Improving Understanding of the Social Security OASDI Trust Fund

Schmult, Brian (2012): Improving Understanding of the Social Security OASDI Trust Fund.

Abstract

This paper argues that the Social Security OASDI Trust Fund is widely misunderstood by the public, thereby corrupting the debate on how to handle future scheduled benefits, and increasing the risk of program changes that would not be accepted if people understood how the program functions. The Trust Fund is a fiscal nullity but appears to be regarded by many as essential, hence the public debate is about how to ``fix'' it, rather than about the moral question of {\it whether} to fund scheduled benefits, which are clearly affordable. This misunderstanding indicates the need for a shift in emphasis in public descriptions of the program. For this, this paper lays out a set of data, arguments and analogies that are asserted to be accurate representations of the OASDI program and Trust Fund operation, and which are proposed as tools for public education. Finally, this paper argues that an important step in shifting public debate is to re-institute full recourse to Treasury funding for any payroll tax shortfall, which will force the public debate back to benefit levels and revenue sources.

• Item Type: MPRA Paper
• Language: English
• Keywords: Social Security; Trust Fund; OASDI
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General

References

AARP. 2010. Social Security 75th Anniversary Survey Report: Public Opinion Trends. (August). Washington, DC: AARP.

Altman, N. J. 2005. The Battle for Social Security: From FDR's Vision to Bush's Gamble. Hoboken, NJ: John Wiley & Sons. ISBN 978-0-471-77172-2.

Altman, N. J. 2010. "Demystifying Social Security Financing and the General Fund." Poverty and Public Policy, vol. 2, no. 1, pp. 9-16.

Baily, M. N. and J. F. Kirkegaard. 2009. US Pension Reform: Lessons From Other Countries. Washington, DC: Peterson Institute for International Economics. ISBN 978-0-88132-425-9.

Baker, D. and M. Weisbrot. 1999. Social Security: The Phony Crisis. Chicago: The University of Chicago Press. ISBN 0-226-03544-1.

Bartlett, B. 2011. "The Real Social Security and Medicare Problem (and a Doable Fix)." The New York Times (May 17), Online. Available at http://economix.blogs.nytimes.com/2011/05/17/the-real-social-security-and-medicare-problemand-a-doable-x/?hp.

BLS. 2011. Consumer Spending in 2010. Focus on Prices and Spending, Volume 2, Number 12 (December). Washington, DC: Bureau of Labor Statistics.

Butrica, B. A., J. H. Goldwyn and R. W. Johnson. 2005. Understanding Expenditure Patterns in Retirement. Working Paper 2005-03 (January). Chestnut Hill, MA: Center for Retirement Research at Boston College.

Census Bureau. 2012. http://www.census.gov/compendia/statab/2012/tables/12s0503.pdf, accessed August 21.

Diamond, P. A. and P. R. Orszag. 2004. Saving Social Security: A Balanced Approach. Washington, DC: Brookings Institution Press. ISBN 0-8157-1383-1.

Dungan, A. and M. Parisi. 2012. "Individual Income Tax Returns, Preliminary Data, 2010." SOI Bulletin (Winter), pp. 5-18.

Edwards, K. A., A. Turner and A. Hertel-Fernandez. 2012. A Young Person's Guide to Social Security. Washington, DC: National Academy of Social Insurance.

Hartmann, H., J. Hayes and R. Drago. 2011. Social Security: Especially Vital to Women and People of Color, Men Increasingly Reliant. Report D494 (January). Washington, DC: Institute for Women's Policy Research.

Helman, R., C. Copeland and J. VanDerhei. 2011. The 2011 Retirement Confidence Survey. Issue Brief 355 (March). Washington, DC: Employee Benefit Research Institute.

JCT. 2011. Joint Committee on Taxation Testimony. JCX-49-11 (September 22). Washington, DC: Joint Committee on Taxation.

KFF. 2005. Kaiser Family Foundation/Harvard University/Washington Post Poll: Social Security Knowledge Poll. (February 3-6). Menlo Park, CA: Kaiser Family Foundation.

Krugman, P. 2005. "Confusions about Social Security." The Economist's Voice, vol. 2, no. 1, pp. 1-9.

Lafrance, A. and S. Larochelle-Cote. 2011. Consumption Patterns Among Aging Canadians: A Synthetic Cohort Approach. Economic Analysis Research Paper Series 11F0027M2011067 (March). Ottawa: Statistics Canada.

Mulvey, J. 2010. Social Security: Raising or Eliminating the Taxable Earnings Base. (September 24). Washington, DC: Congressional Research Service.

NASI. 2012. http://www.nasi.org/learn/socialsecurity/economy-share, accessed August 24.

NYT. 2011. "Room For Debate: Ponzi Scheme?" The New York Times (September 8), Online. Available at http://www.nytimes.com/roomfordebate/2011/09/09/is-social-security-a-ponzi-scheme?hp.

OECD. 2011a. Pensions at a Glance 2011: Retirement Income Systems in OECD and G20 Countries. OECD Publishing. ISBN 978-92-64-09523-6.

OECD. 2011b. Revenue Statistics 1965-2010. OECD Publishing. ISBN 978-92-64-12285-7.

Reno, V. P. and J. Lavery. 2009. Economic Crisis Fuels Support for Social Security: Americans' Views on Social Security. (August). Washington, DC: National Academy of Social Insurance.

Smetters, K. 2004. "Is the Social Security Trust Fund a Store of Value?" The American Economic Review, vol. 94, no. 2, pp. 176-181.

SSA. 2011. The 2011 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. (May 13). Washington, DC: Social Security Administration.

SSA. 2012a. http://ssa.gov/history/genrev.html, accessed August 23.

SSA. 2012b. The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. (April 25). Washington, DC: Social Security Administration.

US Treasury. 2011. Combined Statement of Receipts, Outlays, and Balances of the United States Government. Washington, DC: US Treasury.

WP. 2011. Washington Post-ABC News Poll. (March 10-13). Washington, DC: Washington Post.