Such uninformed statements show how little people know about how SS works. Since its inception SS has worked the same way.
All revenue collected thru the payroll tax is used to pay benefits and any "surplus" is deposited immediately into interest bearing, non-market T-bills. When SS goes into the red, as it has now permanently pending any reform, these T-bills are used to make up the shortfall.
Yes, the $2.4 trillion in the SSTF is included in the $17.3 trillion national debt under "Intragovernmental Holdings" as distinct from the so-called publicly held debt. The T-bills represent debt backed by the full faith and credit of the USG whether they are held by the Chinese, an individual, or the SSTF. The money has not been embezzled by the USG any more than any other debt.
All USG trust funds are treated the same way whether it is the HI Trust Fund (Medicare Part A), the federal employee pension fund, or the SSTF. They are held in interest-bearing, non-market T-bills. Some, including Bill Clinton, at one time, suggested that SS should invest the money in the stock market or some other investment. The only problem is the huge amount of money involved would distort the markets and give government even more power to use the money to influence politics and to choose winners and losers. At this stage, it is a moot point since SS has been running in the red since 2010 and Medicare (HI) has been running in the red since 2008. Both trust funds have been cashing in T-bills to make up the shortfall.
The overall national debt is not affected by such redemptions, but the publicly held debt is increased since the General Fund must borrow money to redeem the T-bills. This gives the lie to Nancy Pelosi who says that SS is not contributing to the national debt. The sad fact is that we must borrow money to pay for SS benefits and Medicare benefits. The SS DI trust fund exhausts its T-bills in 2016--just three years from now. Congress will have to authorize the movement of T-bills from the SSTF so that benefits will be paid and not reduced per the law.
Even if the SSTF contained cash, SS would still go bust. We are paying out more in benefits than we take in in revenue. The baby boomer cohort is retiring at 10,000 a day for the next 20 years. By 2030 one in five Americans will be 65 or older--twice what it is now. SS is going broke because it is not actuarial sound. We either need to cut benefits or increase taxes or some combination thereof. It is why many have compared SS to a Ponzi scheme. The folks at the top of the pyramid like me have gotten far more out in benefits than they paid in. That is not going to be the case in the future. I agree with you we should privatize most of it leaving a small defined benefit program to cover disability and survivor benefits.
A private annuity with the same record as SS would be blamed on poor actuarial and risk management....or embezzlement. Either way - they would be jailed for breach of trust.
The Feds just move tax payments around to cover their ineptitude and/or criminality without penalty. The tax payers suffer the penalties.