Retirement Planning
Social Security

Did President Kennedy use Social Security assets to fund NASA?

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November 01, 2011 11:59PM

Roosevelt used SS funds to build the Atomic Bomb, Truman used SS Funds, Eisenhower used SS to build the Interstate and Kennedy and every President since has used SS Funds. The so called Social Security Trust Fund exists in name only, and they are comingled with the general fund.

The above is an over-simplification of the SS Fund. Money collected for SS goes to the SS Administration, which uses the proceeds to pay out current claims, then looks to put the surplus funds into some place to save it for future use. The safest place to invest such money turns out to be U.S. Treasury bonds - thus, the SS Administration goes to the bond market, and buys US Treasury bond. These bonds are a U.S. Government "I.O.U." to the holder, to pay them back their principle, plus X amount of interest, 30 years (usually) in the future.

Thus, the funds' AREN'T co-mingled, or "raided", or otherwise. Rather, the SS Administration is the largest creditor of the U.S. government; the impact of this is that Congress has become lazy, being seduced by the easy availability of credit (as they can count on the SS Administration to buy any U.S. Treasury bond that Congress has them float to pay for projects). The concern is that the normal U.S. budget (which does NOT include the SS fund) has failed to account for the fact that the SS Administration is lowering its purchase of bonds (as the yearly expenditures of the SS go up while SS revenue goes down, due to demographic changes), and that the SS Administration will shortly begin to actually cash in bonds (i.e. expecting money back). The normal U.S. budget hasn't taken into consideration that the SS Administration won't be a huge creditor anymore, and, in fact, will begin to "pull out" money from the U.S. government, rather than invest in it.

The above is complex, but, the reality is that the actual SS fund ISN'T directly being raided for anything. Rather, the normal U.S. budget process has become addicted to the easy credit that the SS fund has provided.

As a side note, the time period where the SS annual expenditures outweighs annual revenue is coming soon - likely sometime around 2023. However, the actual Fund itself still has significant savings at that point, and it will take about another 15 years before the fund is actually "broke" (i.e. has redeemed all the U.S. bonds it has, and still expenditures outweigh revenue).