Reply #9: Yes. [View All]

[Jim Lane]

The 1983 FICA tax increase was designed to build a surplus. For years, Social Security's receipts exceeded expenditures. That's how the Social Security Trust Fund was built up.

When Bush was advocating privatization, he was pushing this "Social Security bankruptcy" idea. It was based on projections that, sometime in the 2020's, the system's annual surplus would turn into an annual deficit. At that point, continued payment of full benefits would require the Social Security Administration to begin redeeming the bonds that were in the Social Security Trust Fund. The bonds would be completely redeemed, and the Trust Fund exhausted, sometime in the 2040's. At that point, the system's current receipts from FICA taxes would be adequate to pay only about 75% of benefits.

The projection Bush favored were criticized as being based on unreasonably pessimistic assumptions about long-term economic growth. As it turned out, the projections were too optimistic in the short term, not having included the Bush recession. For the long term, the uncertainty is, necessarily, even greater. It's possible that the Trust Fund will never be exhausted.