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Monday, May 23, 2005

What is The Social Security Trust Fund, Anyway (from Vox Baby)

Andrew Samwick at Vox Baby is one of my "go to guys" for all things related to Social Security. While a lot of academics are maligned (rightfully so, IMHO) for being both linguistically dense and unconnected to the "real world", he represents the bright side of academia: intellectually honest, willing to go where the data leads him, and dedicated to stating things (as Einstein one said) "as simply as possible, but no simpler". He's started a new set of posts on Social Security. The first one answers the question on everybody's mind (well, not really, only the nerds and policy wonks among us), "What the Heck is the Social Security Trust Fund, Anyway?":
Think of the Trust Fund as a line of credit that the Social Security system extends to the rest of the government. The balance in the Trust Fund is simply the current value--principal plus interest credited at the Treasury bond rate--of all the withdrawals that the rest of the government has made historically on that line of credit to pay for things other than Social Security.
Click here for the whole article.

Finally, he makes the point that one benefit of private accounts is that they would pre-fund future liabilities in such a way that the government can't appropriate the money for other, non-Social Security purposes.

Click here for an archive of his earlier Social Security posts.

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