Nothing gets the delusional American public worked up like reports Congress has “robbed the Social Security trust fund.” The trust fund is a scam, designed to make people who don’t want to believe they’re getting benefits from a welfare program feel better about getting benefits from a welfare program. It’s one thing to sort of go along with the pretense as a way of compartmentalizing that reality. It’s another to get self-righteously angry about supposed theft from this psychological pacifier.
The Social Security Act is itself a promise to tax people in the future to pay you and me benefits in the future. Now, in order to convince us rubes the government is instead going to pay us out of the money we contributed, the government said it was setting up a “trust fund.”
Now, everyone knows the dollars they contribute now won’t even pay their newspaper subscription 40 years from now because of inflation. So, the government told us they would “invest” the annual surplus over present liabilities in treasury bonds, which would “earn” interest to offset inflation. That means the government spends the dollars taken from us today and replaces them with a paper promise (the treasury) to pay us back the principal plus interest in the future.
The fact that our contributions were always partly used to pay present benefits, even when Social Security was running a surplus, should have made it obvious to everyone that the government would have to tax someone else to pay at least part of our benefits (the portion of our contributions paid out to previous beneficiaries) when we became beneficiaries. But most people don’t want to acknowledge that because they want to labor under the delusion Social Security isn’t a welfare program.
The reality is even the trust fund treasuries can’t pay us benefits without taxing someone else. As opposed to corporate bonds, which pay back the principal and interest from the increased production underwritten by the borrowed money, government bonds (treasuries) can only pay back principal and interest one way : by taxing people in the future even more than you’re paying in today. That means 100% of Social Security payments have always come from taxing someone else. Not a single dollar comes out of the money we pay in, which is spent by the government the moment it’s taken out of our checks.
So, the “trust fund” was always just a bunch of paper promises to tax people in the future to pay you and I benefits in the future, just like the Social Security Act itself. Periodic reports it’s being “robbed” by Congress or will be exhausted by some date in the future is just noise. With or without a trust fund full of government bonds, every payment sent out today requires someone to be taxed today or new money to be borrowed by the government today (which can only be paid back by taxing someone in the future). That means Social Security is a welfare program, no different from Food Stamps or Aid to Dependent Children.
If you don’t like the idea that every American over a certain age ends up on welfare, stop whining about the bogus trust fund being robbed and do something about the real problem. Stop refusing to elect anyone who even suggests Social Security might have to be cut and instead start making privatization a condition of your vote. It is completely immoral to continue forcing young people entering the workforce to subsidize a 20-40 year vacation for us. And the first step in solving our problem is admitting we have one.
Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.