In the August 24 post of his amusingly named "The Conscience of a Liberal" blog, Paul Krugman states:
No matter how many times you try to kill the mythical Social Security crisis, it just keeps coming back.
He goes on to quote from a CBO study:
CBO’s projections indicate that future Social Security beneficiaries will receive larger benefits in retirement...than current beneficiaries do, ... even if the scheduled payments are reduced because the trust funds are exhausted.
Hint to Krugman and CBO: the "trust funds" are exhausted right now.
Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets to secure workers' paid-in contributions. Instead, it holds non-negotiable United States Treasury bonds and U.S. securities backed "by the full faith and credit of the government".
Wikipedia quotes the Office of Management and Budget on this arrangement:
These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. (from FY 2000 Budget, Analytical Perspectives, p. 337)
Which assumes that we'll still have taxpayers who can and will pay more taxes; and/or we'll still have
The National Bureau of Economic Research chimes in, describing this situation:
The trust fund build-up may not help future generations due to the adoption of the Unified Budget in 1970. The Unified Budget includes trust fund receipts as income and trust fund payments as expenditures. The empirical evidence suggests that attempts to balance the Unified Budget while the trust funds were generating surpluses has led to increased government spending and personal and corporation income tax cuts within the rest of the federal government.[This also demonstrates that not only are the "Trust Funds" of no use to the future, it demonstrates that the Bush tax cuts at least in part used a regressive tax (the "payroll tax", which only covers the first $102,000 of income) to finance a very "progressive" tax cut, where the benefits flowed overwhelmingly to the well-off.]
As for the best way to internret the worth of the "Trust Funds": Wikipedia states:
If you write an I.O.U. to yourself and count this as an asset, this presents very different issues than if someone else writes you an I.O.U.
And that is what the trust funds are: an IOU from one part of the government to another, with unspecified means of payment to be figured out at some unspecified future date.
It's as if you gave money every year to an investor for a retirement fund, and instead of investing it, he took it - as well as all of his own salary, his HELOC and maxed out credit cards and everything else he could beg, borrow, or steal - and spent it all on meth and hookers. One day, you ask him to see the assets of your retirement plan and he pulls out of his pockets a bunch of IOUs - all signed by him. That's our government.
So the "Mythical" Crisis is very real indeed.