Timothy J. Penny: Social Security trust fund is no more than an IOU

Tim Penny wrote in a Star Tribune article that the Social Security Trust fund does not consist of "real" money. He's right, it's put in Treasury Bonds, which means that when it is needed, the government has to get the money from somewhere else to pay the bonds back.

That's why it does no good to generate a surplus now, unless it is invested in an annuity type account. We can raise the payroll cap now, but the extra surplus we generate is just more taxes we need to raise through the general fund later to get the surplus back. What we need is not a surplus, but a invest plan that will return the guarenteed benefits when they are needed.

Raising the interest rate on bonds issued to the trust fund simply raises the amount of general fund revenue that the government will eventually be required to transfer back to Social Security.

These transfers to the trust fund are not free: They must come from raising income taxes, reducing other government programs or increasing the national debt.

Even at the current rate of interest, repaying these trust fund dollars would within 20 years require cuts in the general fund totaling about $120 billion annually.

We don't need to turn a Social Security problem into a general fund problem later. We have the answers and time to prepare for a secure Social Security now. We should take advantage of this opportunity.