Editorial “Fixing the trust (fund)” opines: “Critics have long argued that Social Security is running out of money. They cite the fact that there is no ‘lockbox’ and that monies from the trust fund have been transferred to the U. S. Treasury and spent.
“Not so. The U. S. Treasury Department has been issuing bonds since Social Security’s inception. Those bonds have the full backing of the U. S. Government.”
WATCHDOG: The Intell editors may be in over their heads. A bond from the government is simply an IOU from a future generation to the current generation. Were the funds invested in real estate or the stock market, there would be collateral that could be liquidated in the future to pay benefits. But to the extent that the funds are used to pay current expenses, they simply shift the Social Security burden to future generations.
Here is an excerpt from “Social Security: Trust Fund Investment Practices”:
“Social Security is financed primarily by payroll and self-employment taxes, as well as by a portion of the proceeds from the income taxation of Social Security benefits. The revenues are deposited in the U.S. Treasury. Social Security benefits and administrative expenses are also paid from the U.S. Treasury. By law, if Social Security revenues exceed expenditures, the “surplus” is credited to the Social Security trust funds in the form of U.S. government securities. The money itself, however, is used to pay for whatever other expenses the government may have at the time.
There is no separate pool of money set aside for Social Security purposes. That is not to say that the trust funds are ephemeral—as long as the trust funds show a positive balance, they represent the authority and an obligation for the U.S. Treasury to issue benefit checks during periods when the program’s expenditures exceed revenues. At the end of calendar year 2009, the trust funds were credited with holdings of $2.5 trillion.1 By the end of calendar year 2020, trust fund assets are projected to reach $3.1 trillion (in constant 2010 dollars).2 Section 201 of the Social SecurityAct provides the following guidelines for trust fund investment: … (more)
While it may be a bad idea to allow individuals to invest their social security savings in the stock market, it may be worth considering having the government acquire mortgages with Social Security funds via Fannie Mae. Of course, that would mean further spending deficits would have to be addressed, preferably by closing tax loop holes and higher taxes on the super rich.
