I agree, but simply stopping it is not possible, either politically or economically. What we need is a transition to a privately managed (and owned), like what Chile did back in the 80's.
The uninformed like to blame the boomers, but they are in a unique situation. Most of them hit their prime earning years in the 80's when the Social Security tax was ramped up in order to build up the "trust fund".
So, while most generations paid Social Security taxes to provide benefits for older generations, boomers have been effectively paying for both their parent's (and grandparent's) Social Security benefits, and their own. That's why it's unreasonable to suggest that it should be terminated with prejudice.
Yes, the trust fund is effectively an accounting fiction, but you have to consider the alternative. The SSA invested the trust fund in what was considered the safest investment at the time: US government bonds. They could have done better with a well-managed corporate bond portfolio, but do you really think it would have been "well-managed"?
Congress wouldn't have been able to resist tampering. They would have prohibited certain investments. They would have mandated other investments. Decisions would have been political, rather than financial. And, we would have had Solyendra, GM, and Chrysler -- multiplied by thousands.
You have hit the nail on the head, but not hard enough.
The “reforms” of the 1980s to “secure” SS dramatically boosted collections. While these were supposed to be set aside to ensure the solvency of SS, they were, in fact, placed into the general budget, where, over 35 years, they were used to cover up progressively bigger deficits under both Republicans and Democrats.
So, not only were the FICA taxes not saved (i.e. earning interest), they have been spent.
That we have managed to spend TRILLIONS in FICA taxes and still find ourselves with a $15 TRILLION deficit (omitting SS and Medicare shortfalls) tells you how seriously screwed we are.
Now, as the baby boomers retire, they will need to pay for their retirements AGAIN. That is, we are running a $1.5 TRILLION annual deficit, and SS must by law cash bonds to make payments to retirees; cash to redeem those bonds must come from the general fund, either by crowding out other expenses or via increased deficits.
Lastly, in re your suggestion that the trust fund should have been invested in a corporate bond portfolio, that would have made the US government the owner of ALL corporate bonds, based on the magnitude of the cash flows involved. While some would argue that this would reduce the corporations’ cost of capital and encouraged investment and growth, it also would have partially or completely replaced fiduciary obligations with political concerns (IMHO), which would add risk and likely engender capital flight (we are in agreement).
I think we should have pursued a transition to the Chilean model, which would mandate private savings while providing a limited safety net. This idea has been bruited several times since then, but has always been scaremongered.
Now people are going to truly see the depths of the abyss, and most are too afraid to look (and politicians are only too happy to not tell them while the happy music plays on).
YMMV