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There are a lot of legitimate issues regarding social security and reasonable alternatives to the present system. What is so frustrating about this as a policy debate is that there is so much misinformation out there.

There are Social Security Trust Funds - and they take in more in contributions at present than is paid out in a given year. That means there is a surplus of funds in the SSI Trust Accounts. As the demographics of the United States shift (increasing older population, longer spans of retirement income collection) we are reaching a point where the amount paid out in benefits in a given year will exceed the amount collected. At that point there will be an annual deficit, which will reduce the accumulated surplus until some point (typically estimated at a point in the 2030-2050 range) when the accumulated surplus is erased. That's when the s*** hits the fan.

The trust funds exist, the employer withholdings from wage earners and the employer match are sent to the SSI trust funds and are not spent on general revenue purposes. Since the surpluses are large amounts, the funds are not accumulating as literal cash balances - but are funds invested in government securities.

What seems impossible for many (including Rush Limbaugh - in one of the few errors he repeats regularly) to understand is that in the consolidated budget - the surplus that the SSI accounts run each year is netted out against the budget surplus. In other words a $350B surplus in SSI funds in a given year - as an accounting matter, will mask $350B of general revenue expenditure deficits. That does not mean that the money is spent on dams, missiles, food, buildings, etc. It simply sits in the trust fund accounts until it is disbursed to recipients of SSI. The reduction in the apparent general budget deficit is an accounting artifice.

What seems to feed this myth that there are no trust funds is this accounting maneuver - which is rather dishonest in the sense that it only makes the general budget deficit look smaller than it actually is - since the SSI funds are never spent on general revenue purposes.

If we cannot get past this canard - we cannot get on to serious discussion of alternatives to the present system.

Ya, there is a social security trust fund corpus, which is an accounting entry, because it is all "lent" to Uncle Sam, and earns an interest rate tied to treasury returns. The money lent to Uncle Sam is of course spent. So it is really a cash flow matter, and when the cash flow from the inflow of SS taxes and the outflow of paid out benefits, turns negative as it soon will (long before the actuarial BK point of 2035 or whatever, more like 2010), it will cause the federal deficit to increase steadily, unless spending is cut, or revenues increase to cover it. In short, the drawing down of the SS trust fund surplus will require the drawing up of government revenues. It really is a Ponzi scheme, but all other schemes after having spent much time pondering it, are worse.

And there you have it.

Of course, SS is a relatively minor fiscal problem in the scheme of things. Turn the page to the Medicare books, and then you will really suffer fiscal vertigo.