Deficit and partially funded social security

Economics can be very confusing and hard to understand, kind of like those story problems we had in math class.

Remember, where Peter had 12 apples, Sam had 6 oranges, Paul eats 4 of Peter's apples, how many oranges does Sam have left? Yes, it is a trick question, and so is the question of how much debt government has, $16 trillion-plus or $100-trillion.

All we read and hear much about is the $16 trillion-plus deficits, which is the borrowed money government used to operate with, primarily salaries. But in addition to the $16 trillion-plus deficits there are the estimated $70 trillion to $100 trillion partly funded and unfunded entitlement debts, or somewhere between $86 trillion and $116 trillion estimated total government debts.

Here we are going to talk only about the partially funded entitlement debt and how it works (few social security recipients are fully funded).

Peter is a private sector business owner and/or private sector worker who generates income by making and/or selling products and/or goods and services, from which he pays taxes and contributes to social security.

The next step is that government borrows the social security money, issuing an IOU (treasury bond) at around 5 percent interest, saying it owes the Social Security trust fund. And this is where the story problem gets really complicated.

Government does not generate income. So the only way it can repay the IOU, plus accrued interest, and write a social security check to Peter is by taxing Peter's family and private sector neighbors to repay the money that the government already spent from taxing Peter the first time.

And that my friend is the full meaning of partially funded entitlement, money taken from Peter, borrowed and spent by Government then taken from Peter's family and private sector neighbors (more than double taxation) to repay the IOU, plus accrued interest in order to write an a social security check to Peter. But since Peter's money wasn't really invested, there is no interest income. So Peter's investment isn't enough to cover his retirement.

So now the government will tax Peter's private sector son(s), daughter(s), and private sector neighbors to repay the IOU, accrued interest, and the deficit. And none of this cost includes the added cost to administer the multimillion dollar Social Security Administration, which also receives unfunded benefits [another story problem].

Dale Hellewell

Royal City