Serious Time

[ZenGum]

In Parliament of Whores, P.J O'Rourke described the situation with social security. He's more than half satirical, but I think he has these facts, at least, correct.

Soc Sec takes some money in, pays some money out. If there is surplus (which there has usually been ... up until now) the only "investment" they are allowed to make is to buy US treasury bonds. A brief reflection on the insane gambles of the Savings and Loans crisis will make clear why no one trust bureaucrats with money.

Problem is, when they lend money to the treasury, the only thing the treasury can do is spend it. They're not allowed to invest it either.

Then in the future (which is now here), when soc sec runs into the red, they call up the feds and say, pay some back please. The feds can only shrug, say "we've spent it" and either raise taxes on everyone else, or cut or delay soc sec payments.

US style social security seems to be either disguised and poorly managed taxation, or a giant ponzi scheme.

Is this how it looks to you guys?

[Happy Monkey]

Originally Posted by ZenGum

Then in the future (which is now here), when soc sec runs into the red, they call up the feds and say, pay some back please. The feds can only shrug, say "we've spent it" and either raise taxes on everyone else, or cut or delay soc sec payments.
...
Is this how it looks to you guys?

Social security is just another purchaser of Treasury bonds. They will get paid back. They are projected to run out of bonds in 27 years, and even then they're projected to be able to cover 80% of their obligations out of year-by-year income. Social Security is fine, for the forseeable future (which is less than 27 years). It would be OK to do some of Orszag's tweaks, to fill in that last 20%, but that will not help the deficit appreciably. And I see no need to do much with Social Security until the bonds run out, as they were only intended to be a temporary stopgap for the Boomers. Once they run out, it should go back to paying year by year, using tweaks like those described.