Our congressmen have been "borrowing" from the Social Security trust fund until they are now addicted to that money. If only those annoying peasants would stop drawing from the fund! What they would like to do is to direct the payroll tax money directly to the general fund so they could use it to consolidate their feudal power.

issued securities and to redeem the securities the government has to come up with money
which comes out of the general budget.

Last edited Sun Oct 9, 2016, 11:28 AM - Edit history (2)

but at the end of Hillary Clinton's first term, the Trust Fund with its Treasuries will start to be drawn down. In approximate terms this will be $200B/yr. for 15 years. After the 15 years then Social Security will have depleted all of its Trust Fund and then start paying around 70% of its current benefits.

This happens if nothing in the law is changed.


The $200B/yr. will have to come from additional borrowing by the Treasury, reductions in current federal programs, or additional taxes.

The current federal budget is about $4T/yr. The federal debt is about $20T. The current federal deficit is about $500B. Our current GDP is $17T. We have one of the highest debt to GDP ratios of a large liberal democracy. Our GDP growth rate is at 1.4% but has been around 2% during Obama's presidency (about 2% lower than Clinton's presidency).

Our current 10 yr. Treasury rate is 2%. Historically this is much higher (for example during Clinton's presidency it was 6-7%. In our current budget deficit we borrow about $220B to cover interest on the debt. So if it costs more to borrow that amount will also increase (lets say to $600B). That is also money that must be borrowed, made up in cuts, or additional taxes.

A fourth option to address the federal debt would be allowing inflation to take off (monetizing the debt). This would hammer everyone.

What could be easily missed in your assessment is that when Social Security starts drawing down the trust fund it will be demanding repayment of the money that the government has borrowed from the SSA trust fund. Forget higher taxes or cutting other programs, Congress does not have the courage to do that, and the additional borrowing from other sources by the government will be at higher interest rates than are currently being paid on the debt to the SSA. The result will be increased interest payments on debt by the government.

"In our current budget deficit we borrow about $220B."

Budgets don't mean much if you don't stick to them. From 9/1/2015 until 9/1/2016 our national debt increased by $1.423 trillion. That is the actual current deficit, and it matches the deficit level during the great recession. Then it was caused primarily by tax shortfall, but now we are told that the economy has recovered sufficiently that it is not caused by tax shortfall.

All the other government programs are a drain on the budget and not bringing in revenue the way Social Security has for decades.

Just too bad politicians have been unwilling to raise the cap that would have extended the program's solvency