Lock box!

Starting in 2010, Social Security began to permanently spend more than it takes in. This is by far the most important year. From now on, Social Security will require large and growing amounts of general revenue money in order to pay all of its promised benefits. Even though this money will technically come from cashing in the special issue bonds in the trust fund, the money to repay those bonds will come from other tax collections or borrowing. The billions that go to Social Security each year will make it harder to find money for other government programs or require large and growing tax increases.

Compared to these two dates, 2036—the year that the Social Security trust fund is projected to run out of its special issue bonds—is of little importance. Even though the end of those bonds will require approximately a 25 percent benefit reduction, Congress would have been paying about $250 billion a year (in 2011 dollars) to repay those bonds for about seven years by the time the trust fund runs out. Congress will have to do this through some combination of other spending cuts, new taxes, or additional borrowing. These are the same choices Congress would face without the trust fund.

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What Does It All Mean?

Bad News for Younger Workers. Unfortunately, younger workers have a great deal to worry about. Even though their parents’ and grandparents’ benefits are fairly safe, theirs are not. Any worker born after 1970 will reach full retirement age after the trust fund is exhausted. Unless Congress acts soon, younger workers can look forward to paying full Social Security taxes throughout their careers but receiving only about 75 percent or less of the benefits that have been promised to them. In addition, they will have to repay the Social Security trust fund, an expense that will total almost $6 trillion by the time the trust fund is exhausted in 2036.

Improving Retirement Savings Is a Must. Allowing American workers to save and invest a portion of their income in accounts that they would own is the lowest-cost way to ensure that they have an adequate retirement income. Increasing the ability of workers to save for retirement will reduce their dependence on Social Security for retirement income and enable them to increase retirement security.

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It takes about 22 years to grow a taxpayer. Almost every new taxpayer who will begin a career after graduating from college in 2033 is living today and can be counted. Similarly, all people who will face approximately 25 percent across-the-board benefit cuts starting in the year 2036 (if Congress does nothing to fix the program) are alive now, and most of them are paying taxes.

Social Security’s problems are based on demographics, which do not change from year to year. The people who will be hurt if nothing is done to fix Social Security are not unknown people of the future: They are our children and grandchildren of today.

Whatever. Sucks for them.

Meantime, there are beaks to keep whetted and crony programs to keep funded. After all, elections we now know can’t be won without pandering and special pleading, without matching the Democrats in “compassion” — which is just another word for using the power of the government to redistribute tax revenues already spent to those you wish to keep you in power to begin with.

It’s beyond a ponzi scheme. It is state-sanctioned fraud, state-sanctioned theft, and the very people in charge of the government have granted themselves the rights to proceed apace, knowing full well that their temporary stewardship over the trough that gluts them will be finished long before the final crisis hits.

At which point the Republicans will be blamed either way. So really, what does any of it matter — to establishment types from either party?

What? You thought they truly cared? Please, say it ain’t so…

(thanks to TerryH)