Thursday, January 29, 2009

Economic Stimulus Package Would Place Social Security Trust Fund in Deficit for First Time Ever Next Year

/PRNewswire-USNewswire/ -- The Congressional economic stimulus plan would place the Social Security Trust Fund into deficit for the first time ever next year, if the current economic stimulus package is passed by both Houses of Congress.

Social Security is funded by payroll taxes that employees and their employers pay into the system. Money that comes into the Social Security Trust Fund is used to pay the Social Security checks retirees receive each month, and since the creation of the Trust Fund in 1983, the program has always had more money coming in than going out.

However, that may change as soon as next year, due to a proposed refundable payroll tax credit which would offer workers a refund on their portion of Social Security taxes, meaning there would be insufficient cash to pay benefits. The $145.3 billion refundable payroll tax credit proposal would give individual workers up to $500 and couples up to $1,000.

According to the 2008 Social Security Trustees Report, the estimated surplus under "high cost," or bad economic conditions, is as follows:

Year Social Security Trust *Payroll Credit Costs,
Fund Projected Surplus Proposed Legislation
(Billions) (Billions)
2009 $54 $24
2010 $57 $80.8
2011 $43 $37
2012 $26
2013 $5

* Source: Joint Committee on Taxation

"A sufficiently funded Social Security Trust Fund is critical in ensuring that seniors don't have to endure benefits cuts," said Daniel O'Connell, chairman of The Senior Citizens League. "Although we recognize the economy is in bad shape, we don't think putting the Trust Fund into the red is a responsible response."

The Senior Citizens League is advocating for any decrease in payroll taxes to be taken from the general treasury, not the Social Security Trust Fund.

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