Joe Weisenthal has a good piece on Business Insider regarding the truth about the Social Security trust fund. Unfortunately, the comments on the article display the extraordinary level of misconception surrounding this subject. The myth that the trust fund is “unfunded” or “running out” is one of the great myths we confront on a regular basis. Of course, it’s silly to talk about the USA not being able to “fund” Social Security. As an autonomous currency issuer there is no such thing as the USA not being able to fund its expenditures. There’s no such thing as the USA not being able to print more money to meet every obligation it has. So there’s no solvency constraint for the USA.
There is, however, an inflation constraint. The USA could print so much money in an attempt to provide particular benefits for its citizens that it reduces the living standards of those citizens. But this is a very different phenomenon than the solvency constraint that is often trotted out to scare everyone about Social Security. Of course, we all know that with inflation near 40 year low it’s not as sexy or effective to try to use the inflation scare tactic on people these days. That’s not to say that inflation won’t ever become a problem, but when discussing constraints it’s important to frame the discussion correctly. Not surprisingly, Joe gets this right. Hopefully more in the media will begin to catch on….