I’m a Social Security Expert — 3 Reasons Program Will Never Be in Danger of Insolvency
Written by
Vance Cariaga
Edited by
Daria Uhlig
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For more than 80 years, Social Security has been paying retirement benefits to Americans. And for nearly as long, Americans have worried about the future of the program. Today, a significant portion of U.S. workers are not confident Social Security will be around when they hit retirement age. But while the Social Security Administration has its problems, many experts agree that it’s not heading for insolvency anytime soon.
As of March, more than 53 million Americans received Social Security benefits, according to the SSA. That number changes from month to month, but it’s usually right in that same neighborhood. With so many seniors getting Social Security, why do rumors keep spreading about its coming insolvency?
It mostly has to do with the looming depletion of Social Security’s Old Age and Survivors Insurance Trust Fund, which is expected to run out of money in about a decade. When that happens, Social Security will be solely dependent on payroll taxes for funding — and those taxes only fund about 77% of current benefits.
That 77% figure is an important one to remember. What it means is that Social Security is mostly a self-funded program. As long as workers keep paying into it, it will always have a source of income.
Even critics of Social Security downplay fears that it will run out of money. One of those critics is John Tamny, an author, editor of RealClearMarkets and president of the Parkview Institute, a nonprofit think tank dedicated to free-market ideas.
Tamny is an expert on Social Security — and no fan of it at all. In a recent column for Forbes, he criticized the program for “shrinking” paychecks and providing the “most minuscule of returns.”
But Tamny also provided a few reasons Social Security will not go bankrupt. Much of this has to do with his apparent belief that U.S. Treasuries, rather than payroll taxes, will be the savior of Social Security. Here are three reasons he believes it is in no danger of insolvency.
Treasuries Will Prop It Up
According to Tamny, “In the future, Social Security will not be paid for with past or existing Social Security taxes. Rather, it will be paid for out of general revenues.” Furthermore, Tamny wrote, “Yields on 30-Year Treasuries reveal much the same confidence about the future solvency of a government charged with paying Social Security benefits.”
And Those Treasuries Do Well
Tamny called Treasuries “the most owned assets in the world.” Because of that, “Treasury markets are the deepest and most knowledge-pregnant in the world. Yields on Treasuries traded in those deep markets don’t signal reduced tax revenue collection in the future, rather they signal gargantuan gains.”
Capitalism Helps Fund Social Security (and Capitalism Is Not Going Away)
Another reason Tamny believes Social Security is safe from insolvency is that judging by their actions, young Americans are not “sour on capitalism,” as some have warned. It’s not easy to decipher Tamny’s connection between capitalism and Social Security, but here is his argument: “Evidence supporting this [pro-capitalism] claim can be found in the yields on the very Treasuries that signal with utmost certainty that Social Security benefits will always be paid.”
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