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I thought that the problem was not just the non-negotiability of the SS treasury bonds, but also whether the Treasury legally must redeem the bonds for cash when the bonds become due. The government would do that either through income and miscellaneous tax receipts or through issuance of negotiable bonds in the marketplace, like it does now to cover the budget deficit.

According to the dems and others, if the SS treasury bonds are redeemed for cash, the system will not go broke 'til 2042 or thereabouts. Some dems want to roll back the Bush tax cuts on the "wealthy" in order to cut the budget deficit (assuming no more spending) so that the treasury will have the ability to issue negotiable bonds when the SS bonds come due.

There are also commentators who are concerned that if the Treasury does not redeem the SS bonds, the international credit markets will deem the negotiable U.S. Treasury bonds worthless. The reasoning is that if the Treasury won't redeem the bonds issued to its own citizens, it surely won't stand by its promise to pay on the negotiable treasury bonds. At that point, the "full faith and credit" of the U.S. government will be worthless, and we'll be paying 75% interest on any borrowings.

If the Treasury declines to redeem or pay back the SS bonds, expect massive litigation.

The non-negotiability means that the Feds are just self-dealing. Only they can issue them, only they can buy them back, so it's just a useless piece of paper.

As far as your main issue is concerned, the way I see it is that that's a red herring. They've been dumping non-negotiable bond notes into the Trust Fund for decades to keep the books 'straight', and aren't going to switch them to negotiable ones in the future. The whole thing becomes moot when the income from FICA is less than the outlays, since there will then be no more bonds issued. The ones already in there will be retired on a one-to-one basis with the amount that outlays exceed income each month.

If they never get to that point (e.g., they raise FICA taxes or reduce benefits again), they will continue in the same old way, with non-negotiables. That's my assessment, FWIW.