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Willisms

« Congratulations to UNC Tarheels. | WILLisms.com | Carnivals and Bonfires of Vanities. »

Social Security: About That "Trust Fund."

National Review takes on the Social Security trust fund:

Social Security faces an unfunded liability of $4 trillion over the next 75 years. The liability is $11.1 trillion in perpetuity. Some dismiss infinite timelines as absurd. The concept is an easy target: It’s difficult enough to get people to care about the fiscal situation over the next 75 years; why should they care about Social Security benefits in the year to 2500? But that’s not the point. The infinite horizon is necessary to ensure that any Social Security fix is a permanent one as opposed to the many temporary patches that are floated — patches that would leave the system out of balance beyond the truncated window.

As the Social Security Trustees point out, “Overemphasis on summary measures for a 75-year period can lead to incorrect perceptions and to policy prescriptions that do not move toward a sustainable system.” The 75-year unfunded liability increased by $300 billion over the past year and the infinite gap increased by $600 billion. So right now the American people have an implicit liability of about $11 trillion. The liability is implicit since there is not an explicit IOU for the whole shortfall sitting in any filing cabinet.

The unfunded liability is the amount of money that we would need to put away today in order to generate a large enough revenue stream to fill in the growing gap between program benefits and revenues. It is important to understand that this implicit liability is completely different from other types of debts, such as the government debt owed the public. Unlike a government debt resulting from borrowing, this implicit debt is not binding because participants have no legal right or claim to their Social Security benefits. While the benefits have been promised (or implied), they are not owed, need not be paid, and can be changed at any time.

If you are a Social Security policy wonk, it's a must-read.

Posted by Will Franklin · 4 April 2005 11:13 PM

Comments

Social Security is the Lamest game in town! Like I've said before! Would you rather pay into a retirement plan that takes out 12% and gives you back 2% of your investment?.... I don't know anyone who would really say Oh! yes sign me up!, when you could take your hard earned money and put it into safe bonds or other investments that will actually pay you returns for your retirement so you won't have to choose between eating and medicine in your old age!

Posted by: Zsa Zsa at April 5, 2005 09:54 AM

PAY MORE GET LESS! DOh...Darn Flanders!

Posted by: homer at April 6, 2005 09:37 AM