I was told by one of my friends a few weeks ago that the Social Security Trust Fund really exists and it has a board of directors. This is different from what I believed for years. I always thought the money collected for Social Security went into the general fund that Congress could allocate in their budget. I thought I would take a few minutes to see what kind of factual information I could find about our Social Security money.
To begin with, there is a Social Security Trust Fund, but there is no “lock box.” The Trust Fund is an accounting device within the Treasury Department. There is never any money in the trust fund and there never has been any money in the trust fund. It is basically a fund filled with IOU’s. Social Security payroll tax goes to the Treasury Department. When the government sends your Social Security check, the Treasury Department puts a credit memo in the Social Security trust fund and at the same time makes a debit memo for withdrawal, then makes a distribution. The two amounts are identical; thus no money is actually in the account.
Here is the real kicker. Congress is allowed to borrow money from the Social Security Trust fund and insert an IOU, with no means or plan to repay the money. Congress can spend the money any way they choose and leave it up to future generations to pay the IOU.
Looking further there is indeed a Social Security Board of Trustees. They are known as the OASDI Board of Trustees. OASDI is an acronym for Old Age, Survivors and Disability Insurance. It is a six-member board that includes the Secretary of the Treasury as the managing trustee, the Secretary of Labor, the Secretary of Health and Human Services, the Social Security Commissioner and two others, appointed by the President and confirmed by the Senate. As near as I can figure, their main responsibility is to be a signatory on the annual Social Security report generated by the Treasury Department.
We currently have more money being paid out each year to retirees, survivors and people on disability than the money coming into Social security from payroll taxes. This is a serious problem and no administration wants to be tainted by admitting the problem and trying to solve it. It keeps getting worse and worse.
Incidentally. Medicare is managed the same way and it presents a similar problem.
My conclusion is, as long as the government is responsible for the Social Security funds deducted from payroll checks, they will spend the money and they will deplete the fund. Government cannot be trusted with our money. The only solution is a “lock box” for every individual that is held in private firm paid by the government on our behalf. The firm should invest the money in such manner that the value increases. Some brave President needs to accept this challenge and meet the problem head-on.