Allan Sloan’s article in Fortune “The Next Great Bailout” is as clear and blunt as one can get about what’s going on with social security. He quote’s David Walker, ex-Comptroller General of the United States saying the social security “trust fund has no financial significance. If you did [bookkeeping like] that in the private sector, you’d go to jail”.
Bottom line – the trust fund is just an IOU from one branch of the government to another. For decades the government has spent more than it takes in with other taxes by “borrowing” from the trust fund. That’s over. Sloan predicts Social Security will go cash flow negative this year, meaning that on top of all the other debt we have piled on our kids, now taxes and deficits will rise to cover the shortfall in social security that we have been pretending was safely locked in a “trust fund” but which is really just a pile of worthless pretend IOUs that the federal government wrote to itself. Nice accounting trick. Unfortunately, now we have to start paying for it.