Quote Originally Posted by emu steve View Post
One more point about Social Security:

I believe recently it has been in the 'red' - paid out more than it took in.

BUT the immediate cause, I believe, is that the President and Congress decided to have a 2% reduction in payroll taxes [[which ended Jan 1, 2013).

I assume FICA is 7% from the employer and 7% from the employee for a total of 14% of salary.

Cut that from 14% to 12% [[7% + 5%) and that is a 14% reduction [[2 / 14) in FICA taxes the government collects within a year.

A 14% cut in Social Security revenues is a lot.
You accurately describe the FICA tax cut, but that isn't why the fund went into deficit, as the lost revenue was made up by revenue from the general fund. It was because of the weak job market. If you include the interest that the trust fund earns on its bonds, I think the fund was still cash-flow positive even so. However, in a few years that will no longer be true, barring some changes to the system, which is why the trust fund is projected to be exhausted in 20 years.