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Social Security is broke. It comes out of the general fund. The money is gone. There is no account with money in it for you.

You got 2 out of 4 right.

Social Security is not broke, yet. And, even if nothing is done, it won't go "broke" -- they will just have to reduce benefits significantly. See my post #47.
However, if you really mean "broken", I'll agree with that.
Only a small portion comes out of the general fund, and that began in 2010 -- when redemption of the Trust Fund started. The overwhelming majority is paid from payroll taxes collected the same year from people still working, although that ratio will change in the next two decades.
The money is indeed "gone" (with the exception of the relatively small portion in the Trust Fund). Your contributions were paid to your parents and grandparents, and your kids and grandkids will pay for your benefits.
If you think there is an account in your name, go look at your Social Security annual statement. Where does it say how much you contributed, much less an actual balance? Your statement only says how much of your wages were taxed.
Social Security doesn't want you to easily figure out how much you contributed, much less how much it would have grown if you had just put it into long-term US Treasury Bonds. They don't want you to think you might actually have a claim on a certain amount, or be able to compare the balance to the benefit they are promising.

1. Social Security is a net loser. If it were a business it would be in receivership or bankruptcy.

2. ALL of the money going into the Trust Fund is being used to buy US treasuries. There is nothing in the trust fund but IOUs. The money being used to pay your SS is coming out of that money and the general accounts. SS and other Civil Service Pension funds (like the post office) is being used to float the rest of the government.

3. There are not enough people younger than use to maintain the contributions because our parents lived 20 years longer than “they were supposed to.” By the time I reach SS age, at 70 (15 years from now) my TWO kids will be supporting my payments. And my payments are about twice what my parents got. Who is going to pay for my WIFE’s benefits—which are about the same size as mine? Who will pay those for 30 years?

4. Give me your name and address. I will be happy to send you a statement telling you that you have a billion dollars in the VT LT fund. Sure, I can see what I’ve paid in and what my benefits are supposed to be. But based on the inflation that will head this way in the next ten years, my benefit will be lucky to be worth 1/2 of what it says.

I think you and I are comparing differences without much distinction. Medicare is going to wipe out any surplus we can manufacture. The slightest increase in the cost of debt will take a huge chunk of any tax improvements made through raising or lowering taxes.

Here is what I think:

1. Stop the elimination of the SS tax at $118k. There were a few years in the early 2000’s where, with my bonus, I stopped paying social security taxes in MAY. Most years it was in September. It was my 1%’er version of a Christmas club. Tons of money will be gathered without so much pain. Perhaps split the burden with the employer half.

2. Index the start dates with an establish expected life expectancy that is tied to START Dates. Therefore the kids coming on know what their deal is—and it doesnt change as they grow old.

3. For folks with huge pensions, allow them to recoup or get a one time pay out for an adjusted SS allowance. Then they are cut off. It would be similar for anyone who leaves a company and is given the option of cashing in a pension. The present value would be less than the anticpated long term, “no-end-in-site” payouts.

4. Break out disability benefits to those who have not put into the system. I have been at the SS office and it is full of people on disability who are not even 30 yet. Whats up with that?

5. If necessary to make the payments, increase the tax—but only into a designated, self controlled, UST based account. You mention that it all goes there anyway...what the hell—put in two more percent that you get over the years.

6. Eliminate the tax free portion of the 401(k). I know this sounds crazy. But hear me out:

I think the 401(k) was the worst invention of the last forty years. It allows billions, probably trillions of dollars to be shoved into the markets with very little oversight from the owners. Most people have extreme expectations of what they are going to get from a 401(k). Those expectations are passed onto the mutual funds. Those expectations are passed onto the companies. Having worked in the boardroom from a couple of companies driven by the institutional holders I can assure you, expansion, growth, and employee decisions are all made based on the analysts review for the quarter ending in eight weeks. Its always eight weeks.

If you wonder why many other countries have longer term views, its because their culture is not driven by what happens in eight weeks.

How many people do you know who actually research and monitor what is in their 401K? They just keep pumping the money in there. The pumped money has inflated the stock market and put us in a crazy position where one bad quarter for a major company (Apple, Amazon, whomever...) is going to tank your retirement funds for decades.

If you tax it before it goes in and allow it to grow from there tax free...you will front load the collection of money, the compounding will still take place, and perhaps—just perhaps—people will pay a little more attention to what they are doing to their kids.

Those are some back of the envelope thoughts. I am interested in what others think. Because, we can all see this train coming. Its just a matter of sucking up the pain now.