A Stitch in Haste

As I noted yesterday, the trustees of Social Security and Medicare released their annual report on the state of the systems' finances.

Little has changed:

By 2017, Social Security will pay out more in benefits than it collects in taxes, the trustees said in their annual report. The program's trust fund is projected to be exhausted by 2041, one year later than estimated last year.
...
Over time, the programs are expected to consume a growing share of the federal budget. This year, about 7 percent of federal tax revenue goes toward paying Social Security and Medicare benefits. The figure is projected to climb to more than 10 percent by 2012, and 26 percent by 2020, said economist Thomas R. Saving, a trustee.

To keep the programs going, Congress and the president will have to increase taxes, reduce benefits or do both, the trustees said. "Without significant reform, these programs are not sustainable in the long run," Saving said.

It's interesting, and perhaps unfortunate, that the commentary uses total federal tax revenue rather than FICA taxes. The whole point of the Social Security crisis is that FICA taxes, which are over-collected today to fund general federal operations and to understate (i.e., lie about) the true size of the federal deficit, will soon be inadequate to pay for Social Security obligations. The all-important date is not 2041, when the fraudulent Social Security "trust fund" is nominally exhausted, but rather 2017 (only a decade away!) when the "trust fund" will finally and irrefutably be exposed as an accounting (and political) fraud in the first place.

To review: An IOU from myself to myself is worthless. An IOU from the federal government to the federal government is worthless. Calling that IOU a "Treasury security backed by the full faith and credit of the United States Government" does not change its worthlessness — any more than would calling it "zoop."

When Social Security runs into deficit starting around 2017, those IOUs will be "cashed in," which simply means that the federal government, which has already spent the money, will have to raise either taxes or the budget deficit (I'm guessing the latter). But there simply are no "assets" for Social Security to redeem. That has been the great lie all these years — to call a promise to raise taxes or deficits in the future a "trust fund" today.

If a private party tried to lie like that, they'd go to jail.

More thoughts at Cato@Liberty.