I was just repeating what my economics professor (a doctorate in the craft) told us at LSU. If those notes were backed by money, Social Security would not be in trouble, would it? You would be hard pressed to find anyone who agrees with you. The money was spent. It has not been replaced and the notes don’t replace the money. It just means they are backed up by the faith and credit of the Federal government.
Take the 300 billion in annual tariff revenue and buy back all of those SS T bills. In 7 years SS will be all cash.
I respectfully disagree for two reasons.
1) Think about how much us FReepers rightly fuss that our govt can't keep running up a bunch of debt. Eventually it'll have to be paid back. That means that the treasuries have real value (the treasury / IOU's have to be paid or the country is no more). I'm not saying $1K in treasuries is as valuable as $1K in gold. I'm just saying that it's a stretch to talk like treasuries are just worthless paper. Also to say that the SS fund's purchase of treasury debt "has not been replaced" is simply not true. The U.S. Treasury Dept. has made regular debt payments to all treasury holders, including making payments to the SS fund. Just like my two treasury mutual funds grow from dividends, the SS fund slowly gets back dividends for owning treasuries more than it paid for the treasuries. My mutual fund balances are 1.5 times the money I put into them (when I rebalanced 7 years ago to prepare for an eventual retirement and shifted a quarter of my growth portfolio to bonds/treasuries/money market funds). I'm not saying owning treasuries grows as fast as a simple S&P 500 index fund (I was amen'ing Bush when he tried to allow us put just a portion of our SS contributions into investments). I'm simply saying that treasuries have value well above zero and the SS fund has benefited from being able to invest in something (I just wish they were allowed to invest in more than just treasuries).
2) As far as "Social Security would not be in trouble", yes it would be. The bottom line is that the payouts promised for SS checks is larger than the incoming receipts to SS plus investment growth (investing in treasuries). In other words, it's the Ponzi scheme property of SS that makes it insolvent, not the underlying savings account medium of the trust fund investment (cash vs treasuries).
Don't get me wrong. I hate the SS Ponzi scheme. I wish we were allowed to keep what we put into SS and invest it on our own and retire based on our rules, not the rules of lying, broke, corrupt govt. (For the record, I still plan to be fully retired in my late 50's.) I'm just saying us FReepers especially should make sure we get the details right when we fuss about govt incompetence and fraud.