Is the Social Security Trust Fund a Fiction?

No! If the government exists, and government securities exist, and different accounts have different legal status, and so forth, then the social security trust fund exists.

Every month, my employer dumps a bunch of money into a pipe (I like to imagine it as coins from a big change jar) that has my name on it. Most of that money goes through the main pipe to my checking account. A bit goes down a little pipe to my health savings account. A good bit of it is diverted down a pipe that goes to the federal government. A yet smaller amount goes down a pipe that goes to the DC government. Some goes down pipes to special bins for Social Security and Medicare. Some of that flows back up pipes to SS and Medicare claimants. Some continues into the big pipe to the general fund. The Treasury sends little pieces of paper up one of those vacuum tubes that say that they'll pay back the money that passed through the Social Security bin and ended up in the general fund.

Now, my health savings account and my checking account are both my accounts. However, there are legal restrictions on what I may do with my HSA. If I buy a big bag of Skittles with my HSA, I will, in some fairly clear sense, owe my HSA $1.99, or whatever it is, even though I would be transferring money from myself to myself.

Similarly, the Social Security Trust Fund and the general fund are different accounts that have different legal statuses. The administrators of the SSTF can, as far as I understand it(and please correct me if you understand it better), do three things: (1) cut SS checks; (2) pay SS administrative costs; and (3) buy securities from the Treasury. The SSTF, as I characterized it, is basically a little stopping off point from the pipes that run from our paychecks to the general fund. The point of this, I take it, is to have a box of change from which to pay SS benefits without having to get legislation appropriating money for SS each year. Because there is no point in having a huge pile of coins sitting in the SSTF being unspent, the rest of the coins are sent down the chute to the general fund, and are replaced with slips of paper (vacuum tubes!) promising repayment from the Treasury.

Now, I don't see how the SSTF is any more a fiction than my HSA. As John Searle would say, the SSTF and the general fund have different “deontic powers” associated with them, and those powers are real powers underwritten by real institutional facts.

But who cares? Suppose there was no SSTF, and SS benefits were paid out of the general fund, and thus there was no issue of the general fund owing money to the SSTF. The demographic unsustainability of Social Security as it presently exists would be exactly the same. And the regressive and unjust nature of Social Security as it presently exists would be exactly the same. So I can't understand what's at stake in the discussion of reality of the SSTF, or whether we have a crisis of the general fund to which the design of Social Security contributes, or a crisis of Social Security, period. What we've got is a program that's just plain bad in normative terms, and even worse in normative terms because it's unsustainable.