The Social Security Trust Fund, a Logical Demonstration of Its Insignificance

If the Social Security Trust Fund were of actual significance, then it would seem likely that the day that it becomes exhausted in, say, 2042, would be of some note, more newsworthy than, for example, Tax Freedom Day, the day that taxpayers in general start working each year for themselves, rather than for the government.

You would expect, for example, that SSTF Exhaustion Day would be marked by an sudden increase in the sale of Treasury Debt to fund the difference between SS payment obligations and payroll tax revenues.

In fact, anyone who is still living in 2042 could watch the daily reports of Treasury Debt sales and never see a thing as the sales would proceed seamlessly across the SSTFED boundary. This is because only the description label of the debt sales changes on SSTFED. Previously the Treasury Debt sales would be classified as redeeming the remaining special Treasury Securities held in the SSTF, and subsequently the sales would be classified as being for the SS payouts more directly. In both cases the amount of the sales would be set by the then current payroll tax shortfall. The redeeming sales of debt actually began more than 20 years earlier when the then current payroll tax receipts first began to fall short of SS payout requirements.

If the exhaustion of the SS Trust Fund brings about no more of a disruption than a change in the classification name of the debt sold to fund SS payments, then it is hard to claim that the SS Trust Fund has any real significance. Nor would it matter if the date of exhaustion were to occur 10 years earlier or later.

The logic behind this post of Brad DeLong starts to hint that even he may someday come to the same conclusion.

"...However, the General Fund--the non-Social Security part of the government--is in crisis. The General Fund is now in deficit to the tune of 5.5% of GDP. Within a generation General Fund taxes will have to go up (or spending will have to go down) by enough to (a) close this deficit, (b) cover cost growth in Medicare and Medicaid, (c) deal with other unexpected contingencies, and (d) produce a 2.5% of GDP surplus to pay back the Treasury Secretary's obligations to the Managing Trustee of the Social Security Trust Fund.

It's a crisis. It's a big crisis. It's just not a Social Security crisis per se... "

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Just a simple comment. The

Just a simple comment.

The debt won't be paid because it can't be paid.

Any other machinations about it are just looking for
fool's gold and finding it.

Nobody knows what real gold is anymore and I'm not
just talking about the metal.

The raiding of the SSTF by

The raiding of the SSTF by the General Fund is just a Bonnie and Clyde operation but on an enormous scale.

The Bush operatives are spending SSTF funds to run the war in Iraq, pay off rich friends in agriculture, Wall Street, energy ( oil), the military ( halliburton and others). They are replacing the stolen dollars with IOUs which, in turn, will be paid ( with interest) by future generations. In tax terms, the middle class is paying a regressive tax to reward the rich.

Whie Bonnie and Clyde are in the bank, making witrhdrawals, Bush's operatives are on another street corner, yelling to a crowd about the crisis in social security. After B & C have left, they take the crowd over to the bank to see that there's no money left!

Um, Dick, isn't this what

Um, Dick, isn't this what every administration has done for last few generations?