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The impending Social Security crisis
Posted by George Regal Categories: Taxes, US Economy,
Social Security (SS) is called the third rail of American Politics; when, in truth, it’s just a third rail period! Within the next ten years outlays for Social Security will exceed incoming revenue from SS taxes and things get really interesting. Now, you may be saying, what about all the money in the SS Trust Fund? Well, my friends, it’s time for a little truth about Social Security.
Since its inception, Social Security has generated an annual surplus; this means that after paying out current benefits, there is money left over. What happens to this money? It goes into the general fund (the same place the rest of your taxes go) and is spent on other programs. When the government spends the Social Security surplus it prints Treasury bond certificates equal to the amount that went into the general fund. Normally, Treasury bonds are sold on the open market. Again these are the same instruments that China has purchased, and the same bonds now being swapped for stocks and bonds in the current bailout. (See “Big Trouble in Little Washington”) The Treasury bonds printed for Social Security however, are quite different. By law they cannot be sold on the open market, they are stored in a vault in West Virginia. Had these bonds been sold on the market, they would have been inflationary (increasing the money supply) just like regular Treasury bonds.
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