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Can Social Security Be Saved for Future Generations?
Can Social Security be saved for future generations? Many have already concluded it’s hopeless, and if the current trajectory is left untouched, that is pretty much baked in. Only a radical reform of the program’s basic purpose, design and funding mechanisms could return the program to anything resembling sustainability and fairness.
Let’s start with a thought experiment: what if Social Security (SSA) had been an authentic pension plan rather than a pay-as-you-go social welfare program? The program’s accounting artifices obscure the reality that there is no “trust fund” of cash sitting in an account somewhere; all benefits are paid out of taxes collected from workers and employers today.
An authentic pension plan deducts a percentage from workers’ earned income and deposits these into a fund that earns income. The fund is in effect a savings account that accumulates the monthly deposits and interest until the worker retires, at which point the fund starts disbursing monthly retirement payments and continues to collect interest on the fund’s remaining balance.
In contrast, the SSA “trust fund” is an accounting gimmick that makes everyone feel warm and fuzzy, but it’s nothing more than self-serving delusion. The “trust fund” holds “non-marketable securities,” a nice way of masking the truth which is when SSA payroll tax revenues don’t cover SSA expenditures, the Treasury makes up the difference by selling Treasury bonds — the same way it pays for all other deficit spending.
