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MISCONCEPTIONS ABOUT SOCIAL SECURITY 1 The Social Security Trust Fund is an accounting fiction The Social Security tax has been raising more money than is needed to pay for current benefits in order to build up a surplus to help finance the retirement of the Baby Boom generation All of this surplus is lent to the US Treasury when the Social Security Trust Fund buys bonds from it The money is then used to finance the federal deficit just like any other money the government borrows The bonds held by the fund pay the same interest as bonds held by the public These bonds are every bit as real or as much of a fiction as the bonds held by banks corporations and individuals Throughout US history the federal government has always paid its debts As a result government bonds enjoy the highest credit ratings and are considered one of the safest assets in the world Thus the fund has very real and secure assetsIt is true that the interest the government pays on these bonds is a drain on the Treasury as will be the money paid by the government when the fund ultimately cashes in its bonds But this drain has nothing to do with Social Security If the Social Security Trust Fund were not currently building up a surplus and lending the money to the government the government would still be running a deficit of approximately 60 billion in its non-Social Security operations It would then have to borrow this money from individuals like H Ross Perot and Peter G Peterson and to pay out more interest each year to the people it borrowed from Therefore the governments debt to the fund is simply a debt it would have incurred in any event The governments other spending and tax policies not Social Security will be the cause if there is any problem in the future in paying off the bonds held by
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