Question

Evaluate the following statement "The Federal government has already borrowed and spent all of the money in the Social Security and Medicare Trust Funds, so there wont be anything left for me when I retire"

Answer 1

The Social Security Trust Funds are funds that provide for payment of social security, like old age, survivors, disability insurance, administered by the US Social Security Administration. The administration collects payroll taxes and uses the money collected to pay for the fund. The fund is also open to borrowing and investing. Medicare trust fund provides health services for beneficiaries of government insurance program for the elderly, the disabled, and people with qualifying health conditions. It is again financed by payroll taxes, general tax revenue, and premiums paid by enrollees.

The government has borrowed almost $2.6 trillion from the social security fund, and $140 billion from the Medicare fund. Under current circumstances, program costs are expected to exceed non-interest income. Unless the government wants to trap itself in a debt spiral, it must find a way of reducing this intergovernmental loan.