Wednesday, June 15, 2005

Cashing in the Trust Fund. How will it work?

The plan in 1983 was that the baby boomers would prepay a part of their Social Security and that the excess would be saved in government bonds in the trust fund. Then, when benefits started to exceed revenue, the trust fund would cash in those bonds to maintain the benefit level.

This may become a problem since the Bush administration has been giving away revenue in tax cuts and still overspending, so that the total debt the U.S. government has is sharply increased. Current projections suggest that the trust fund may start asking for its money back in about 2018. The question arises about how the government will redeem those bonds when needed.

NYCmoderate has an interesting discussion at TPM Cafe that covers how the government can possibly pay the bonds back and what the ramifications of each method are.

I am not sure that I agree with everything he says, but he has a lot to say that is very valuable to understanding the Social Security issue and what G.W. Bush is saying (and not saying) as he discusses the problems as he sees them.


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