David Henderson recapitulates a good point (talking about a hypothetical Social Security privatization plan):
So what just happened here? The government imposed a new forced saving scheme. It, in effect, said to workers, “We were already taking X from you. Now we’re going to let you use X the way you want, within limits-…. Oh, and we’re going to have to take another almost-X to pay SS claimants.”
Let’s say the government announced a new social security privatization scheme — suppose, at your option, you could receive a lump sum representing the value of your contributions to date (as long as you invested it in index funds or bonds), but at the price of giving up your future Social Security income stream. And then, presumably, instead of making Social Security “contributions” with your payroll taxes, they would go into your retirement savings account.
In order to make that payout, the government would have to print a lot of money. They don’t have any assets backing the Social Security “trust fund”. Although payroll taxes are framed as “contributions,” they are merely spent on current expenses — and have been spent, since they first were collected in 1935. The money is just gone, and like the depositors of a tunneled bank, we need to come to terms with that.