implications of this seem to be up for debate- some people say that there will be sufficient money to cover everybody, while others say that there won't be.
I personally don't see how it can possibly work, but I'm certainly not an economist so what do I know? At any rate, I don't expect to see a dime of it when my time comes. At this point, I view the whole thing as basically a charity for baby boomers, and from that perspective it kind of makes sense- unless we want to let them die/starve in the streets, we're going to end up paying for them one way or another; we may as well make use of the existing infrastructure for helping to support elders.