…compared to Social Security. Referring to it, President Obama says we can no longer “kick the can down the road.”  Who did the kicking?

Obama implies that Bush ignored the problem. Not so. President Bush courageously touched the “Third Rail” of politics in 2005.

How did the Democrats respond? Like spoiled children who cram fingers into ears and hum to drown out reason. Here’s a taste:

MaxoutMama posted on this at length.

 There is so much misinformation about this issue. It is causing a lot of anger and confusion, as in this DU thread. However, the confusion over the issue has been fed by loopy idiots like Paul Krugman, as in this interview, and politicians like Pelosi, who apparently believes that the trust fund has assets in the same way she believes that natural gas is not a fossil fuel and that the Supreme Court is just like God.

There isn’t a Social Security trust fund in the form of any assets other than year by year taxation of US persons. There is a “trust fund” that serves as a bookkeeping device for how much money we “owe” to future retirees, but there are no independent assets in there. So as soon as Social Security current receipts stop exceeding benefits paid out, the general fund (i.e. corporate and personal income taxes, excise taxes and the like) will have to be used to pay benefits.

The way Social Security works is that current workers pay in taxes every year, and those funds are used to send checks to current retirees. That’s all. It’s a pass-through program. The surplus is moved over to the general fund and is used for other purposes.

The last time the surplus ran out (in the early 1980s), the current system was put in place. Since then there have been minor revisions, but basically Social Security taxes have been used to defray other taxes.

The 2008 Social Security Trustees report (which covers operations in 2007) shows what is happening. In 2007, the 12.40% of wages (up to the max) amounted to 560.9 billion. The total cost of the benefits program was 494.5 billion, leaving a 66.4 billion dollar surplus. That money was given to the general fund (the rest of the government).

The total cost of the benefits program is composed of benefits paid out (489.1 billion), administrative costs (3.1 billion) and the railroad benefits exchange (3.6 billion).

Because the surplus is given to the general fund, the bookkeeping entry for interest and taxation of benefits means nothing. The bottom line is that when the cost of the benefits program exceeds the revenues paid in, we are either going to have to borrow money to pay benefits (and pay the interest on that borrowed money virtually to infinity) or we must raise other taxes or the SS payroll tax to pay for benefits.

What really matters for SS are only two things – the ratio of wages taxed to benefits, and the ratio of workers to beneficiaries. If Congress passed a law wiping out the “trust fund”, absolutely nothing would change about the funding of Social Security. Nothing.