The Social Security Trust Fund every retiree is relying on is not what most Americans believe it is.
The brutal truth is this $2.85 trillion fund, which is supposed to keep the Social Security program solvent until the year 2033, has no money in it whatsoever.
The entirety of the Social Security Trust Fund is held in "special obligation bonds," a type of government bond issued for a single purpose (in this case, the funding of Social Security benefits).
In other words, this "fund" is actually debt.
And unlike marketable Treasury bonds, these special obligation bonds can't be sold. They only have value if the U.S. government buys them back.
They also differ from marketable Treasuries in that they exist in paper form. All of them are stored in two loose-leaf binders in a filing cabinet at the "Bureau of Public Debt" in Parkersburg, W.Va.
But what many people fail to realize is that what the paper bonds represent isn't money that can be sent to Social Security beneficiaries, but debt owed by the U.S. government.
President George W. Bush made that clear on a little-remembered visit to Parkersburg in April 2005:
"A lot of people in America think there's a trust, in this sense -- that we take your money through payroll taxes and then we hold it for you, and then when you retire, we give it back to you. But that's not the way it works.
"There is no 'trust fund,' just IOUs that I saw firsthand, that future generations will pay -- will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs.
"The office here in Parkersburg stores those IOUs. They're stacked in a filing cabinet. Imagine -- the retirement security for future generations is sitting in a filing cabinet."
While the public is generally unaware of this, those in the government have always known.
President Bill Clinton's 2000 budget proposal included a description of the Social Security Trust Fund similar to that of President Bush:
"The Social Security Trust Fund does not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures."
But if the Social Security Trust Fund is just a pile of debt, where did the money go?
You're not going to like this answer, either...
All of the Social Security Trust Fund Money Was Spent
Most people know that Social Security is funded primarily by payroll taxes levied on all U.S. workers. The money is spent as it comes in, sent out to beneficiaries.
But in most years there's a surplus, which the government is supposed to set aside for when the payroll tax receipts can't cover the cost of the benefits.
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Investing that money in those special obligation bonds allowed the government instead to add the surplus to the general budget - where it was promptly spent on everything from defense to welfare to foreign aid.
That’s right. The government spends all the excess Social Security tax money in the year they receive it, replacing it with the paper IOUs that now sit in the filing cabinet in Parkersburg.
Over the years, different presidents have been accused of "raiding" the Social Security Trust Fund to finance this or that program, but that's understating what's actually happened.
The truth is, every president since Franklin Delano Roosevelt has overseen this "borrowing" from the Social Security Trust Fund. And as long as the program's receipts exceeded its expenditures, it didn't matter all that much.
But that's about to change...
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.
If people who have been in the US for years and have especially ablished themselves as la abiding people who work full time are given citizenship, then they can pay into the Social Security system. Especially people in their thirtys or forties who have years until retirement, would prolong the end of the Social Security system. When the cost of living is already high, how can the American people be expected to save enough money to replace Social Security? Benefit cuts do seem to be the answer for future generations. If less people practice birth control in the current child bearing generation, there would be more workers in the future to contribute to Social Security.
So what do we, the taxpayers, who paid our taxes over the working years to do to stop this obvious misuse of the funds, and to insure funds are available. I personally, if I knew this was the problem from the get go of first paycheck would have taken the funds and stuffed my mattress over the 40 years of working, especially in this non-existing age of no interest savings. Just like the savings bonds, that I purchased over the years, I would have the funds and not have to rely on the government deciding if I should get the money or not. The government gets enough free loans of money and needs to control their spending just like all of us regular people do. I have to deal with various issues over my life and try to keep within my means, which meant I could do all my wishes but keeping a roof over my head and having food on the table was more important. I think if our politicians had to work within a budget, like ordinary people due, that is effected by rising costs and no increase in income, they would not be so readily spend money they don't have.
What is the problem with cutting their checks to repay this money? If we owed it their would no problem getting it back. What about no raises for the next 17 yts for them?.
With regard to you article about Social Security, those "pieces of paper" are the same as bonds owned by people and foreign governments. They represent the "full faith of the US Government " to return the funds paid to buy them. Contributions by companies and their employees go into these bonds and the government uses it to finance it operations. But they are not the governments money. They are the return of funds lent to them, the same as buying US Treasuries. And they should be secure. Not one cent of the SS income is from the budget, only from return of equity.
LBJ is the guy responsible for making that move, and other politicians were only too glad to raid the fund to buy votes. We the people are aware of all the shenanagins that have been going on with SS since 1964. Time for the politicians to pay back the folks that contributed for decades, only to see a bunch of lying politicians tell you it's broke. Well, Bernie Madoff did the same thing as the government, and he's in jail, So why are these politicians immune from punishment?
I put more than enough into the SS fund to see me through the rest of my life, there should be a criminal investigation into who the f#@$%^& stole my money!
You still don't get it? Can you see the nose on your face?
Every person who puts their faith in the Humanist religion, who voted for Liberal Democrats stole that money! Maybe you ?
Liberals came up with SSI and they also came up with the idea of spending the receipts on welfare programs that bought votes but gave money to people that provided nothing of value in exchange. It was theft in collusion of the democrats and their core. Liberals sat back as Al Gore lied, claiming that SSI was in a 'locked box'. This is the same person leading the Global Warming scam, enriching himself with $110's of millions as the core principle of the Humanist religion.
Here is how to cure social security.1. Separate the fund into 2 categories, one for US citizens 50 and under. One for the rest of the participants.2. Completely privatize the Plans and place their investments under the direction of the Board Of The Institute Of Chartered Financial Analysis, who will appoint the Investment committee each of whom will serve an agreed upon term. Fund 1.( 50 and under ) will be initially funded from two sources with a 10% tax on the current and future foreign earnings of U.S. Corporations and the accumulated (unaccounted for) penalties confiscated by the U.S. Government from the Financial Sector, etc. This money was reportedly placed in a slush fund and allocated to Causes favorable to the Obama Administration. The Society Of Actuaries will determine how much funding will be required. Once satisfied, any excess will got to Fund 2( current recipients) if the current payroll tax is not sufficient to fund benefits. Since this is paying off an unscheduled debt of the Government , U.S. Corporations would get a Tax Credit against their U.S. obligation against their U.S. Tax from all sources. As payments are made the bogus IOU's will be redeemed. The legislation required will prevent government interference with this "Private Plan", to prevent a future breach of trust. Once the plans are actuarially balanced the contributions , which are to be paid directly to the Plans, the foreign tax will go to the Treasury. The legislation will prevent the level of tax on foreign earnings from ever being increased without a vote of the people.
Plan 1. The Social Security Rehabilitation Trust. Plan 2. The Seniors Social Security.
They are not subject in Congress to Social Security, why should they administer it. It is a trust fund!!!!
You must be smoking something, especially the comment "Not one cent of the SS income is from the budget, only from return of equity." Good luck to your kids and grand kids.
OK — Here is the truth that the fear-mangers and right-wing opportunists are not revealing. ALL bonds are IOU's, based on the understanding that they will be repaid at maturity. The word "credit" comes from the Latin word for "believe." You do not want the govt. to let the surpluses sit idle. Besides, there are probably not enough coins and currency to cover the amount, as they represent only a small fraction of the money supply. The US has never defaulted on its bonds, which makes them the safest security in the world. And remember that Social Security is set up like an insurance program. Do you think an insurance company holds on to your premiums till you file a claim? It invests the funds, and it pays benefits out of current premiums it receives.
Did you actually read the article? The monies in the fund are not invested. The monies sit there until they are quickly raided by the government so there is no extra money left in the fund to invest or even to stuff under a mattress.
LIke a Ponsi scheme
I LIKE SOCIAL SECURITY
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