With all the talk about budgets and deficits, the inclusion of Social Security in these debates confuses quite a few people, since it’s thought to be a “stand alone “ program that pays for itself. This perspective, however, is quite wrong. Social Security started off as a “pay-as-you-go” system, in which current workers paid for current retirees. The “pay for itself” component wasn’t brought forth until 1983, when the Greenspan Commission came up with the idea to set aside enough money to cover the expected shortfall when baby boomers began to retire around 2010.
This allocation of funds was known as the “trust fund”. The US government has been borrowing from this trust fund since its establishment, using it to cover any gaps in the budget. When PBS visited the trust fund in 2005, it found file cabinets upon file cabinets filled with Treasury IOU’s.
Although the Trust fund was supposed to be protected, untouchable by the government, it has been “borrowed” from since its inception. In 1990, the late economist Paul Samuelson suggested diversifying the trust fund’s holdings, which would have isolated the funds from government debt. The downside to that method would have been that past generations would have had to pay the debts which we are now faced with.
Kenneth G. Marks has been practicing personal injury law since he was admitted to the California Bar in 1981. www.KmarksLaw.com