Taking a few liberties, it’s not that much different from what you and I can do (if we have a long work life in front of us). We can take out loans based on our ability to generate future revenue (income). The US Govt can take on debt based on its ability to generate future revenue (explicit taxes, or insidiously printing money).

As to the entire US Govt debt picture, it’s long been a reverse mortgage, with the net inflows from SS lowering the increase in US debt. Soon, however, under the current “entitlement” structure, those net SS inflows will become net SS outflows.

And like you and me, the US Govt does not have a infinite ability to borrow. We’ve just seen what happens when private overleverage gets exposed. It’s been painful, but we’re still here. I’m expecting similar pain related to US govt debt in the future, only it will be meted out more gradually (reduced SS payments, higher taxes, stagflation, etc.)

As a purely academic exercise it might be done with a combination of investments. What sort of effects it would have on the markets could be modeled. My assumption is that it would be better than what is happening now.

I understand the deflationary effect when they started pulling out of the fund, but compare that to the inflationary effect we are going to experience in the current incarnation.

Of course you are quite right, there is no way politics could be kept out of it in the real world.

The day that happens is that day that SS can finally be brought under control.

But the only way to “save” SS is to cut back to just a bare-bones ‘safety net’ program, and make everyone else live off their 401k’s…

The ElectedElite just do that to scare us while they continue to spend trillions on their pet projects and cronies.

How about cutting spending like the rest of us need to do if revenue falls short?!!!! nahhhhhhh

For one thing, there isn’t enough gold in the world to do that. The total amount of gold now in Fort Knox is roughly one-third of the amount that the payroll tax produces every year.

For another thing, that payroll tax is used by Congress for other spending, to the extent that it exceeds the annual payouts of Social Security. If they were to sink the payroll tax into gold, the federal deficit would instantly increase by the same amount.

Third, what happens when the payroll tax stops exceeding the annual payouts? Now you’re spending down your gold rather than adding to it. You still have the demographic problem of needing to increase the payroll tax or cut benefits or both, so holding gold hasn’t solved anything.

Fourth, why would you pick gold as a store of value? That would be a very questionable choice for a professional investor. Most private pension funds invest in the stock market, the bond market, emerging markets, and exotics like VC and private equity. Please tell me you don’t want the Treasury investing in those places.

But I suppose that would still disrupt some markets.

You are absolutely correct there is no such thing as any trust fund, never has been.

Eventually all of these programs will have to be separated from the false idea of insurance and means tested.

The only way the government gets away with this mendacity is because people persist in fooling themselves with the pleasant fantasy that Social Security is somehow an “insurance policy,” and that SS payouts are simply a return of money that people have already paid in. Nothing could be farther from the truth.

The government has no way to save money past the end of each year. That’s what the private sector does. If the government were to actually save money, that would create positive evil. Either they would store it in savings accounts, which would be directly deflationary. Or they would use it to invest in private assets, which would expose the whole economy to corruption and political manipulation.

So, when government spending acquires an asset, that asset can offset a deficit, but when government spending incurs an obligation, that doesn’t add to the deficit. You’re right, heads they win, tails we lose.

President Barack Obama opened Monday’s economic summit by taking aim at the “casual dishonesty” of Bush administration budgets Monday, saying he’ll abandon accounting “tricks” used to hide the ballooning deficit and pledging to cut a $1.3 trillion federal shortfall in half during his first term.
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“I want to be very clear,” Obama said in opening the session in the White House State Dining Room. “We cannot and will not sustain deficits like these without end. Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration and the next generation.”
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At one point, Obama criticized “the casual dishonesty of hiding irresponsible spending with clever accounting tricks, the costly overruns, the fraud and abuse, the endless excuses. This is exactly what the American people rejected when they went to the polls. They sent us here to usher in a new era of responsibility in Washington, to start living within our means again and being straight with them about where their tax dollars are going.”