Thursday, October 6, 2011

Social Security--Where IS the money, really?

Imagine a young boy, age 10 or so, decides to save for college.  He saves for 8 years, and since he is under age, his parents are custodians on the account.  Upon high school graduation applies for college.  At that point, his parents regretfully inform him that he has no money to go to college.  He asks where his college fund went.  They reply that a few years ago, when money was short, they dipped into his college fund to pay the rent.  A few years later, they dipped into it again to fund a vacation.  Whatever the reason, the money is gone, and the son is out of luck.

What is owed to the son?  Who owes it?  Obviously, at the least, the son is owed what he put in.  And obviously, the parents owe that money to the son.  The parents SHOULD have used their own money for those other expenses, but they didn't. 

This is the same as our current situation.  We, like the son, have put in money for years.  The government, like the parents, spent the money (which SHOULD have remained in trust) on other things--previous years' recipients, as well as other miscellaneous expenses through the years.  Congress used funds from Social Security to fund pet projects and make it appear that the national debt was lower than it actually was.

That's right--technically the lack of a Social Security trust fund is an off the books addition to the national debt.

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