It is instructive to note that the $2.5 Trillion Social Security Trust Fund has value, not as a tangible economic asset, but because it is a claim on behalf of beneficiaries on the goods and services produced by the working population. This claim will be enforced by the United States Government although the precise monetary mechanism of enforcement is yet to be determined. In order to repay the Trust Fund, the United States government has three options, which may all be pursued to varying degrees.

(1) The government may issue debt by selling treasuries, which would further raise the deficit. This scenario would likely increase the tax burden on future generations, as annual interest payments on the national debt would increase. If government revenues do not increase sufficiently either through taxes of economic growth, the government would be forced to cut spending on other programs (such as Defense, Education, Research) or else default on all or part of the debt.

(2) The government may raise taxes. Ironically, by reducing take home pay for workers, the government would make it harder for the younger, working generations to invest and save for retirement.

(3) The government may monetize trust fund obligations by transferring the treasuries held by the Trust Fund onto the Federal Reserve balance sheet. In such a transaction, the bonds would become "assets" on the Fed's balance sheet, and the Fed would create money "out of thin air" to purchase the bonds from the government. Under such a scenario, the bonds are converted into cash, which would then be used by the government to cover social security payments. This scenario would likely lead to increased inflation, as it would inflate the money supply without directly increasing the amount of goods and services produced by the economy as a whole.

While there are many options for financing social security in the short-term, there is no government program, aside from promoting massive immigration or raising the retirement age, which can instantly change the demographic aspects that affect the sustainability of social security. The program's sustainability is directly tied to the number of workers supporting each retiree. As the ratio of retirees to workers increases due to the retirement of the Baby Boomers, it is an economic identity that productivity among the working population must increase in order to support the same living standard as before. This is true because there are fewer workers available to produce the same amount of goods and services. If productivity does not rise fast enough to offset to loss of productive workers, the national standard of living in the United States may fall.

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There is an additional (more likely) possibility which might be added to these three options. In accord with Obama's plan to redistribute wealth and income, money to fund the claim on dollars in the Trust Fund will be increasingly paid by more progressive income taxation to minimize monetary inflation by reducing the accumulated wealth and higher income of the wealthier and higher-paid in the tax base. This can be seen in last week's disclosure of plans to add a 3.9% tax to certain kinds income of those making $200,000 and up and by clawing back a similar percentage when SS benefits are distributed to the upper income retirees.