What happens when the SS Trust fund runs out? And what happens between now and then?

by David

Just to be clear, when you read in the media that the Social Security Trust Fund is projected to run out of money in 2033, and that after that, SS revenues in would be only enough to pay 77% of projected promised benefits — just to be clear — that’s only half the story.

The other half is that the “Trust Fund” is (currently) $2.8 trillion dollars of (non-marketable, but that’s not relevant) US Treasury securities. When we say that the trust fund is going to “run out of money” — that means that all those treasury securities will mature and/or be cashed out.

And that means that (currently) $2.8 trillion dollars that the rest of the federal government has borrowed from the trust fund will have to be paid *back*. Plus interest. And guess where all that money to pay it back will have to come from? You got it. Either taxes or borrowing from the public rather than from SS.

So, no, the US isn’t going to default against itself. SS benefits will be paid. But if those two sentences are going to hold true, when you consider the national debt, you need to add in this, too. So all those who keep saying “Oh, no — SS is not in crisis” — that may be true. But the /rest/ of the government financial structure is looking a a bit less healthy to make it so, even if that debt is not generally included when looking at national debt figures (because they are usually quoted as “national debt held by the public” and all that debt owed to SS is not counted. (currently $13 trillion, btw).

http://research.stlouisfed.org/fred2/series/FYGFDPUN

 

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