Sunday, December 21, 2008
The S.S. Trust Fund explained -- in one sentence
If we want to keep the FICA rate at the same 12% for 60 years even though covering retirements requires only 6% at the start and will need 18% (under worst growth assumptions) at the end -- you can use a trust fund to shift tax revenue from what it is supposed to cover to what it is not supposed to cover by pretending to, first, put money into the fund and by pretending, afterward, to take money out.
Unfortunately, the starting tax payers -- who will have lower per capita incomes (pre 60 years of economic growth) -- will pay a more regressive overall rate to cover on budget items, while the ending taxpayers -- with the highest per capita incomes (post 60 years of economic growth) -- will pay a more regressive rate to cover S.S. retirements.
Thanks, again, Alan Greenspan (with a tip of the hat to Pat Moynihan).