As surely as holders of pay option mortgages will default, so will the U.S. government default. But there is a huge difference. Mortgage lenders can evict mortgage holders in default and gain ownership of their houses. There is no way that "lenders" to the U.S. government can evict the government for non-payment.
This relieves today's politicians from having to make payments above the minimal required payment to be re-elected. Year by year, month by month, day by day, the government is adding to principal owed to future retirees by not setting aside funds to pay the beneficiaries of the two old-age programs. The funds are immediately spent by the government. Any funds not paid out to today's growing army of elderly recipients is borrowed by the Treasury and spent. The Treasury issues IOUs to the two trust funds, but these IOUs are not counted as part of the official on-budget debt.
This is deception. The voters don't understand. Congress likes the results: deferred day of judgment.
The pyramid schemes of Medicare and Social Security are crises waiting to happen. Are we doomed? Gary North suggests you put aside some cash for a rainy day because the forecast is for inclement weather ahead.
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