Tom Maguire has an amusing piece on this NYT article on Social Security. The NYT says, shockingly, that Social Security is in even worse shape than you thought since everyone is living longer, and JOM has good fun with that. But of course it’s a far worse situation for reasons we’ve previously discussed. The Times says that the Social Security “trust fund” will be depleted earlier than anticipated. But what is in the “trust fund”? Shares of Google or, heaven forfend, those of post-Jobs Apple? You should be so lucky.
Social Security is an IOU from the government to you. Its structure is that of a Ponzi Scheme, in which the current payors fund the current beneficiaries, instead of a trust fund like a private sector pension or an IRA for example. What it has in its “trust fund” is another IOU, this one from the Treasury. How does the Treasury fund such an IOU? Only three ways. (1) Taxes. (2) Borrowing, from China and elsewhere. (3) Printing money (these days that’s Borrowing as funded by the Fed’s QE2,3,4,etc.). The Social Security “trust fund” isn’t a trust fund. It’s more like a panicked response to a ransom note: “we’ll get the money somehow, we promise.” Feel better now?