Hi and welcome to The Bottom Line! In this
video, we’re going to take a look at how the rising national debt isn’t as big of a problem
for Social Security as you might think. For the past eight decades, Social Security
has been providing the financial foundation for our nation’s retired workforce. Today,
over 22 million people are lifted out of poverty as a result of their monthly payout, and more
than 15 million of these folks are retired workers. If Social Security didn’t exist,
elderly poverty rates would soar, and the long-term disabled would
also be in big financial trouble. But Social Security is facing some very real
challenges. The program will begin spending more money than it collects in 2020, and the
nearly $2.9 trillion currently in asset reserves will be completely exhausted by the year 2035.
Unless additional revenue is generated and expenditure cuts made, an across-the-board benefit reduction
of up to 23% could await retired workers. This isn’t the only cash crunch pundits have
suggested could threaten Social Security. There’s also the belief that our nation’s growing
debt level could compromise the ability of the federal government
to make good on its outstanding debt. What does the federal debt and Social Security
have in common? Well, Social Security uses its asset reserves to buy bonds and other
investments, and then the federal government borrows some of this cash to fund general
revenue line items. Social Security then receives interest payments from the federal government
until the bonds mature. The concern is that if the national debt rises too high, then
the federal government won’t be able to repay the interest it owes to the Social Security
Program. But for that scenario to play out, national debt levels and interest rates
would probably have to climb significantly from where they are now. In other words, this is
something that would happen generations down the road. Additionally, Social Security’s
asset reserves are expected to be completely exhausted by 2035, which is well before the
federal government’s debt levels would be in the danger zone. Without any excess cash,
no special issue bonds would be purchased by the federal government, and therefore,
no interest payments would need to be made. The other concern that some people have is
that rising national debt levels could negatively affect the federal government’s general fund,
but Social Security is not part of the general fund. Instead, it has three separate sources
of funding, two of which are recurring sources of revenue for the program. Most of Social
Security’s revenue comes from payroll tax on earned income, as well
as the taxation of benefits. The bottom line is: as long as Americans continue
to work and earn income, these two sources of recurring revenue ensure that there will
always be money flowing into Social Security. It’s completely independent
of our country’s national debt. Thanks for watching this video! Do you think
that the rising national debt is a problem for Social Security? Let us know in the comments
below. Make sure to like and subscribe to our channel if you liked this video. It helps
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