“…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund…in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.” Senator Ernest Hollings, SC, 1989
It’s 2017. And Senator Hollings was right.
At the time of this article, Stephen Ohlemacher, political reporter for the Associated Press, mentioned Social Security’s financial shortfall wouldn’t drain the Trust Fund until 2037. Now we know the Social Security Trustees expect insolvency to occur in 2034.
Seven years later, not only are we on track to drain Social Security, but it seems we’re doing such a good job, we’re going to get it done three years early.
As Ohlemacher says, now seems like a pretty good time to start dipping into all those surplus funds we collected over the years to use in just this sort of situation.
There’s just one problem:
“Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors.”
Those surplus funds are long gone–spent on a variety of general budget measures and programs almost as soon as that money touched the outstretched palms of the federal government. Any surplus collected in Social Security income is immediately invested in Treasury bills to be repaid to beneficiaries upon reaching their maturity date.
In other words, the government takes the “extra” income and writes Americans an IOU. This has been the way Social Security has operated since 1930.
Beginning just a few years ago, benefits officially outgrew the amount collected in payroll taxes to pay them. Instead of the money taxpayers have generated throughout the years, we have only these Treasury bills. And unlike the public-issue Treasury bonds issued to foreign countries, these bills aren’t marketable and have no cash value.
These t-bills may represent a promise to repay our borrowed Social Security funds, but they are in no way an actual financial asset.
So, here we have arrived: it’s 2017, our back-up funds are spent, and we have $2.5 trillion in IOUs with no cash value.
And all the while, there is still no lockbox, and nothing that prevents Congress from continuing to borrow funds from Social Security.
You can read the rest of Ohlemacher’s piece at Ohio.com.