For decades, politicians have lied to the American people about the status of the Social Security Trust Fund, asserting that incoming taxes are more than adequate to pay benefits for years to come. Now, the latest Trust Report shows that the Fund will be exhausted three years earlier than last year’s projection and more that 20 years earlier than projections made in 1990.
Starting decades ago (I don’t know when), fedgov began moving Social Security surpluses to the general fund to pay for everything from roads to wars, giving the Trust Fund bonds that have to be redeemed by the Treasury. The Trustees cannot simply sell the bonds on the open market. This, of course, will add to fedgov’s deficit, which this fiscal year will hit about $1.2 trillion.
According to the Mercatus Center at George Mason University, “Without a positive balance in the trust fund, the program won’t be able to pay full benefits but only what it collects in taxes, which would require an across-the-board cut in benefits. By 2033, benefits would have to be slashed by 25%.”
Sadly, this issue is not even being discussed among lawmakers, and guess why: There are no easy solutions. Either benefits are cut or taxes are raised, or both. But, it is likely that deficit spending will be the solution until Congress is forced to act.
People who are capable of doing so need to prepare for reduced Social Security benefits, as well as reduced Medicare and Medicaid benefits. This will undoubtedly put downward pressure on the dollar and upward pressure on gold and silver.