Oct 4, 2012

What Does Interfund Borrowing Do To The Retirement And Survivor's Trust Fund?

     The Congressional Budget Office (CBO) has released a report on Social Security's finances. It's old news but I did see an answer to a question that I've had. Under current law the Disability Trust Fund will run out of money in 2016. The solution to this problem is simple and inevitable. Congress will allow borrowing between the Retirement and Survivor's Trust Fund and the Disability Trust Fund. It's been done before. It would only be temporary since the problem is temporary. Once the baby boom population ages a bit further, the problem goes away. There may or may not be changes in disability benefits to accompany interfund borrowing but interfund borrowing is going to happen. My question has been what does interfund borrowing do to the date that the Retirement and Survivor's Trust Fund runs out of money. The answer is that it changes that projected date from 2038 to 2034.


Max Abilify said...

Hey, great idea. That's how I'll pay my overdue credit card bill -- I'll shift the balance to another credit card. Why didn't I think of that?

Don Levit said...

The trust funds will not run out of money; rather their numbers will increase or decrease.
The trust fund balances represent the numbers that can be withdrawn from the general fund of the Treasury without an appropriation.
The withdrawing of these numbers is the same way we pay for all pay-as-you-go expenses, such as defense and Medicaid - from general revenues of the Treasury.
The trust fund makes it look like the process is different.
Just because the trust funds are due the money back that was borrowed from the Treasury, does not make the process of that pay-back any different than "unpromised" payments. They all come from the general fund of the Treasury.
From a cash perspective, the trust funds are already exhausted.
There is as much cash in the SS trust fund as there is in the Medicaid "fund" - zero.
How are we to make SS solvent if you continue to deny there is a cash flow problem?
People who deny a cash flow problem exists are part of the problem, not the solution.
Don Levit