Social Security is not going insolvent. Not now, and not in ten years. Write it down and do so confidently.
The surest sign insolvency in no way looms in Social Security’s present or future can be found in the certainty that there’s no “lock box” and there never was one. The paradoxical truth is that the lack of funds stashed away for future retirees is the surest sign that their Social Security payments are secure now and forever. Please read on.
What’s apparent from an “empty” lock box is that any excess Social Security collections from individuals and their employers was transferred to general revenues and spent by Congress. Well, of course it was. Politicians exist to spend, and Congress arrogated to itself what was left over after existing Social Security recipients were paid.
Looking ahead, precisely because excess Social Security collections were spent by Congress, the reverse will reveal itself. What Social Security doesn’t collect, but that’s required to pay the meager benefits provided by the faux forced savings program, will be made up for by Congress through general revenues, borrowing, and almost certainly both. So-called “insolvency” solved. With ease.
To which some will respond that the rising national debt imperils the rosy scenario described above. Nonsense. Without defending the massive tax that is government spending or borrowing for even a second, the surest sign that there’s no looming payments crisis related to the national debt is all the debt. Get it?
As I note in my soon-to-be-released book The Deficit Delusion, there is nothing more ruthless than money. That’s why it’s so difficult to attain for most of us, but easy for the federal government. Why the contrast? Because the federal government has taxable access to way too much of the earnings of the most productive people on earth, the American people.
In other words, the looming crisis isn’t the “national debt,” nor the laugh line about looming Social Security insolvency, rather its long been with us in the routine over taxation of the American people. What takes in lots of revenue can borrow in enormous amounts. In other words, our federal government has run up staggering amounts of debt not because it has taxed us too little for decades, but because it’s taxed us way too much such that the world trusts Treasury income streams more than any other income stream in the world.
Worse, there’s no evidence in the markets even now that investors think the over taxation of Americans will stop now, in five, ten, or even thirty years. See yields on U.S. Treasuries. No doubt they’re up a little right now, but in a historical sense they remain very low. Which is a sign of long-term market confidence that Treasury’s intake isn’t imperiled now, or in the future.
Confidence about the present and future streams of dollar income that Treasuries embody tells the Social Security story quite well. Without defending the federal government’s savings program for even a second, it’s fine now and always will be fine exactly because Treasury owns far too much of the earnings of the American people. Which means the alarmists who’ve always been wrong about Social Security’s “insolvency” will maintain that status well into the future.
