The Maddening Trust Fund Lie
It’s sad to see very smart people get fooled into playing the government’s games. I hate to call him out on this one, because he’s a blogger that I respect, but Kip is using their terms when he’s smart enough to know how fraudulent they are.
To review: An IOU from myself to myself is worthless. An IOU from the federal government to the federal government is worthless. Calling that IOU a “Treasury security backed by the full faith and credit of the United States Government” does not change its worthlessness â€” any more than would calling it “zoop.”
When Social Security runs into deficit starting around 2017, those IOUs will be “cashed in,” which simply means that the federal government, which has already spent the money, will have to raise either taxes or the budget deficit (I’m guessing the latter).
We all can agree that the “trust fund” is a bunch of BS. The trust fund has no assets in it, as Kip points out quite correctly, and which I explain through the use of analogy here.
Some will tell you Social Security fails in 2041, because that will be the time that the fictional “trust fund” is empty. The people who tell you that are trying to deceive you. But it’s equally deceptive to claim that we’re doing just fine until 2017, because that’s when Social Security goes into deficit. Kip, throughout his post, references that 2017 date, but that obscures the problem. The problem won’t magically hide until 2017, and then appear. THE PROBLEM STARTS TODAY!
It’s very simple. Right now the government is spending every dollar that we provide in Social Security taxes, every dollar we spend in income taxes, and then borrowing money on top of it. Every year between now and 2017, the amount of money the government has to pay in Social Security benefits will rise, and will rise faster than tax receipts from the payroll tax. So unless they reduce spending elsewhere, every year total government spending will rise, and because each year the social security “surplus” gets smaller, they have to make up that money elsewhere, either with other taxation or more debt.
The 2017 date is a convenient fiction, much like the 2041 date. It’s used by people to make us think that we still have time to fix the programs in the future, but the problems exist today. The problem is that government spending is rising faster than government revenue. Unless we cut spending or raise revenue, we’re in a lot of trouble. Which pocket they take that revenue out of doesn’t matter.