Social “Security”

Back in my seminary days, all fourth year students had to go listen to a man from the SS (heh-heh) tell us the wonders of Social Security.  “You see”, he explained, “you pay money now, and it goes to other people.  When you  retire, you take other people’s money. ”

“And don’t worry” he continued, “Social Security isn’t projected to run out of money until 2037.”  (I am eligible to retire in 2039, so I’m not sure why that’s  comforting.)  “But it won’t really run out of money then.  You see, that’s just a projection.  Back in the eighties, they were forecasting that the money would run out in 2035.  But about a decade ago, they ‘fixed’ it so that the money would last another two years.”

I was not a math major.  But even I could see that if every decade they managed to squeeze another two years out of it, then by the last years of the 30’s, they would be solvent until 2045.  So, as long as I die at 73, I’m fine.

But that was not the most frightening part.  The part that really worried me was this :

Social security is “solvent” for so long, because it is taking in far more than it is paying out.  And don’t worry about the money.  It is even earning interest in the safest investment around : Government Bonds.  So when it starts to pay out more than it takes in, that money will be there for you.  (Of course, not for me personally, but there were a lot of second career guys who will be dead – or at least too feeble to spend the money – long before 2045.)

In other words : The government is loaning the money to itselfAnd then spending it. So, the problem for Social Security doesn’t arise in 2037.  The problem arises when it starts cashing in those bonds.  Because that’s when the government has to start paying out money it no longer has.  I pointed this out at the time.  I said, we are all in trouble, because once it starts doing that, the curve on his “money graph” gets so steep that taxes will have to go Waaaaayyyy up.  (Of course, the curve is so steep that you can bend it slightly, but you can’t fix the fundamental flaw in the program : not enough people paying for too many benefits.)

In the last decade plus, I have heard nothing about this.  No one pointing out the obvious – you can’t loan yourself money, spend it, and come out ahead.  Well, the day has arrived.  This is the first I have heard about it, but I guarantee, it won’t be the last.

Have a nice day.

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