Social Security fund sleight-of-hand

01/31/2013 7:52 PM

01/31/2013 7:53 PM

For years the Social Security Administration has promoted the illusion that there are approximately $2.5 trillion sitting in the trust fund which is available to pay 100 percent of monthly benefits through at least 2037. It's an illusion because what they want people to see is not what's there.

By law, the U.S. Treasury must invest any payroll contributions not needed to pay benefits in interest-bearing U.S. government bonds. These bonds are what make up the Social Security trust fund.

When the U.S. Treasury issues a bond, it is taking on debt; however, the Social Security Administration touts these bonds as an asset. This is where the illusion becomes apparent — $2.5 trillion of Treasury debt when added to $2.5 trillion of trust fund assets equals zero.

This illusion was on display to the public when President Barack Obama recently suggested on television that Social Security recipients could have their monthly benefit checks delayed unless Congress raised the debt limit. If there really is $2.5 trillion in the trust fund, there would be no need to delay payments.



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