Several blogs have pointed out this February editorial in the USA Today by Jacob Lew, head of Obama's OMB. In February he told us, no, in true Obama Administration fashion, he lectured us like little kids that:
Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries.
When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government — and are held in reserve for when revenue collected is not enough to pay the benefits due. We have just as much obligation to pay back those bonds with interest as we do to any other bondholders. The trust fund is the backbone of an important compact: that a lifetime of work will ensure dignity in retirement.
According to the most recent report of the independent Social Security Trustees, the trust fund is currently in surplus and growing. Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.
As many have pointed out this week, if this is the case, why does the debt limit even affect the ability to pay or not pay Social Security to grandma? Because Lew was spouting complete BS. Social Security has generated surpluses in the past, but these have been spent and replaced with IOU's. And we are finding out right now how much those IOU's are worth - zero.