[Pelham]

SS was designed as a pass-through system. The amount paid out was supposed to equal the amount taken in. In the early years the SS tax rate was adjusted every year to keep the two in balance.

I believe it was LBJ who came up with the policy of lending excess SS funds to the general fund in exchange for bonds.

There really can’t be a “lockbox” where people’s SS contributions are stored, that would have a highly deflationary impact on the economy by draining money out of the economy. The biggest problem with SS is the ratio of people paying in to people getting taking out. I sure wouldn’t want to rely on it surviving.

[justlurking]

I believe it was LBJ who came up with the policy of lending excess SS funds to the general fund in exchange for bonds.

Actually, the investing of excess into US Treasury Bonds (or the equivalent special-obligation bonds) was written into the original law.

It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals. Such investment may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States.

There's more information here: The Social Security Trust Funds and the Federal Budget

The biggest problem with SS is the ratio of people paying in to people getting taking out.

In a nutshell, this is it. However, I will point out that ratio can even be 1:1 -- it all depends on how much you are willing to tax the taxpayer, and how much you pay the beneficiary.

But, as I noted: the benefits have been exceeding what the taxes will support in the long run, for decades. Yes, there was a surplus for the past 30 years or so, but that was intended to compensate for the baby-boomer "bubble".

The problem: the demographic and economic assumptions were too optimistic back in the 80's, and we have been losing ground ever since.