Common Myths About Social Security

This is from a letter we recently sent to The Virginian Pilot commenting on a letter to the editor claiming that there is a Social Security crisis caused by the government having borrowed all of the money out of the Social Security Trust Fund:

“There are many misperceptions about our Social Security Administration insurance programs. That the government is “borrowing” from the trust funds is one of them.

The Social Security Administration is an insurance company, and runs its trust funds the same way all insurance companies manage their reserves. By law, all insurance companies deposit premium payments into mandated reserves, and conservatively invest the money in a manner designed to produce cash flow for payments to policy beneficiaries. By law, F.I.C.A. withheld from our paychecks must be deposited in the trust funds and invested by the Social Security Administration in U.S. Treasury securities, which are the safest investments on the planet. That is why banks and foreign governments the world over hold U.S. Treasuries for security and liquidity.

Apart from this misperception about what happens to our money, the problem we face is indeed with Congress. Insurance actuarial forecasts and corresponding premium and benefit schedules must be routinely adjusted over time, as experience proves them to be more or less accurate in producing positive cash flow. Failure do this on a regular basis can run any insurance program into the ground. Unfortunately for us, it is Congress’ job to make these adjustments, and Congress is failing miserably.

We don’t need prophesies of doom, accusations of theft and fraud, political gamesmanship, or melodramatic news coverage. We simply need our Social Security insurance programs to be competently managed by our congressmen.

Is that too much to expect?”