Somebody is Lying

With the “drop dead” date on increasing the debt limit fast approaching, we're hearing more and more dire predictions about all the bad things that will happen if we can't borrow any more money. Perhaps the most alarming scare tactic is that Social Security checks will stop being mailed unless the debt limit is raised. Is that true? I guess that depends.

For a long time, I've spoken out against the ponzi-scheme like funding of Social Security. What some people call “pay-as-you-go”, I call a “pyramid.” Social Security benefits being paid out now are coming from the Social Security taxes being paid now. When today's workers eventually retire, they will have to rely on other people paying into the system to pay the retiring people's benefits.

For many years, there was far more money being paid into Social Security than was being paid out. The difference was set aside in a “Trust Fund” to be available for future demands on the system. On the Social Security website, you can find this quote:

The Social Security Trust Funds are the Old-Age and Survivors Insurance (OASI) and the Disability Insurance(DI) Trust Funds. These funds are accounts managed by the Department of the Treasury. They serve two purposes: (1) they provide an accounting mechanism for tracking all income to and disbursements from the trust funds, and (2) they hold the accumulated assets.

Whew! It's comforting to know they've been holding onto these “accumulated assets” because, just recently, the cost of benefits payments has begun to exceed the total receipts. No worries though, because we should be solvent for many decades to come. Consider this quote from the same website:

In the annual Trustees Report, projections are made under three alternative sets of economic and demographic assumptions. Under one of these sets (labeled "Low Cost") the trust funds remain solvent for the next 75 years. Under the other two sets (the "Intermediate" and "High Cost"), the trust funds become depleted within the next 25 years. The intermediate assumptions reflect the Trustees' best estimate of future experience.

You see then, we should have enough funds in the SS “trust fund” to remain solvent for at least 25 years – maybe even 75 years. So why is Obama saying the SS checks will stop unless we increase the debt limit? Before you answer, keep in mind that people will still continue paying their SS tax even if the debt limit isn't raised so that can't be used for an excuse as to why SS checks might stop.

If SS checks stop, then we know there was never really a trust fund that held all these decades of overpayment into the SS system. On the other hand, Obama certainly is aware of this supposed trust fund. If he believes there's such a fund, then he knows the checks aren't going to stop. Either way, somebody is lying.

Of course, if the debt limit is increased then it will be business as usual. The Social Security Administration will continue promoting the falsehood that it will remain solvent for many years to come. Obama will continue to scare seniors by telling them Republicans want to take away their monthly checks. However, the truth is now out. This budget crisis has shone a light on the fragile Social Security system. It's a house of cards. They're just lying about it.