Should Social Security Be Reformed?

Most Americans have known for numerous years that Social Security and Medicare are in financial trouble. However, politicians avoid reforming them due to political pressure to keep them as they are. Things may be changing, but first some history, which I have taken from this site. 

The Social Security Act of 1935 legislated the collection of payroll tax to be credited to an “account” known as Social Security. The law included instructions for the Secretary of Treasury to invest any funds collected that were not needed for “current withdrawals.” The law became effective in January 1937, and monthly benefits began in January 1940. “Payroll taxes were just credits in the Social Security account on the Treasury’s ledger under the initial law.”

The Social Security Act was amended in 1939 to establish a formal trust fund and to require “annual reports on the actuarial status of the fund.” Credits that were already on the federal records would be transferred to the new trust fund along with future revenues. The investments of the trust fund are a mix of marketable and non-marketable Treasury securities.

Since the assets in the Social Security trust funds consists of Treasury securities, this means that the taxes collected under the Social Security payroll tax are in effect being lent to the federal government to be expended for whatever present purposes the government requires. In this indirect sense, one could say that the Social Security trust funds are being spent for non-Social Security purposes. However, all this really means is that the trust funds hold their assets in the form of Treasury securities.

These financing procedures have not changed in any fundamental way since payroll taxes were first collected in 1937. What has changed, however, is the accounting procedures used in federal budgeting when it comes to the Social Security Trust Funds.

When the Social Security program was first set up, “its transactions were reported by the administration as a separate function in the budget” – known as being “off-budget.” In 1968, President Lyndon Johnson changed the budget presentation to include “Social Security and all other trust funds in a ‘unified budget’” – known as being “on-budget.”

I learned something from reading the above history. I had previously heard that the government was using Social Security taxes to run the government, which it is doing indirectly but not directly as I thought.

We can now discuss the willingness of politicians to consider reforming Social Security and Medicare. Former Vice President Mike Pence spoke recently to college students at Washington and Lee University and discussed why “commonsense” reforms should be made to Social Security and Medicare. 

If we act in this moment with the support of this generation, we can introduce commonsense reforms that will never touch anyone who is in retirement, or anyone who will retire in the next 25 years….

President [Joe] Biden won’t even discuss commonsense reforms of Social Security and Medicare, and too many leaders in my political party take the same position…. If that frustrates you, good – it should, because it’ll be your generation that’s robbed of your dreams and opportunities.

Prior to the event, Pence spoke about the topic with reporters and added other thoughts that had to do with making commonsense changes to a law that was legislated in 1935 – nearly 90 years ago.

I cannot endorse voices in our party today that simply want to walk past the problem of national debt by pledging to never touch Social Security and Medicare. The truth is we’ve got candidates for president today that are saying the very same thing that Joe Biden is saying. And that’s just unacceptable. And so I am going to continue to be a voice in my party for saying that there is a way for us to advance commonsense and compassionate reforms to Social Security and Medicare that will put our nation back on a path towards fiscal solvency.

Pence may be preparing to announce his candidacy for president in the 2024 election. However, his idea that Social Security and Medicare can be reformed in a commonsense type of way to take care of the people today, in the next 25 years, and beyond. Most of all, we should all be willing to discuss ways to bring fiscal solvency to our nation.