NewMexiKen thought this excerpt from The Social Security Trust Fund is Irrelevant (Or How Al Gore Was Right) to be a pretty succinct summary of Social Security finances:
For all but 11 of the last 68 years, payroll tax revenues for Social Security have exceeded the amount the government spent on Social Security. The government used the excess to buy special bonds printed by the federal government. In other words, the government borrowed from itself. It then took the proceeds of the bonds and used it for other government expenditures. The idea all along has been that in 12 to 14 years, in the midst of the baby boom retirement wave, Social Security benefits will exceed payroll taxes earmarked for Social Security. Then the government can sell these bonds — to itself, of course — and use the proceeds to make up the gap.
And that’s why the Trust Fund is irrelevant. To buy the bonds in the Trust Fund from itself, the government must get the money from somewhere. It has four options. It can reduce other government spending. It can sell assets. It can increase taxes. Or, it can sell bonds [that is, borrow some more].
It’s the underlying financial crisis (i.e, the deficit) that’s the issue, not Social Security.