Social Security is NOT bankrupt.
The confusion in the Social Security debate stems from the notion that there is a "trust fund" that the current works "pay into" to fund those who are currently receiving social security benefits. For a handful of reasons, the current beneficiaries are receiving larger dollar amounts than they have personally paid in. So based solely on that information, it would appear that the "trust fund" is lacking and deficient. But this is a huge misconception of the way government spending ACTUALLY works.
The United States is Not Like a Household
The United States is a currency ISSUER, not a currency USER. As the monopoly supplier of US Dollars, in a floating exchange rate system, the US Government simply doesn't have piles of dollars sitting around, waiting to pay out it's citizens. Taxes and bond issuance don't "fund spending". The US has virtually no constraint to create dollars to meet it's obligations. This is very different than a household or corporation's budget (currency users).
As a result, the USA always has the money to make its social security payments. There is no social security "fund" sitting around, being fed dollars by workers, that will ultimately pay the beneficiaries.
As FDR once told one of his advisers: "I guess you're right on the economics. They are politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren't a matter of economics, they're straight politics." http://www.ssa.gov/history/Gulick.html
Understanding the operational realities of a currency user vs issuer is not a small feat. Much of what we learned in Econ 101 was relevant BEFORE the US abandoned the gold standard in 1971.
What the SS Debate Should Be (in my opinion, of course)
The ultimate discussion should be whether we, as citizens, want to provide benefits like this to our elderly. It's not about "how" we will provide these benefits, as much as it is, "how much" benefit do we want to provide. "Measuring" whether or not the government has the ability to pay the benefits is a waste of our time and energy. We should instead turn the focus of the discussion to deciding whether these benefits are consistent with the size of government and prosperity that we want for ourselves as citizens. We need a dramatic shift in our approach to government spending in this nation. If we can better understand HOW the government spends, we can help decide what we want our government to spend money on. We should always strive for efficient and sensible spending. Just because the government technically can't "run out of money" does not mean it has a license to spend recklessly. Government is intended to exist for the people, by the people. Let's continue to work towards that concept.
Other Links You Might Find Interesting
- China Does NOT Fund US Government Spending. Period.
The headline might be the exact opposite of what you've been told, but it's true. No other country "funds our spending".
- What is a Stock Market Bubble?
Stock market bubble characteristics. Why they happen, and their progression.
- Roth IRA 101
Frequently asked questions about a Roth IRA answered!