By some accounts, the social security trust funds now have over half a trillion dollars, while others say the money in these funds is so phony it may as well have Art Linkletter’s picture on it. Are the assets in these funds actually worth half a trillion dollars, or is it all a sham? –Daniel Moore, Chicago
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You enclose a published debate between two former social security officials that, like most things I’ve read on this question, manages to take the mildly confusing and make it completely opaque. Let’s try it from the top. Social security, in theory, is a break-even proposition. Payments to retirees are supposed to be balanced by taxes collected from the poor stiffs who are still working (and their employers). Long ago some genius realized that once baby boomers got to retirement age there was going to be a lot more cash going out than coming in. So social security taxes were hiked to build a surplus we could draw down later. This surplus, in theory (again), goes into a trust fund.
Would those investments be more “real” than investments in U.S. bonds? Depends how you mean. All unsecured financial obligations are built on air. If you walk into the Japanese savings-bond agency or the GM treasurer’s office and ask to see the assets underlying their financial instruments, what will they have to show you? Nothing–the money went to pay off current debts. Presumably, however, the venture as a whole prospers, and it is in the belief that it will continue to do so that one reposes one’s hope for future repayment.
Art accompanying story in printed newspaper (not available in this archive): illustration/Slug Signorino.
