If the Social Security trust fund really exists then why do they have to raise taxes to cover Social Security?

One of the most boring catfights in US political economy is over whether the Social Security trust fund really exists. Essentially, more has been taken in payroll taxes in the past than needed to be spent on social security in the past. That money was then spent by other arms of government. And a special sort of Treasury bond was issued to the trust fund for that borrowing from it.

On the one side, look, the money\’s been spent, the trust fund doesn\’t really exist. All that can pay those bonds off is the general tax raising power of the government.

On the other, look, there are bonds there, the trust fund is real.

Which leads us to this:

One point, however, cannot be disputed: Even if President Obama wins all the tax increases on the rich that he is asking for, the long-term fiscal picture will still look grim. Perhaps we can stabilize the situation for a few years just by taxing the rich, but as greater numbers of baby boomers retire and start collecting Social Security and Medicare, more will need to be done.

Quite: everyone is arguing that either benefits need to be reduced (Republicans) or taxes increased (Democrats) in order to meet the redemption of those bonds that fund Social Security.

Ergo, the trust fund doesn\’t exit: it\’s just an IOU on the future tax raising powers of the Federal Government.

4 comments on “If the Social Security trust fund really exists then why do they have to raise taxes to cover Social Security?

  1. bck in 1941, the SS fund had a reserve of 7 years disbursement..
    too bad the gov had already spent it
    the last I checked it had 4 years surplus,back in 2010..
    and of course the gov had already ..etc..
    maybe less now..

  2. The Baby Boomers’ blip on Social Security payout has been seen coming for generations. The Federal government could have prepared for it by getting debt down to zero, to enable covering the shortfall by borrowing.

    The Feds have done the exact opposite, jacking debt to $16T, just in time for the BB blip to hit.

    Note that SS payouts are made from current taxes, and that, as excess revenue is spent immediately, there is only detriment derived from setting SS taxes greater than current revenue requirements.

    The U. S. government is the ex-wife with your credit card.

  3. Even Aneurin bloody Bevan realised that the National Insurance fund didn’t exist: is it possible that so many Americans are dimmer than that twat?

    Apparently.

  4. Ergo, the trust fund doesn’t exit: it’s just an IOU on the future tax raising powers of the Federal Government.

    Actually, that doesn’t follow. You could just as well say that there is clearly a massive IOU on the future tax raising powers of the Federal Government, and that since that’s what the trust fund is by definition, clearly it exists.

    The argument is entirely semantics. Everyone agrees the bonds are there, and will be redeemed, and revenue will need to be found to fund that. Whether you say “thus, the trust fund is real, because if it wasn’t we wouldn’t need to raise taxes to pay for redeeming the bonds in it” or “thus the trust fund is not real, because if it was we wouldn’t need to raise taxes to pay for redeeming the bonds in it” is…pretty silly.

    If it helps, consider the principles of double entry accounting – for every credit there is a debit. If the trust fund is a bona fide asset, then it must be someone elses liability. So, pop quiz: Is the US debt $11.5 trillion (which is total debt held by the public) or $16.5 trillion (which is total debt). If you say $11.5 trillion, then there are no trust funds, and we’re going to need to raise like…$5 trillion to pay off all the unfunded liabilities the bogus trust funds have. If you say $16.5 trillion, then the trust funds are real, and we’re going to need to raise like…$5 trillion to pay off all the totally funded liabilities the totally real trust funds have.

    It really doesn’t how you slice it, it’s a pointless discussion with two perfectly valid answers (“yes” and “no”) that have precisely the same meaning.

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