This is hardly surprising and I even wrote about how the president’s payroll tax cuts would make the problem worse. Since Social Security and Medicare funding is being squeezed by not only the economic downturn but now by these payroll tax cuts. Those payroll taxes are specifically allocated for those programs, being a direct source of funding for them, a pot of money that is different from general government revenue which is funded by income taxes. The government will now have to dip into general Treasury funds (read income taxes) to make up the difference. And since our government is beyond broke, it will add to the deficit and our ever growing national debt. This only means that these short falls are going to have to be covered by other taxes at some point, offsetting the payroll tax cuts, making them utterly pointless and nothing more than a political ploy, not sound policy.
The only sound policy that will help us out of this mess with Social Security is changing the retirement age and paying out benefits to retirees who have reached that age and have paid into the system, not to support adult babies and others who Social Security was never meant to cover. We also need to start reforming the system to make it privatized retirement accounts, ones that have your name on it that allows you to do what you want to do with your money and one that allows you to give it to your family if you die before recouping all you’ve paid into it instead of the government just keeping it and giving it to others. Doing so would also allow you to invest it as you want, whether it be in a safe, stable guaranteed bond fund with an overall lower return or a risky stock fund with the potential for great growth. Personally, I’d love to see the entire program abolished but I don’t believe that will ever happen in my lifetime so I figure some sort of private investment account is the best alternative for this irredeemably flawed system.