The serious (as opposed to Serious) thing to say here is that on current projections, Social Security faces a shortfall — NOT bankruptcy — a quarter of a century from now. OK, I guess that’s a real concern. But compared to other concerns, it’s really pretty minor, and doesn’t deserve a tenth the attention it gets.First, Krugman starts out with this howler where makes some kind of Serious distinction between shortfall and bankruptcy. A shortfall means the money isn't there to make payments as the SS program is designed. This means that someone is going to get screwed (which is what happens in a bankruptcy). It will be either a cut in payouts to recipients (a most obvious bankruptcy), higher taxes (bankruptcy paid for by taxpayers) or money simply printed to pay for the shortfall ( a bankruptcy paid for by savers and those who will not get pay increases that are enough to compensate for the inflation).
But, aside from this howler, is the fact that SS is no longer cash flow positive. Krugman completely misses this and this is a very big deal. Just a few years ago, SS was a buyer of up to 25% of all Treasury securities issued. As of about a year, they are a net liquidator. Got that?
SS has gone from a major buyer of Treasury securities, to raising funds from the liquidation of Treasury securities. They are for all practical purposes now competitors with the Treasury in the Treasury market. This is the only way SS will be able to meet their obligations in the here and now. What happens in a quarter of a century, which is the time frame that Krugman wants to pass the problem off to, is that SS will have sold off all of its Treasury securities and things will get worse. But the problem begins now with the start of the sale of the Treasruy securities. Very dangerous and another important reason why interest rates will skyrocket at some point.