Social Security has ZERO to do with the Deficit.

[wercal]

18. He's refering to Intra-Governmental Tansfers

Since the 1980's, the federal government has been robbing Peter (the SS trust fund) to pay Paul (annual obligations paid out by the general fund).

Well now we sit and Peter doesn't have any money. Peter needs some of his money back. And from here on out, he'll need a little bit more back every year.

How does the federal government pay back Peter?

The money will be borrowed. And it will increase the deficit. Absolutely no question about it. If more people retire early and take benefits early...the deficit will increase to pay Peter back quicker. Its a direct causal relationship.

So the two are absolutely related, and its a case study in denial to pretend they aren't.

Now considering our deficit, and in particular our total debt, cannot balloon forever, you correctly have looked for one way to make SS more solvent (raising the cap). This is because, despite your protestations, you instinctively know that Peter is never getting his money back at a fast enough rate (because it is directly tied to the deficit). Your idea is on the revenue side (raising the cap)...and you are quite confident it will work....but you dismiss out of hand any suggestion that changes on the expense side (benefits) would have any effect. That is deliberately putting one's head in the sand.

Raising the cap is a good idea...probably should go back to when the cap went into place and index it to today. That will keep it going a little longer. The next logical steps will include means testing on the benefits side - morphing SS into a progressive tax structure, instead of insurance. But it can't be called an insurance plan for much longer anyway. Back to the original comment about accounting...in many states, SS would not meet the requirements of that state's insurance laws. The fund has essentially lent most of its reserves to a deadbeat borrower...a borrower that can use the power of the money supply to decrease the value of the dollar and reduce the value of the repayment. That would not be even close to acceptable in any other insurance venture, in many states.

Oh yeah - similar to my suggestion on indexing the cap, one can count on the minimum age to start to get ticked up. Its going to happen, you can count on it.

SS has always had one fatal flaw - its lack of control of its reserves. The fund is not at all autonomous...and it has made some very bad 'investments' by lending to the federal government. That deed has been done. It cannot be undone. Our future will see raised caps, raised minimum age, means testing of benefits, and a perverse redefining of COLA, to reduce benefits over time.

I'm just the messenger on this...flame me if you want...but people have to realistically know what to expect.