Social Security: An IOU is not a cookie

Imagine you go into your pantry to count boxes of cookies, because you really like cookies and you want to make sure you have enough.  But some mischievous member of your family has eaten the cookies and put the empty boxes back on the shelf.  You count the boxes thinking they’re full, but when you go to open one, it just has a note inside promising to pay you back. 

Social Security has a looming empty-box problem.  Such is the sadly unsurprising conclusion of the annual report on Social Security, released on Thursday by the Social Security Board of Trustees.

The report tells us that “[the cost of Social Security] is projected to exceed tax income in 2010 and 2011.”  As the Heritage Foundation bluntly points out, that means the program is now paying out more than it can take in, and the entire Social Security fund will run completely out of money by 2037. 

However, the cupboard may be bare even sooner than that, thanks to what John Hall and like-minded colleagues consider their signature achievements:  the new health care and financial “reform” laws.

When the Social Security Trustees predict that disaster will come a little more than one generation from now, they’re not taking into account the predictable harmful effects of the massive health and financial laws.  Let’s consider the fact that because of the health law, businesses are now reluctant to hire more employees, because they know that there will likely be financial penalties for doing so.  One such penalty:  as payrolls increase, the cost per worker of the employer mandate also rises.  Meanwhile, the financial reform law will actually limit the availability of credit to businesses that need it to grow.

If we limit the ability of businesses to grow and to hire, then we won’t have the workers whose wages fund Social Security in the first place.  That’s still not all:  if we have more people on the unemployment rolls, they will file for Social Security benefits earlier than they would if they were employed.

Not one of these factors enters into the Trustees’ calculations, but they will further shorten the time to Social Security’s implosion.  And then there’s the matter of what actually is counted as assets in the Social Security trust fund.  Right now, $2.5 trillion of the assets is held in U.S. Treasury securities that earn interest at 4.8%.  These securities are IOUs, not actual money. 

If you’ve ever tried to eat a piece of paper, you know it’s not a cookie.  And when the time comes, as it surely will, for the Treasury to pay the Social Security trust fund what it’s owed, real money is going to have to come from the ever-shrinking wallets of our already overburdened taxpayers.  While John Hall insists on the House floor that “our seniors depend on their monthly checks to put food on the table and a roof over their heads,” he’s voted for two major bills that will make fulfilling that obligation, as we now understand it, impossible.


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