The kicker is the first sentence. Today's workers pay today's retirees. The payments are designed to ensure a consistent, inflation adjusted standard of living for retirees. If the ratio of retirees to workers stayed the same, the payments would. But when there fewer retirees per worker, workers pay less, and when there are more, they pay more. It's the system's fatal flaw.

The problem now is that baby boomers paid much lower Social Security taxes than us, but they still need to receive the same standard of living that we will. You can see the historical rates here:

http://www.taxpolicycenter.org/taxfacts/Content/PDF/ssrate_h...

They paid a lower % with a much lower cap, even adjusted for inflation. They did so because the retiree to worker ratio was lower. If they paid the same percentage and cap that we do now, Social Security would be sitting on enough money to cover the shortfall in the future.

In 20 years, that ratio will be much higher than today, meaning the workers of 2018 would have to pay far higher taxes still for the system to fund itself. This would, of course, be unbearable (it's already close) so the government will have to seek other solutions, such as borrowing money or printing.

I'd like to offer you an annuity. Here's how it works: you give me about 15% of your paycheck every year, and I spend the money on whatever I feel like. I replace it with a piece of paper that says "Dear Byrneseyeview: Please tender to the bearer -- Byrneseyeview -- an amount equal to the sum borrowed)." See how this 100% foolproof scheme might break down?

a) Government borrows $4 trillion from the Chinese at 2% annually.

b) Government borrows $4 trillion from Americans, by way of Social Security, at 2% annually.

What's the difference in what the government owes after 10 years? Either way the government has to raise $4 trillion (plus interest) in taxes, borrow it, or print it to pay it off. Either way everyone is in the exact same boat, except in boat b, Americans get the interest. In boat a the Chinese do. (Unless you count borrowing from the Chinese, leaving the Social Security money in a CD, and defaulting to on the borrowed money while paying out SS an option, which it isn't.)

I wasn't suggesting that government borrowing is not a problem. It is. They probably should just not borrow the $4 trillion from anywhere. But that's just a different issue that has nothing to do with Social Security, as many economists have pointed out.

Social security is only as "sound" as the will of future taxpayers to pay the inevitably increased taxes required to keep it going, regardless of whether the money is borrowed, promised, set-aside, appropriated, recommended, etc.

Since its inception, social security benefits have been cut little by little to the point where middle class people must significantly supplement it with their own private investments to avoid poverty in retirement.

So there still may be something called "social security" in 20 or 30 or 50 years, but chances are it will bear little similarity to the program's initial inception or even to the program people think of it as today.

You also argue that the government should borrow money. Why not just tax today for what we spend today? Had we done that, Bush would never have been able to go to war in Iraq, the "trust fund" would not be in danger, etc.

Not to digress, however. The biggest threat to social security is that congress won't have the will to use the limited available tax revenue for the program, and the public won't want the drastically increased taxes.

Obama wisely suggested switching SS over to be a welfare program and funding it from general revenue, but the initial concept was that it's not welfare and so nobody should feel like they are on welfare when they receive their social security check. This is a fairly significant matter.

Either way the government has to raise $4 trillion (plus interest) in taxes, borrow it, or print it to pay it off."

Sadly there's another option. the gov decides not to pay and basically asks for a declaration of war from China...

Unless the US economy really goes in the toilet[], Congress is not going to substantially cut Social Security benefits for retirees. (The Republicans couldn't get partial SS privatization to pass Congress even when Bush was at the height of his popularity.)

[]and if the economy gets that bad, then anyone who relied on private savings or investment for their retirement is probably also screwed.