The logic of thinking illogically

According to the "economics writer" of the article below, we're in lots of trouble because Medicare is already broke--paying out more money than it takes in--and Social Security will begin doing that in 2016, draining its "trust fund" in 2032 and going broke then.

Maybe the writer got his facts correct regarding Medicare, but he certainly doesn't understand Social Security. There is no such thing as the "trust fund." This "trust fund" is supposed to be the accumulated SS funds collected over the years but not yet disbursed to recipients. This big pile of cash is supposed to be in a vault somewhere. But there is no cash. Fact: every dime of SS funds ever collected has already been disbursed. The biggest recipient? The US federal government. It has "borrowed" these funds to spend year by year as part of its annual budget deficit financing. The SS "trust fund" is just a big pile of IOUs--government bonds, i.e., debt. Any excess SS funds accumulated during the year are always spent--just not on the old folks.

So in 2016 (or before), when SS begins paying out during the year more than it collects, then (and not later) SS will be insolvent, i.e., broke. Where will the missing money come from? Higher domestic taxes or more borrowing from abroad are the only possibilities. Maybe we can persuade the rest of the world to finance the retirements of millions of American elderly, but I doubt it. Maybe we can tax young American workers up to 100% to finance the retirements of millions of American elderly, but I doubt it too.

So what happens in 2016 (or before) when it all goes broke? Well, the logic of illogical thinking catches up with America and the crap hits the fan. My guess: if the government has not already done so financing Mr. Obama's colossal deficits, wars, and bailouts, it will then print money by the trillions to pay its debts. Hyperinflation will overwhelm the economy. Everybody will be impoverished. After that, who knows?

Read it here