Saving, Mitchel on the "Trust Fund"

August 7, 2001

In a perhaps vain attempt to clear up the confusion surrounding the Social Security Trust Fund, two members of the President's Commission to Strengthen Social Security, one a Republican, the other a Democrat, wrote an editorial in The Washington Post, pointing out that, while the Trust Fund is an asset to the Social Security System, it is a liability to the government as a whole, meaning that it is essentially irrelevant to Social Security's financing.

Thomas Saving and Olivia Mitchell cited a variety of nonpartisan experts, including the Congressional Budget Office, the General Accounting Office, and the Congressional Research Service to the effect that "having a Trust Fund doesn't avoid the hard choices that stem from Social Security's impending financing shortfalls."

Saving and Mitchell liken the Trust Fund to your credit card balance statement, in that it is simply a record of how much money the federal government has borrowed from Social Security. But, just as you must eventually find a way to pay off your credit card debt, so to must the federal government find a way to pay off the bonds in the Trust Fund. These balances are quite large: $93 billion in 2020, $194 billion in 2025, and $271 billion in 2030 (in today's dollars.) The only way for the government to get the money to make good on this debt is to raise taxes, borrow, or cut other government spending.

"One way or another," Saving and Mitchell point out, "promises of Social Security benefits made under the current system must be financed by the taxpayers." That is one reason why Social Security reform is so essential.

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