The Wall Street Journal subtitled an April 22 article “Social Security Costs to Exceed Income in 2020, Trustees Say” with “The trust fund to be depleted by 2035, they add.”
What funds, if any, are in that “trust fund?” Is it really a fund?
That piggy bank doesn’t have cash, or gold bars. It holds unique, non-marketable securities issued by the U.S. Treasury. And the annual “Analytical Perspectives” section of the President’s budget regularly tells us that the securities issued to the Social Security trust fund represent obligations of one government account to another, not obligations to Social Security participants.
This is consistent with the federal government’s accounting treatment of the massive unfunded present value obligations in Social Security (and Medicare). Those obligations are not reported as debts on the federal government’s balance sheet, under the reasoning that the government controls the law (and the benefits), and can change the law at any time.
But this treatment is not consistent with the Social Security Administration’s website allowing people to view their “accounts,” and telling people that the website tool “puts you in control.”
Yesterday, the Peter G. Peterson Foundation published a related primer titled “What Are Federal Trust Funds?” The primer took care to emphasize that “Federal trust funds bear little resemblance to their private-sector counterparts, and therefore the name can be misleading. … Further, the federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.”
Truth in Accounting believes the federal government should report the massive unfunded obligations for Social Security and Medicare as liabilities on its balance sheet. Granted, the government can change the law. Until it does so, those debts deserve to be booked. And the federal government should also correct the misleading claims to citizen “control” of their Social Security accounts at the Social Security Administration’s website.