Toward the end of this New York Times story about the Social Security “trust fund” experiencing net withdrawals this year for the first time are a few words from former Fed chairman Alan Greenspan about the system that he helped “fix” back in the early 1980s.

Although Social Security is often said to have a “trust fund,” the term really serves as an accounting device, to track the pay-as-you-go program’s revenue and outlays over time. Its so-called balance is, in fact, a history of its vast cash flows: the sum of all of its revenue in the past, minus all of its outlays. The balance is currently about $2.5 trillion because after the early 1980s the program had surplus revenue, year after year.
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Mr. Greenspan recalled in an interview that the sour economy of the late 1970s had taken the program close to insolvency when the commission he led set to work in 1982. It had no contingency reserve then, and the group had to work quickly. He said there were only three choices: raise taxes, lower benefits or bail out the program by tapping general revenue.

The easiest choice, politically, would have been “solving the problem with the stroke of a pen, by printing the money,” Mr. Greenspan said. But one member of the commission, Claude Pepper, then a House representative, blocked that approach because he feared it would undermine Social Security, changing it from a respected, self-sustaining old-age program into welfare.

Recall that payroll taxes were raised back in 1983 and the Federal Government has been spending the Social Security surplus every year since that time, in the process making the government’s annual budget look a lot better than it actually is. This no doubt helped to make the former Fed chairman quite popular with elected officials, that is, until the whole financial system melted down a couple years ago.