Social Security Federal Debt

“Treasury Secretary... will be forced to choose between servicing the nation's loan obligations and making Social Security, Medicare, and Medicaid payments to retirees and poor people, to say nothing of funding the military.”
~Allan Greenspan

Over time, the national debt will limit what America can spend on all government programs not just Social Security. The consequence of debt will be higher income taxes. As income taxes go up, the ability of Americans to pay payroll taxes goes down.

Social Security Contributes To The Federal Debt

Politicians are telling us that “Social Security has not added a penny to the federal deficit”. It is politically crafted myth. View all of the myths.

Payroll taxes reduce what the government can collect in income taxes. The Congressional Budget Office estimated that cutting Social Security taxes by 2% will create 2.5 to 7 million jobs. In other words, funding Social Security costs us millions of jobs and billions of dollars in income taxes.  Basically, pay roll taxes increase the cost of labor and discourage investment. 

Politifact confirmed analysis by Senator Jeff Merkle who said "costing another estimated 900,000 jobs in 2012."  It is impossible to say that a tax that costs jobs does not contribute to the deficit.  See Politifact's Analysis

Refinancing The Social Security Trust Fund
“I run a shoe store, and I would be concerned that I was losing 20% of my best customers. Our country’s problem is worse because our best customers are leaving us to open their own shoe store.”
~ user name withheld

The Social Security Trust Fund has been the best customer of the US Treasury Dept, owning as much as 20% of the country’s debt – more than twice what the Chinese Government owns. Not only does the Trust Fund lend our government a lot of money, but it does so on very friendly terms.

Here is the problem: the best customer will soon be a direct competitor. The largest buyer of US government securities is about to become the largest seller of government securities.