About that math: Legally, Social Security has its own, dedicated funding, via the payroll tax (“FICA” on your pay statement). But it’s also part of the broader federal budget. This dual accounting means that there are two ways Social Security could face financial problems. First, that dedicated funding could prove inadequate, forcing the program either to cut benefits or to turn to Congress for aid. Second, Social Security costs could prove unsupportable for the federal budget as a whole.
Baloney. This is called fraud in the private-sector. First, there is no dedicated funding. Second, all the money taken in over the years was not “invested”, it was spent.
Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund.
That so-called “trust fund” is a fraud. It does not exist.
Here’s what actually happens (and Krugman knows this, which makes him a damned liar besides):
Your tax dollars go to Treasury.
Treasury keeps them and issues “special” Treasury bonds to the Social Security “trust fund.”
Treasury counts these tax receipts against the federal deficit, making it look (much, until the last year) smaller than it really is.
Note the slight-of-hand here. Social Security gets an alleged “bond” but they can’t sell it to anyone but the Treasury. That is, legally it is an IOU, not a bond. A bond can be marketed in the open market to anyone who is willing to buy, for whatever they’re willing to pay. These are unmarketable (intentionally) and thus can only be redeemed in one place – at Treasury.
The problem is that Treasury spent the money and thus doesn’t have anything with which to redeem the IOUs!
So in order to redeem these alleged “bonds” Treasury will have to sell more bonds – this time to the general public (foreign governments, people, etc) who have actual capital surplus, because Treasury doesn’t – it blew that surplus on social spending programs right here and now.
This is similar to you coming to me with $100,000 and I “promise” to hold on to it for you and keep it “safe.” I give you a promissory note to this effect. But I never hold the funds – I immediately go blow them on hookers, coke and limousines. You now have a bunch of IOUs, and I have no money.
Now perhaps I can manage to sell someone else some bonds when you come to redeem those IOUs. Perhaps. But what is unmistakable and true is that the money you allegedly “deposited” with me was immediately dissipated, not invested, saved, held or secured.
This little scheme seems to work just fine provided that each year the Social Security system takes in more than it spends on benefits – that is, so long as the file cabinet full of IOUs continues to get bigger. Treasury gets the appearance of “Free Money”, Social Security is able to pay benefits, nobody’s the wiser.
But it’s a scam, because in point of fact the so-called “Special Bonds” are nothing more than a bare promise to pay and the asset against which they were issued (tax receipts) was instantly dissipated!
So what happens when Social Security starts to eat into that so-called “trust fund”? Immediately, Treasury needs to sell more debt. Ok, that sounds reasonable – but on what terms – that is, at what interest rate – will Treasury have to pay in order to sell that debt?
If you surmise that there’s every possibility that we’ll face a “Greece” moment long before 2037, you’re correct. In fact, we could face that as soon as three or four years from now.
It is this that the Commission folks are worried about, and with good cause. As we have repeatedly seen these sorts of fraudulent accounting schemes are both extremely common in government and work really well right up until they collapse – and when they collapse they tend to do so without any warning at all.
What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution.
What’s really going on here is that LIEberals have run this scam for 50 years and accumulated a bunch of IOUs that have absolutely no capital behind them, since they have already SPENT the capital on their other fairy-tale projects which have, in turn, failed to produce to claimed and expected increase in Treasury cashflows.
And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.
The hardship was created by stealing the Social Security tax receipts and lying about the so-called “Trust Fund.” Everyone involved in that, including those in the LIEberal media, ought to be brought up on charges and jailed.
Those who believe that there is an actual “Social Security Trust Fund” are either lying or have an IQ smaller than their shoe size.
Either way, listening to them and believing this tripe, if you’re expecting to actually receive Social Security and structure your life around that belief, is a great way to wind up destitute, homeless, hungry and cold.