Social Security Trust Fund

I really hate this kind of rhetoric from Maya MacGuineas:

“They are nothing like any trust fund that any one of us would think of,” says Maya MacGuineas of the New America Foundation. “It conjures up an image of really holding savings, and it doesn’t do that at all.”

I think this is incredibly misleading. If your rich uncle wanted to set up a trust fund for you and chose to stipulate that the fund should be invested 100 percent in treasuries, that would be a conservative investment choice but it would very much entail really holding savings. The Social Security trust fund is a very real fund that really contains assets — bonds — that represent lending from Social Security to the rest of the government (ROTG).

The only issue with the Social Security Trust Fund is that if you assume ROTG will repay its debts, that means ROTG will need to obtain that many through tax hikes or spending cuts. Conversely, if ROTG avoids tax hikes or spending cuts, that will require additional hikes or cuts from Social Security. But it’s hardly as if the overall federal budget deficit is some kind of secret number that people don’t know about because trust fund accounting is confusing them. The point is that ROTG is facing a very large budget deficit over the next 30 years, and that insofar as you try to reduce ROTG’s deficit by rejecting obligations to Social Security then that merely increases Social Security’s actuarial deficit. By the same token, if we reduce federal spending by cutting aid to K-12 schools, then states and municipalities will have a bigger budget gap. The mere fact that the US public sector can be examined at different levels of comprehensiveness doesn’t mean that the distinctions are irrelevant somehow.