The Social Security Crisis [View All]

[Nederland]

Lots of people here claim that there is no Social Security crisis. If that is the case, please explain to me what is wrong with the following analysis done by Allan Sloan, a frequent commentator on NPR's Marketplace show:

Social Security is now taking in more cash than it spends. The accumulated surplus is approaching $2 trillion. But there's a big problem here, fans. The money isn't being saved. Instead, one part of the government, the Treasury, is writing IOUs to another part, Social Security. The Treasury borrows Social Security's surplus cash and gives it IOUs in return. It pays interest on the trust fund's IOUs with additional IOUs rather than cash. So you've got a big pile of government promises to itself. Nothing's been saved. It's as if you wrote IOUs to yourself, stuck them in a coffee can and called them savings. When you needed cash, you'd reach into the can, but all you'd find are IOUs. You'd have to bring in more money or spend less or borrow—just as if there were nothing in the can but coffee.

OK, let's fast-forward to 2018, when Social Security is projected to take in $23 billion less cash than it spends. By then, the trust fund would have more than $5 trillion of Treasury IOUs in it. So it would be a piece of cake to cover a crummy $23 billion, right? Wrong. No matter how many Treasury securities the trust fund has, Treasury would still need $23 billion of cash to cover Social Security's bills. The Treasury can trim other expenses, bring in more money or borrow 23 billion bucks. But these options are exactly the same as they'd be if there were no Social Security trust fund. By 2027, Social Security would be taking in almost $400 billion less than it spends, requiring huge cash influxes. The trust fund—on paper—would still be getting bigger. In the real world, though, Social Security's cash deficit would be seriously squeezing the rest of the government. Finally, as the cash deficit nears half a trillion dollars annually, the trust fund starts to shrink, then melts away. But the fund's irrelevant, folks. It's an accounting entry, not real money. How the Democrats can cling to the trust fund with a straight face is beyond me. Maybe it's because they don't want to shatter Social Security's myths, or let people see how expensive Social Security really is.