So social security is payed for by FICA taken out from your paycheck? This is supposedly put into a social security lockbox that can’t be touched by the government for anything but paying out retirement checks right? Why then is it even shown as part of the debt or a line item for govt expenditure. Why isn’t SS and the lockbox set aside since they are supposed to be a wash…
As you think of new and novel ways of calling me an idiot think about this also, Medicaid is payed for by FICA tax taken out from your paycheck? This is supposedly put into the same social security lockbox that can’t be touched by the government for anything but Medicaid?
As other's have already pointed out, there is no lockbox. (I'm not even sure what that would mean in this context. It seems like little more than a disingenuous buzzword thrown around for political purposes.) And sense a significant portion of the federal debt is money owed to the Social Security Trust Funds, and Social Security represents a huge portion of federal spending and taxation, it makes sense to report that debt both inclusive of and exclusive of the money owed by the general treasury to the Social Security program. The same goes for reporting of annual federal deficits; it makes sense to report them both accounting for and not accounting for the net transfers between the general treasury and the Social Security program.
There's long been a lot of innacurate information spread and mistaken assumptions made regarding the way Social Security and Medicare work. Consequently the general understanding of those programs is, based on my experience, pretty poor. So hopefully you won't mind if I offer a
broad-strokes explanation of how they actually do (and have) work(ed) when it comes to finances and accounting.
At the very beginning of the Social Security program there was no separate trust fund. Money coming in or going out was lumped in with general treasury funds (though there was tracking of what money was ostensibly owed to the SS program). But that was quickly - as in still in the 30s - changed such that there was a separate trust fund for SS.
Importantly, from the beginning, excess SS funds were required by law to be put into federal securities or otherwise in securities fully backed by the United States. In other words, excess SS money was required to be loaned to the general treasury. (That actually made and continues to make sense. What other option is practical and advisable? We can have that conversation if you want.) Also importantly, the program wasn't conceived as or structured such that it would be one that built up a substantial nest egg. It was a mostly pay-as-you go program that collected tax revenues from certain people and used those funds to pay benefits to certain other people - i.e., a present day wealth transfer program. It wasn't meant to collect and save money for the future, so there wasn't ever going to be a huge pile of cash to be loaned to the general treasury. As recently as the mid-80s the amount saved by the program (and currently loaned to the general treasury) was less than 20% of the amount it paid annually in benefits.
During the Reagan Administration this was changed. We realized the program - even leaving aside the generally problematic nature of the ill-advised program - was going to run into major financial problems because of changing demographics. Bluntly, there would soon be too many older people not working and needing to be supported by too few younger people working. The program was originally designed to support a very small number of retired people with a very large number of working people. The original SS retirement age was greater than the average life expectancy at the time. But people were living longer and, no doubt in part due to the SS program, still expecting to retire at around 65. And at some point the wave of Baby Boomer retirements was going to make the financial realities untenable. The balance between beneficiaries and contributors was going to be too far out of whack.
So, among other changes, we raised tax rates more than was needed to roughly align SS income with expenses so that the fund could build a nest egg. With those changes it would start to matter more that the the program's savings were required to be loaned to the general treasury. (But again, what other option is there?)
Around 2010 non-interest income for the program started falling below expenses, but because its interest income (from the funds loaned to the general treasury) was substantial by that point the size of the Trust Fund continued to increase. Interest made up the difference and then some for about 10 years. But now the program is starting to run a deficit, even accounting for the interest it receives from the general treasury. The $3 trillion or so in the Trust Fund is starting to shrink - hence the impending problem.
This train wreck was set up almost a century ago when the program was first implemented. It could have been more easily avoided, or significantly delayed, if we'd have had the political will to do so a decade or three ago. But we didn't. Very few people want their taxes raised. Very few people want their benefits cut. Very few people want to have to wait longer to start receiving those benefits. And the people who would likely be most negatively impacted by the needed changes tended to vote at higher rates than the rest. So there's been little political will to switch tracks. Now we're just about at the in-the-tunnel-and-can-see-headlights-approaching stage where options are quickly becoming more limited and any escape will be more painful.
On another note, I assume you meant to refer to Medicare rather than Medicaid. That being the case, I'd point out that only Part A of Medicare is funded by FICA taxes. For Parts B and D, to the extent they aren't user-financed, they are funded from the general treasury. In that sense they are little different from other welfare programs.
