Yesterday’s mail brought my annual Social Security statement. It shows how much money I’ve paid in and how much I would get if I were to become permanently disabled. It also includes some lies about the Social Security Trust Fund:
In 2017 we will begin paying more in benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 75 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations.
This statement is very misleading – in reality, the Social Security crisis begins in the year 2017 because there are no actual economic assets in the Social Security Trust Fund. The Social Security Trust Fund is merely an accounting entry; it shows what the Treasury has borrowed from Social Security.
“In 2017 we will begin paying more in benefits than we collect in taxes.” So what happens then? Well, the Social Security Administration will cash in the IOU’s from the Treasury in order to pay benefits. Since there’s no actual cash set aside to pay, the Treasury will have to get the money from somewhere…either by raising taxes, borrowing from the Chinese, cutting expenditures, or simply printing money.
Good timing that today Paul Krugman would write a column arguing that “Social Security isn’t a big problem that demands a solution; it’s a small problem way down the list of major issues facing America…”
Krugman criticizes Obama for calling the Social Security situation a “crisis.” After all, this is the type of language used by the Bush Administration a few years ago when they were trying to privatize the whole thing.
As far as I can tell, acknowledging that Social Security is in crisis (which it is) is not tantamount to calling for privatization… it’s simply acknowledging the above-mentioned reality.