The Social Security Trust Fund is an accounting trick. There is no money in the fund. It is filled with government bonds, issued specially to government agencies. The money was spent by the government as soon as it rolled in. These bonds are not marketable to the general public. There is no market for these bonds. They represent an accounting trick.
What stands behind these binds? The promise of Congress to pay them off when they come due. When is that? Whenever the income from FICA taxes ("contributions") no longer is enough to meet monthly payments to Social Security beneficiaries. This is expected to begin no later than 2017. It may happen before.
Then how will the government pay the recipients? There are only three ways: (1) collect more revenues; (2) borrow the money; (3) print the money. Results: (1) a tax revolt; (2) rising interest rates and a collapsing economy; (3) the destruction of purchasing power and also the lifestyle of anyone dependent on Social Security.
There is no way out. The politicians know it, but they always defer any decision. All of the available decisions are painful. When you read that the U.S. Federal budget is hundreds of billions of dollars in the red, add about $140 billion more. This is the money that Congress pulls out of the Social Security Trust Fund every year.
But isn't this just trading one kind of debt for another? Yes. Then why does the government do this? So as to deceive the voters. The Social Security debt is counted as off-budget debt. The bonds issued to the Trust Fund are off-budget bonds. The money is owed, but it's not counted as being part of the on-budget debt. So, the government can release good news about "reducing the deficit." The Clinton Administration especially benefitted from this sleight-of-hand operation. As for the deficit: "Now you see it; now you don't."
If you don't believe me, it's explained here:
Spend a half hour with the information and charts in this report. The site will change your thinking.
Then, when your thinking is changed, come back to this site. There are ways out of the trap, but not for people whose idea of action is to watch TV. Six departments apply: Retirement, Real Estate, Business Start-Up, Goal-Setting for Success, Budgeting for Wealth, , and Career Advancement
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