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Trouble for Social Security may be closer than you think.
Worried about 2030? Social Security’s in trouble here and now.By Allan Sloan
. . . .The key to understanding why Social Security is in financial trouble today — not when its alleged trust fund runs dry in 2030-something, but today — is that the interest the trust fund collects on its holdings doesn’t help the government cover the cost of the benefits it shells out.
That’s because the trust fund’s only assets are Treasury securities. And the Treasury pays interest on those — $93 billion last year, $294 billion over the past three years — by giving the fund Treasury securities, not cash.If you exclude that interest, as any competent financial analyst would, you see that the system collected $827 billion of cash last year and shelled out $897 billion. That’s a $70 billion shortfall.
How was it met?
Worried about 2030? Social Security’s in trouble here and now.By Allan Sloan
. . . .The key to understanding why Social Security is in financial trouble today — not when its alleged trust fund runs dry in 2030-something, but today — is that the interest the trust fund collects on its holdings doesn’t help the government cover the cost of the benefits it shells out.
That’s because the trust fund’s only assets are Treasury securities. And the Treasury pays interest on those — $93 billion last year, $294 billion over the past three years — by giving the fund Treasury securities, not cash.If you exclude that interest, as any competent financial analyst would, you see that the system collected $827 billion of cash last year and shelled out $897 billion. That’s a $70 billion shortfall.
How was it met?
Here’s how: Social Security redeemed $70 billion of its Treasury securities and got $70 billion of cash from the Treasury. How did the Treasury get that $70 billion? It borrowed the money in the financial markets. . . .