There’s no question the Social Security retirement trust fund will run out of money, and the current recession will make that happen faster than previously forecast. The key questions now are: When will the trust fund be exhausted?

There are no funds in the Social Security Trust Fund.. There has been no such funds for a very, very long time. The SS money is all "invested" in special securities payable only by the general fund. All the money collected goes to the general fund, and is spent like any other revenue. The "investment" backed by the full faith of the government is good until the general fund lacks the money to make the monthly deposit into the SS account for payments to be issued. If the Congress does not increase the debt limit and spending authority is not authorized, when the general fund runs dry, SS payments stop. All the money is owed by the government to the government.

Social Security and the Trust Fund

nolu chan
June 17, 2015

Note that the source here is the SSA itself, putting their best shine on it. Further below I quote extensively from an SSA Actuarial Note and two Congressional Research Service reports.

http://www.ssa.gov/oact/progdata/fundFAQ.html#a0=6

Money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Many options are being considered to restore long-range trust fund solvency. These options are being considered now, well in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds' securities will need to be redeemed on a large scale prior to maturity.

If the General Fund runs dry, there is nothing to pay Social Security benefits with. The money has been spent. The special-issue securities in the lockbox cannot be redeemed if the General Fund does not have spending authority to redeem them with.

Recently, when Congress threatened a budget default, or threatened to not raise the debt limit, Social Security beneficiaries were told their benefits might be delayed. If Congress had not increased the debt limit, or authorized spending, the General Fund was threatened with running dry. They can't give the SSA their monthly funding if they don't have it.

In government-speak, the fund is wonderful on paper and backed by the full faith and credit of the U.S. government. They also admit that the money has been "borrowed" and actually spent. And the government is over $18T (note this was written in 2015) in debt and running huge deficits every year. That is also on the good faith and credit of the U.S. government.

The "logic" is that the government spent the money, but the government still has the money, as the government promises to repay the money to the government. With interest.

Picture this as "left pocket, right pocket" savings. From your earnings, each month you put $1,000 in Federal Reserve Notes in your left pocket. Call this your Individual Trust Fund. The next thing you do each month is create a debt instrument, payable only by you, for $1,000 and replace the $1,000 in your Individual Trust Fund with the $1,000 debt instrument. You are honest, creditworthy, and a person of good faith. You promise yourself to pay the debt and guarantee it with your full faith and credit. You take the $1,000 in Federal Reserve Notes and place that in your right pocket. Call that your Slush Fund. You spend liberally from your Slush Fund, and in addition use your credit cards to supplement your earnings to pay for your liberal spending. You do this each and every month for a year. At the end of the year you have nothing in your right pocket. The Slush Fund is empty, that money has been spent. The credit card balance is higher. But you feel good because you have $12,000 of your own debt instruments in your left pocket, your Individual Trust Fund.

When both "accounts" belong to the same person, one is a credit and the other is a debit. Together, they equal nothing. You are broke and have credit card debt, but your left pocket makes you feel good.

[snip]