Independent
Thinks s/he gets paid by the post
- Joined
- Oct 28, 2006
- Messages
- 4,629
The "automatic" refers to current law.The article states that in 2035 payroll taxes will only collect only enough taxes to pay 79% of benefits and the trust fund will have no reserves left to make up the difference, triggering an automatic 21% cut.
I've never heard that there would be an "automatic" cut but that is what the article states.
Congress has authorized the Treasury to send SS checks only as long as the "trust fund" shows a positive balance. For this purpose, the trust fund is like your checking account balance. You only write checks (we hope) if you have funds to cover the checks.
When the trust fund hits zero, the Treasury will not have the legal authority to write checks. But, the trust fund is constantly getting income from taxes. It will eventually refill to the point that there is enough money to cover one month's checks, so the Treasury will write one month's worth of checks (but they'll be late).
At the projected income and cost rates, the Treasury will be able to write about 9 "monthly" payouts per year.
On a different forum, I saw a post by a former SS actuary who said they actually looked at the law to see if they would
1) pay 12 checks, each about 75% of the scheduled amount, or
2) pay 9 checks, each 100% of the scheduled amount.
His group thought the law describes (2).