Social Security Retirement Benefits In Danger

The third rail of politics is known as Social Security; you die if you touch it. Both sides accuse each other of being extremists on the issue, but the truth is that neither are correct. Supposedly there are $2.5 trillion dollars in the a trust fund to pay retirees and here lies the focal point of the problem; the trust fund balance isn't really money at all because it cannot pay benefits.

The Congressional Budget Office says that when a trust fund receives "receipts in excess of amounts needed for current expenditures, they are credited with non-marketable Treasury debt known as government account series securities... Thus, the balances of trust funds are not a measure of resources available to pay future obligations for the respective programs; those resources will need to come from federal revenues or additional borrowing in the years those obligations are due."

You can't send out social security checks that are denominated in government securities. The government can either raise taxes, cut spending, lower benefits, raise the retirement age or use the Federal Reserve or some other big bank to liquidate the debt. The first choices postpone the inevitable and the last would considerably reduce the purchasing power of the US dollar.

The Social Security Administration estimates that by 2030 nearly 50% of all income taxes will be used to pay benefits to retirees. This number skyrockets to nearly 90% within 50 years. This could all be avoided if our politicians somehow found the willpower to cut spending and start paying back the money owed to the trust fund, but really, how likely is that to happen?

Democrats consistently accuse Republicans of being aristocratic and opposing any program that helps the poor. They demonize the rich bankers and oil barons while championing the cause of the poor. On the other hand, Republicans see Democrats as proponents of big government social welfare programs that buy votes and are beholden to union interests. Both are partially correct, but neither come close to even beginning to tackle this massive problem. This should not be an ideological issue, it should be an issue of proper public policy. We cannot in good conscience default on our obligations.

Regardless of whether or not Social Security continues past the current era, the $2.5 trillion dollar debt to the fund must be re-paid. Unless that happens, the program will be the equivalent of a ponzi scheme where new investors are used to pay off old ones. We could kill the program tomorrow and still have a disaster on our hands, so we need to put our issues aside and tackle this head on. This should not be a bi-partisan issue, it should be a non-partisan issue. If the nation defaults, everyone will suffer.