Profoundly Stupid Ideas: Government Debt to Itself

In my last post i mentioned a big problem i have with the "social security trust fund".  In this post, i might give you some reasons.  There is another point i want to make - social security is a tax and that is all (it is not some form of savings account).

Government has no real means of saving money (they just can't do it).  It is not like they can take excess money and buy tons of gold (it is probably "too risky" - and if they did it would likely mess up commodity markets).  They are somewhat risk averse (or are they?) into how they can "invest" excess money - they actually cannot. 

Take social security (to oblivion preferably)... Social security was running surpluses because they were overtaxing the American working population/employers.  But, what is the government going to do with this money they got from overtaxing people.  They took this money and loaned it to themselves, which they then spent.  So, the surpluses enabled unnecessary spending. 

However, the real problem with this scenario is that government got money from overtaxing people then loaned it to themselves - but who has to actually pay off the debt?  The taxpayer has to pay off the debt and any associated interest.  So how exactly is this a good idea.  Any way they pay off the debt (if they ever do) will come as a cost to the taxpayers - whether it is higher taxes or reduced purchasing power (all because they were overtaxed in the first place).

This kind of strikes me as another example of the principal/agent problem that exists between the taxpayer and the government.  Taking taxpayers' money to rack up more debt seems morally dubious at best.   

Tangent: one of the real reasons that the government does not support individual retirement accounts is that the program is not set up as a savings program - social security is a "pay as you go" transfer program.