The annual calculations regarding the sustainability of the Social Security and Medicare trust funds are misleading and meaningless, and these funds have no assets other than a federal promise to pay. Right?
Wrong, say two Social Security experts.
“The law requires annual reports,” Nancy Altman, president of Social Security Works, a group that supports expanding the Social Security system, told ThinkAdvisor in a Monday email message. Altman, a former tax attorney and the co-founder of the group, was the assistant to former Federal Reserve Board Chairman Alan Greenspan when he chaired the bipartisan commission that developed the 1983 Social Security amendments.
Shai Akabas, economic policy director for the Bipartisan Policy Center in Washington, echoed Altman’s stance. The Boards of Trustees for Social Security and Medicare “are required by law to issue yearly reports on the status of both of Social Security’s trust funds — the Old-Age and Survivors Insurance (OASI), and the Disability Insurance (DI) trust funds — and the two Medicare trust funds,” he said. “Much of what is included in the reports is required precisely by statute.”
The two programs are “insurance programs,” added Altman, who also taught at Harvard University’s Kennedy School of Government and the Harvard Law School.
The Federal Insurance Contributions Act, or FICA, “requires that the revenue be dedicated to Social Security, only to be used for the payment of benefits and related administrative costs. Until the funds are needed, the law requires that the monies be held in trust and invested,” she explained. “From the beginning, Congress has required that the funds be invested in the most secure investment around — Treasury bonds backed by the full faith and credit of the United States. These are not casual promises to pay, but legal instruments that have the same legal protection and standing as all other treasury bonds.”