Big Dogs Weblog

What Social Security Trust Fund?

by Big Dog on Aug 7, 2010 at 16:44 Political

Social Security is in the red this year meaning that it will pay out more than it takes in in payroll taxes. The system was already unsustainable but was expected to have money for at least a few more years. However, the economy has millions of people who are not working and when they are not working they are not paying into Social Security.

That, of course, is only part of the problem. The bigger problem is that the federal government has spent all the Social Security money collected over the years. We have been told for years about the Social Security trust fund as if there is actually a fund with money in it. There is not but that myth continues as evidenced in this article:

The deficit will last through 2011, then an improving economy will put it back into balance for three years, then it will dip back into the red in 2015, the actuary said. The program has enough money in its trust fund to cover the annual deficit for two decades beyond that. Washington Times

This is an actuary perpetuating the myth. If the uninformed were to read that paragraph the assumption would be that there is a trust fund full of money that will fund SS for two decades.

In reality there is nothing more than a drawer with a bunch of IOUs. The federal government requires SS to send the money it collects (above what it needs to make payments) to the Treasury and in return the Treasury issues a Treasury Bond. It is basically a piece of paper like a bank deposit slip. It tells the Social Security Administration that it deposited a certain amount of money into the Treasury.

The problem is, once the money hits the Treasury it goes into the general fund and is spent by Congress. In other words, Congress is using Social Security money to pay for other things under the guise that it will pay the money later. The only fault in the plan is that the government does not have the money to pay back. We are trillions of dollars in debt and there is no way that we can afford to pay our bills without borrowing even more money. Social Security money has been spent and will not be replaced. We will either go deeper and deeper in debt borrowing money or burden people with tax increases to pay back what should have never been spent in the first place. Keep in mind, the special bonds purchased are supposed to be redeemed later but as the Office of Budget and Management states:

These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense…. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)

[note]If the money had been put aside then there would be no need to raise taxes or anything else. If they tax us we will have paid for SS twice. Once when they took it from our paychecks and once when they collect taxes to pay the benefits.[/note]

If the money collected over the years had been invested in precious metals or placed in interest bearing accounts there would be no worry about the solvency of SS. We would have more than enough money to pay people and things would be good.

But the greedy politicians in DC could not keep their grubby little hands out of the till. They have committed malfeasance and bankrupted the socialized retirement system that was established long ago. SS should never have been created but if they had to do so then they should have ensured it would be protected from the greed and corruption that permeates our government.

Face it. If a private company did this with retirement funds the people responsible would be in jail and the dolts in Congress would be attacking them mercilessly. You can bet that no CEO would be able to get away with saying that he would simply borrow the money to fund the system.

And no company could remain in business being run by such people. This might explain why we are on our way to financial collapse.

The Treasury bonds Social Security holds in place of its money are backed by the full faith and credit of the US Government.

Given how the OBM described the bonds (quoted above), that should comfort absolutely no one…

Cave Canem!
Never surrender, never submit.

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Tags: bankrupt, lies, social security, socialism, theft