Note that Reagan increased the SS tax in order to pad the fund and prepare for Boomers retiring. That surplus of the last 30 years is invested in special government bonds gauranteed with the "full faith and credit" of the US government.
And what a surprise - rates today are much lower, yet tax evasion continues to be a problem.
And what cash will they give to the SSA in exchange for those bonds? Where will that come from?
The same place cash comes from now when the Fed buys t-bonds in order to manipulate the interest rate: nowhere. The Federal Reserve has the authority to create money to redeem any US government security.
The federal reserve can create new US dollars, and it can buy US Treasuries - but this is not the same as redeeming them. The fed becomes just another bondholder that needs paying by the treasury dept. The money goes to the person who previously held the bond as payment for the bond.
Also there is about $20 trillion outstanding public debt, and only $3.3 trillion in the whole money supply, so there is a big gap in money creation needed to pay off the debt. Would tank the currency and kill the economy (think hyperinflation).
https://www.treasurydirect.gov/NP/debt/current
http://www.tradingeconomics.com/united-states/money-supply-m...
The Fed does not get paid. It doesn't need to get paid, since the Federal Reserve by law has infinite liquidity.
https://www.quora.com/What-happens-to-all-the-bonds-that-the...
We're all aware. Whether the money is taken from the next generation or from the federal reserve is irrelevant. The point is that it's not yours until the government takes it from them and gives it to you.