Last Updated May 16, 2011 1:15 PM EDT
If you're already mad about Social Security, this will make you even madder. Judging from the comments I've received on Social Security posts in the past, Americans believe they have been taken advantage of in three ways: 1) In 1983, the system set out to build a huge trust fund to tide it over through the baby boom's retirement. 2) Congress then raided the fund, and 3) now the system is now doomed to go bankrupt.
Now, there are good reasons to be angry about how Congress has handled Social Security. But the popular narrative about the raid on the trust fund isn't one of them. Because the story isn't quite true.
First, there was never a deliberate plan to lay money aside for the boomers. You can read this summary of the Social Security Amendments of 1983 and the Social Security Trustees Report of 1984, and the prospect of a huge trust fund acting as saving for the boomers never comes up. (The latter describes the trust fund as "a contingency reserve to absorb temporary fluctuations in income and outgo." Nothing about saving for a silver tsunami in the 21st century.) The trustees show considerable concern that the system will technically be in "long term actuarial balance" as a result of the benefit cuts and tax hikes included in the 1983 amendments, but that's the extent of their apparent long-term thinking.
Remember, when Reagan signed the 1983 amendments, Social Security was on the brink of not being able to mail out checks, and at the time, the oldest boomer was under 40. Lawmakers and Social Security were worried about the next decade, not about creating a piggy bank for the next century.
Naturally, the actuaries could see the system would run an annual surplus if the economy grew reasonably well. But as to how that extra money might have been saved for the boomers (put it Fidelity funds?) and then drawn down when they retired: Not a word.
In the end the economy did do reasonably well in the 1980s and 1990s, and the surpluses built into a huge trust fund balance. Did Congress raid that money? Well, raiding is a loaded word. By law, the trust fund has to be invested in Treasury bonds, and Treasuries are nothing more than IOUs that Uncle Sam issues to raise money for the things that government needs--like stealth helicopters, helmet cameras for Navy Seals, IRS paper clips and pensions for mail carriers. Yes, the government spent it. There was nothing else it was allowed to do. Is that raiding?
Perhaps, as the estimable financial journalist Scott Burns suggests, Congress might have voted to give those annual surpluses back, but then taxes would have fluctuated every year and there would still be 75 million baby boomers retiring in the early 21st century and no piggy bank to crack open for them. The fundamental problem Social Security faces is that the nation is aging. If the Greatest Generation had fewer kids and the boomers had more kids and didn't live so darn long, we wouldn't have this problem. But it's hard to lay that one at Congress's feet.
Finally, Social Security is not going bankrupt. It is a pay-as-you-go system, which means that as long as taxpayers are willing to pay benefits to retirees, Social Security checks will keep coming.. The real risk to your future benefits is that taxpayers will stop supporting seniors as generously as they have. In fact, it seems obvious that taxpayers will have to cut back sooner or later. Before the burden of Social Security and Medicare becomes unbearable-by 2035, they're together expected to consume about 12% of GDP, or two thirds of every tax dollar--we need to have a national conversation about how much we want to spend on seniors.
But telling ourselves melodramatic stories about how we were cheated by Congress won't help us have that conversation. Let's get our story straight.
More on CBS MoneyWatch:
Five Social Security Myths that Have to Go
The Social Security Trust Fund Myth What's the "Return" on Your Social Security Taxes?