Wednesday, April 15, 2015
SS Trust Fund foie gras?
When FICA income no longer covers SS retirement outgo we will do one of three things: raise the FICA rate, raise the FICA cap or raise the income tax (or expand the deficit) to cash the Trust Fund bonds.
When the TF bonds run out (should keep one year of full replacement, not shortfall coverage -- the statutory definition of solvency) we can easily make a rule that income tax will from then on will cover the FICA shortfall -- easily because that's what we would have been doing for a couple of decades prior.
Politically, cashing the TF bonds may be the most doubtful outcome because that would in effect reverse the cap: the bottom 50% would pay nothing, the top 10% would take the biggest hit. Most doubtful under today's 1% rule politics anyway. Which doubtfulness makes today's Trust Fund stuffing remind me of foie gras. :-)