Social Security - Return on Invement
When the Social Security program became law, the concept was
for payroll taxes to fund the long-range future of the program.
Taxes collected from current workers were supposed to create
a large trust fund that would support future payments.
That didn`t happen. Instead Congress and the President
got the support of current beneficiaries at the expense
of those paying into the system.
Congress delayed scheduled tax increases and moved up the
payment of benefits. Benefits were also increased.
Just as important, as life expectancies increased,
either taxes had to be increased, benefits cut, or the
retirement age increased. None of those corrective
actions were taken.
Secondly, the surpluses that should have funded future
payments, were spent on other government programs instead
of either not funding those programs or raising taxes to
pay for them.
Finally, the interest payments on the trust fund
did not exceed the rate of inflation for over 45 years
(see below). Even then, the real rate of return
never reached 2%.
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