It’s worse than they reported. Right now, the General Fund is short (what economists call the “federal deficit”) but the Social Security Fund is flush because more people are paying in than collecting payments. To “balance the budget,” politicians borrow from Peter to pay Paul and give themselves promissory notes. It’s been going on for 40 years and it’s no secret.

The flaw in the recent projections is the Fund Administrators are assuming these promissory notes will be repaid somehow; it’s only after the notes have been repaid that they consider the system “bankrupt.”

But in about 5 years, when enough Baby Boomers have retired so Social Security contributions no longer exceed payments, there will be no surplus to lend to the General Fund. Taxes will have to go up, or services cut. A year or two after that, when more Baby Boomers have retired so Social Security outgo is higher than income, the General Fund will have to start repaying those promissory notes. That means even higher taxes on those left working to make up the deficit plus repay the notes plus fund government operations. Can our children afford those taxes? If not, what gets cut – benefits, services, military, debt payment?

The crunch is coming sooner than we think.
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