Social Security Trust Fund vs. Treasury Securities

[Outback Jack]

I have a question regarding the Social Security Trust Fund (SSTF) and it's use of Treasury securities.

Social Security payouts exceed pay-in this year. (http://www.nytimes.com/2010/03/25/business/economy/25social.html?hp)
For accounting purposes, the system’s accumulated revenue is placed in Treasury securities.

Wiki article on the S.S. Trust Fund. (http://en.wikipedia.org/wiki/Social_Security_Trust_Fund)
From an economic standpoint, the question of whether the trust fund is fact or fiction comes down to whether the trust fund contributes to national savings or not.

Wiki article on Treasury securities. (http://en.wikipedia.org/wiki/Treasury_securities)
A United States Treasury security is government debt

I've heard about the following situation before from various talking heads but I never looked into it myself until today. I'd appreciate the input of anyone more knowledgeable in finance than I to see if I am misunderstanding this situation.

If I'm reading this properly, for the last 2-3 decades one branch of the gov't (Social Security) has taken in more money that it has expended. This surplus money has been exchanged for IOUs from another branch of the gov't (Treasury Dept. And then Congress promptly spent that money, yes?). According to the Times article, the total worth of the IOUs is $2.5 trillion dollars.

So if I have this right, this year SS is going to have to dip into its SSTF to make its payouts. But since the SSTF only exists as IOUs the gov't, as a whole, is going to have to increase the debt to cover these IOUs. Because the money it took in exchange for those IOUs is already gone? Is that correct?

In other words, the gov't took money out of one pocket in exchange for IOUs. It then spent that money but will now have to honor those IOUs.

Even Wiki seems to be confused on whether or not the SSTF is "fact or fiction".

Is there anything basically wrong with my understanding of the situation Social Security and the gov't face right now and not in 2037?

[Francesca R]

You have it correct. SSTF lending to the government has resulted in a combination of (i) more government spending than otherwise, or (ii) lower federal tax than otherwise, or (iii) less government borrowing from others than otherwise, or (iv) fewer sales of government-owned assets than otherwise. Had there been no SSTF, or had there been a law that it could not own public debt, then one or more of those would have had to be different.

[Random]

It’s easy to get confused about the Social Security Trust Fund. There are a lot of economic pundits whose full time job it is to confuse people about the Social Security Trust Fund. At the same time those trillions of dollars from working class Americans were being "set aside" in the Trust Fund, the rich got huge tax breaks. Now those bonds are starting to come due and the rich are going to do everything in their power to hang onto those tax breaks. With the kind of money we are talking about at stake, hiring a couple of MBA drones to bleat endlessly about made-up BS like $100 trillion dollar unfunded mandates is chicken feed. Throw in a little anti-government ranting for seasoning and you have millions of otherwise intelligent Americans getting angry that rich people are not taking more of their money from them.