In his February 18 Washington Post column, nationally syndicated columnist and FOX News contributor Charles Krauthammer called the Social Security trust fund "fictional" and claimed: "The Social Security system has no trust fund." In fact, far from being fictional, Social Security's trust fund is composed of real assets.
From Krauthammer's February 18 column:
2042 is the fictional date for the fictional bankruptcy of a fictional trust fund.
Let's start with basics. The Social Security system has no trust fund. No lockbox. When you pay your payroll tax every year, the money is not converted into gold bars and shipped to some desert island, ready for retrieval when you turn 65. The system is pay as you go. The money goes to support that year's Social Security recipients. What's left over is "lent" to the federal Treasury. And gets entirely spent. It vanishes. In return, a piece of paper gets deposited in a vault in West Virginia saying that the left hand of the government owes money to the right hand of the government.
These pieces of paper might be useful for rolling cigars. They will not fund your retirement.
The Social Security trust fund -- which is surplus payroll tax revenue that, by law, is used to purchase Treasury securities -- represents as real and redeemable a debt as any other to which the federal government is obligated. Treasury securities are owned by investors worldwide and represent a safe, stable investment backed by the good faith and financial strength of the U.S. government. As a January 10 New York Times editorial explained: "If the trust fund's Treasury securities are worthless, someone better tell investors throughout the world, who currently hold $4.3 trillion in Treasury debt that carries the exact same government obligation to pay as the trust fund securities."
Krauthammer further argued: "To cover retiree benefits [after Social Security outlays exceed revenues in 2018], the government will have to exhaust all of its FICA [Federal Insurance Contributions Act] tax revenue and come up with the rest -- by borrowing on the world market, raising taxes or cutting other government programs." While it is true that the government may have to increase taxes or reduce spending in order to redeem its debt to Social Security, the argument is misleading. The government will have to take the same steps to cover all of its $7.6 trillion in public debts, not just what it owes to Social Security.
As Media Matters for America has documented, the faulty claim that the Social Security trust fund is a "myth" has been repeated by a number of conservative commentators, including FOX News managing editor Brit Hume, National Review contributing editor and former Bush speechwriter David Frum, and self-syndicated columnist and radio host Armstrong Williams.