For the first time in the history of the Social Security program, benefit payments are exceeding FICA payroll tax receipts. As economic growth remains sluggish and job losses mount, fewer workers will contribute payroll tax, exacerbating the Social Security deficit. Current federal proposals to improve the solvency of Social Security include increasing the retirement age
to seventy years old for people age fifty-four years old or younger, and means testing
based upon current income or assets exceeding some arbitrary threshold. These proposals do not address the cause of Social Security deficits, and do little to prevent future deficits.
During the Lyndon Johnson administration, the federal government divested the Social Security Trust Fund and all of the other trust funds of their assets, and lent the money to the federal government.
"Since the assets in the Social Security trust funds consists of Treasury securities, this means that the taxes collected under the Social Security payroll tax are in effect being lent to the federal government to be expended for whatever present purposes the government requires. In this indirect sense, one could say that the Social Security trust funds are being spent for non-Social Security purposes. However, all this really means is that the trust funds hold their assets in the form of Treasury securities [emphasis added].
"In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a "unified budget." This is likewise sometimes described by saying that Social Security was placed "on-budget."
It was not just a "change in budget presentation."
The net result of lending payroll tax to the federal government under a unified budget was divestiture of all trust funds. Congress then spent surplus payroll tax, instead of leaving it in the trust fund and investing it in money market investment accounts, for example, to earn interest and preserve capital during years of surplus payroll tax. Instead of asking the American worker to compensate for Congress' fiscal irresponsibility, Congress should re-capitalize the Social Security Trust Fund with payroll tax deposits. Any deficit in receipts needed to pay benefits should then come from the General Fund.