Social Security’s IOU Trust Fund
27th October 2016
Social Security faces a $10 trillion funding shortfall. Since 2010, Social Security has been running a constant cash flow deficit, meaning that the taxes collected for the program aren’t enough to cover the benefits paid to beneficiaries. To fill the gap and keep the checks going out, the program has been drawing from federal trust funds. However, the government’s trust funds aren’t like trust funds in the real world. Trust funds in the real world contain assets; the government’s trust funds basically contain IOUs. What that means in simple terms is that the government already has to go further into debt to pay Social Security’s bills—and it’s only going to get worse.
The Social Security system is another example of the government doing something for which a non-government actor would go to jail — it’s basically a state-sanctioned Ponzi scheme.