Is Social Security Broke?

The short answer is it depends on how you look at it. The even shorter answer is yes.

A Facebook friend of mine recently posted a link to an article written by a Democrat who claimed that Social Security was solvent and would continue to be solvent for many years. This writer then accused Republicans who said otherwise of lying, demagoguery, worshiping Ronald Reagan and other loathsome acts.

The problem is the writer didn't tell the whole story, if she even knew it. Since Social Security's inception certain tax money has been earmarked from workers' paychecks for Social Security. This is part of the FICA tax (the other part being for Medicare). If all this money ever collected had been only spent on Social Security payments, then Social Security would have a surplus and it would be solvent. The problem is all the surplus has already been spent. There is no money in the "trust fund"--only IOUs and hungry moths. The government spent the Social Security money on other things.

How do politicians sleep at night knowing they are raiding the citizens' retirement fund? Well, besides possible self-hypnosis, one way they do it is to consider all this spending as "investment." Realize that the government cannot invest money as citizens can. What investment is it going to buy? Its own bonds? Then it would just be paying interest to itself. Should it loan the money to other countries at interest? It could, but considers that too "risky" (as if blowing all the money isn't more risky). Basically, politicians consider the best investment for America is America. Sounds patriotic, doesn't it? This gives them the green light to spend money on anything they think is "good for America," which, as we all know, covers a lot of territory.

That might help them sleep at night, but it's still not much more than a rationalization to spend now, pay later (in other words, to work to get re-elected). If would be the same thing as you setting aside monthly retirement money for yourself and then spending all the money every month on whatever you wanted, all the while considering that spending an investment in your future. Good luck with that retirement strategy.

A while back the Republicans came up with the "nutty" idea of investing Social Security money in the stock market. When the stock market crashed and lost half its value, Democrats crowed and gloated over how stupid the Republicans had been. But maybe they weren't so stupid. Think about it this way: If Social Security surpluses had been invested in the stock market, with no allowance for the government taking it out and spending it, then at least half the money would still be there, even after the crash. That's better than none of it, which is the situation today.