Guess what folks. Remember all that extra money Social Security was collecting, well they aren't anymore. This year they have to pay out $29 billion more in benefits than they collected in taxes. That means breaking into the office in West Virginia that holds 2.5 trillion in government bonds (really IOUs).
Think about that for a minute. If your private company decided that it was going to spend all of the money it made, plus it's reserve fund, then repay the reserve fund with IOU's, from itself, it would be called Enron. When the IOU's came due and the accounts were all broke, Congress would be holding investigations and the CEO and CFO would go on trial. When Congress does it this is called "safe investing".
Did you know that your company can't legally require you to put any of your retirement into company stock? Yet the government gives you no choice but invest your social security payroll tax in their bonds.
If you wonder why the deficit is going up so fast, keep in mind that for the last 30 years we've been counting the Social Security surplus twice. We count it the first time and claim it's a surplus, then spend it (replacing the money with T-Bills). Then we count that money again as part of the general budget to show lower deficits than we truly have.
Bill Clinton never had a balanced budget, the closest he ever came was really about $330 billion in deficit spending, then raided the Social Security surplus to tell us it was balanced. Every President since Social Security started has done the same thing.
So how do we fix the Social Security problem? First, we'll have to raise the payroll tax, either on everyone paying it, or extend the limit on the amount that's taxable; or cut benefits (good luck with that).
Then the surplus needs to actually be put somewhere that the government isn't paying itself for the use of the money. Either corporate bonds, or another government's debt would be the safest place to do it. Then when the IOU's are do, Uncle Sam isn't trying to pay you with money he has to borrow. Instead he's paying you with money coming from a different source.
Congressfolks have demonized the idea of investing Social Security's money anywhere but in the same government that's supposed to pay the benefits; but at the same time have made it illegal for private business to do the same thing. If business isn't allowed to do it, there is probably a reason, one that government should probably think about in terms of itself.
Labels: Congress, Debt, Enron, Social Security