No. of Recommendations: 2
As others here have pointed out, the trust fund is exactly like a bank saving account. It is backed by Treasury securities. The US has never defaulted on any obligation for 226 years,and no one should expect our country to start now. If we ever need to redeem the OASDI securites, we would just sell Treasury bonds to the public. These bonds would be eagerly purchased. However, based on many factors including productivity gains, it's beginning to look like the securities will never be redeemed. The interest and present taxation levels alone will eventially cover the payout.

I agree that the government will not default. Before defaulting, the government will borrow money, raise taxes, and/or print money (probably in that order).


The government WILL NOT default on the bonds in the Social Security Trust fund.

It will simply retire them. After all, they are claims that the government owes money to - itself. It will declare itself paid. Both the creditor (the government) and the debtor (the government) will be happy.

So where does the money come from to actually pay the obligations of Social Security?

Um... that isn't an obligation. It's just a law. Passed by Congress. Changeable by Congress. No obligation at all. Terminating Social Security next Tuesday, offering NOTHING to any of the current or future recipients, would not be a default.
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