By: centraljersey.com
There has been a lot of discussion recently about the size and growth of the federal deficit.
Much of the discussion has been focused on the supposed dire condition of Social Security.
Actually, Social Security is doing OK. It is the rest of government financing that is imbalanced.
When Social Security was created in 1935, the basic concept was that active participants in the workforce would pay a small portion of their salary to provide some support to retirees. The system is a retirement savings program that was set up so that distributions were proportional to contributions. That is, except for a mild redistribution to the lowest income people, you get back in proportion to what you put in.
Until the recently passed tax cut, financing was kept in a Social Security trust fund that is totally separate from the general treasury fund.
By 1983, the ratio of workers to retirees had dropped significantly from the time the program was started. Moreover, it was apparent that over the ensuing 60 years, the baby boomers were going to put a strain on the system.
A commission was created and recommended that Social Security taxes be increased so that the trust fund could be built up in advance of the wave of retiring baby boomers. The fund was to be built up over a period of about 30 years and drawn down over the next 30 years.
Not all benefits come from paying down the surplus. The program is still largely financed by current workers paying for retirees.
The commission’s proposal was accepted and passed into law, despite the concern of skeptics who worried that when the time came to pay down the surplus, we would not have the political will or financial resources to do so. The program has worked pretty well, and we are now approaching the point where we shift from building the trust fund to paying it down.
According to the Social Security Trustee Report for 2010, the trust fund will be drawn down to zero in 2037, about four years earlier than previously projected as a result of the current recession. When the surplus is fully used up, Social Security taxes are expected to cover about 75 percent of ongoing obligations.
The trust fund has been building up steadily since 1983 and is expected to continue to increase until 2014. Today, the fund balance is $2.3 trillion.
As for the non-Social Security deficit, that has been a growing problem for some time. The non-Social Security portions of the government have been running large deficits in most years during the trust fund buildup.
Total national debt has grown at a fairly constant rate from about $1 trillion in 1980 to about $10 trillion in 2008 and now stands at nearly $14 trillion. The debt combines the general treasury fund and the Social Security trust fund. Without the inclusion of the Social Security surplus, the debt would be about $16 trillion.
The reason for the increase in the deficit is a separate topic, but we should remember a few points. Tax cuts were greater than tax increases during this time, and this was also the period when welfare spending was greatly reduced.
Also, the deficit increases in the last two years were marked more by revenue reduction than increased spending.
While there has been a lot of focus on Social Security benefits, we also need to be aware of the degree to which we have come to rely on Social Security revenue. In recent years, total government tax receipts for Social Security and Medicare have been similar to total personal income tax receipts. Corporate taxes account for only about 10 percent of all revenue.
One of the implications of our large reliance on Social Security revenue is that a shift from surplus to deficit will have a major impact on the total deficit. As we deal with that problem, we need to remember that the large surplus in the Social Security Trust Fund was created with the specific intent of borrowing from the baby boomers while they worked and paying them back when they retired. We should not renege on that commitment.
Michael Dulin Cranbury
So much from one with so little
To the editor:
I’m a volunteer tutor for GED at the Trenton Area Soup Kitchen, and one of our "patrons," who lives in the next-door homeless shelter, is Rich Rice.
At TASK, in addition to the tutoring program, we also provide hot meals and have art, poetry and music programs.
Rich plays bass guitar in our music group – the FunkTASKtics – and he also writes great poetry.
Below is one of Rich’s excellent poems. This one concerns his thoughts on the environment and is titled "Still I Knew."
It is such a wonderful poem from someone who owns so little. We can all learn from someone as humble as Rich.
I grew up in a moving crowd.
The days were fast, the nights were loud.
I watched the world on a TV screen.
But still I knew the earth was green.
I grew up in a house like mine.
In the shadow of a house like mine.
Rolling concrete on the ground.
But still I knew the earth was brown.
I watched them plow away the trees.
City cure urban disease.
I found out what a mile could hold.
But still I knew the earth was gold.
Richard Moody Cranbury
Ads on buses not a good idea
To the editor:
I think the bill Gov. Chris Christie signed to allow advertisements on school buses in New Jersey is not a good idea.
I think that schools will not get a real profit out of the advertisements on school buses.
Most schools do not own many buses. If ads start to go up on buses, then they might as well be New York City buses.
Most schools rent their buses from bus companies. This means that they will not likely make a lot of money since the leasing company will want some of the money paid by the advertisers.
Clay Kaiser Cranbury

