America’s entitlement programmes are rapidly approaching insolvency | Hacker News Reader

America’s entitlement programmes are rapidly approaching insolvency

economist.com

5 pointshhs3 comments

This is a literal falsehood, unfortunately, on multiple levels. The definition of insolvency is the state of being unable to pay debts, which is not what the US as a whole is, of course (or if it is, it is solely because Republicans will decide to cause/force a default).

It is probably intended here to refer to these specific "programmes" and here the headline is also communicating a falsehood. Medicare, SS, and other programs have taxes associated with them, to be sure, but those taxes pay into general revenues, and those programs are funded as general expenses. There is partitioning of those funds, no actual "lockbox" to use Bill Clinton's unfortunate term.

There many programs that the US government funds "at a loss", so to speak, the military being only the most notable. (The entire government is funded at a yearly "loss" in pure accounting terms, where the accounting of the flows fails to capture the many other dimensions that make a US "loss" in fact profitable both for the US and for most of the western world.)

Deciding to fund any program is a political process decision and having a source of revenue tied to the program is incidental/irrelevant.

The lockbox is an accounting fiction, in the same way that centrifugal force is a fiction. It's a way of viewing things.

They fiction is a Social Security Trust Fund. It has its own source of funding, via payroll taxes. But it had more funds than it needed, so they "invested" it in US government bonds, where they were used for the general budget.

That stopped in 2019, when outflows exceeded income, and they started selling rather than buying those bonds.

Eventually those bonds will run out, and when they do, they won't be able to pay Social Security checks. They could choose to pay them out of the general fund, but that would require a law to be passed allowing it. And that would mean money coming from somewhere -- possibly more bonds issued to the general public.

As you say, those bonds are pretty popular, and the US government performs perfectly well at a "loss". But it does mean that Congress will have to act -- and if there's one thing we know Congress hates, it's doing things, especially if those things might be seen as a benefit to one side or another.

people tune these stories out because they've been published continuously for decades

we were told the US Debt at $10 tln would doom us

then $20 tln

then $30 tln

no different than pension funds...doomsayers were declaring CalPERs dead in the late 90s

maybe the USA is the ultimate Too Big To Fail and we can take the national debt to $100 tln?

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