Faculty Scholarship 1994 - Present

The Mythology of the Social Security Trust Funds

This paper explains that the Social Security Trust Funds (the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund) are merely "accounting devices" used to track the amount of excess Social Security tax revenues that have been spent to fund government "On Budget" expenditures. The Trust Funds have been and continue to be funded with government IOUs. The paper argues that Social Security is a pay-as-you-go system. Future Social Security participants (workers) will have to support Social Security recipients. Government IOUs credited to the Trust Fund will not pay for future Social Security benefits or for the myriad of goods and services that retirees will need. In effect, the Social Security Trust Funds are worthless.