http://www.usatoday.com/news/opinion/editorials/2011-06-16-Payroll-taxes-raid-Social-Security_n.htm
In an editoral, USAToday offers "For almost three decades, Social Security was the only major government benefit program that generated more money than it cost, thanks to hefty payroll tax revenue that exceeded benefit payments to seniors." It is dangerous thinking.
The only way you can say the Social Security has generated more money than it cost, is to ignore the real costs of the system. In 2010, Social Security generated a total of 677 billion and paid out 584 billion. But the 584 billion does not include the cost of future promises. In exchange for the 677 billion, we give pension promises to the working generation who pay Social Security. Social Security is only cashflow positive to the extent that we intend to renege on these commitments.
What USAToday says is based on "cash-accounting". Before you roll your eyes, here is a practical example of "cash-accounting": Wells is a beer drinking college student, who goes daily to the ATM to retreive his balance. He doesn't bother with the other checks that he has written or the impending tuition payment. Whatever the ATM says is how much beer he can buy. That is how cash-accounting works.
Now you may think that Wells is not a problem because he is not your son. But he is your problem if he is the chief accountant for the Social Security system. And there is no way to say he is not when you look at the way that the accounting is handled. When you hear that Social Security is 'making money' you need to think of Wells standing at the ATM shaking a receipt in your face and saying "come-on you cheap skate I'm buying".
The take home here is that cash accounting is illegal for all public companies. There is a reason. It is grossly misleading. Social Security does not generate more than it takes in. It has generated unfunded liabilities in the trillions of dollars.
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