The Social Security Crisis

Lots of people here claim that there is no Social Security crisis. If that is the case, please explain to me what is wrong with the following analysis done by Allan Sloan, a frequent commentator on NPR's Marketplace show:

Social Security is now taking in more cash than it spends. The accumulated surplus is approaching $2 trillion. But there's a big problem here, fans. The money isn't being saved. Instead, one part of the government, the Treasury, is writing IOUs to another part, Social Security. The Treasury borrows Social Security's surplus cash and gives it IOUs in return. It pays interest on the trust fund's IOUs with additional IOUs rather than cash. So you've got a big pile of government promises to itself. Nothing's been saved. It's as if you wrote IOUs to yourself, stuck them in a coffee can and called them savings. When you needed cash, you'd reach into the can, but all you'd find are IOUs. You'd have to bring in more money or spend less or borrow—just as if there were nothing in the can but coffee.

OK, let's fast-forward to 2018, when Social Security is projected to take in $23 billion less cash than it spends. By then, the trust fund would have more than $5 trillion of Treasury IOUs in it. So it would be a piece of cake to cover a crummy $23 billion, right? Wrong. No matter how many Treasury securities the trust fund has, Treasury would still need $23 billion of cash to cover Social Security's bills. The Treasury can trim other expenses, bring in more money or borrow 23 billion bucks. But these options are exactly the same as they'd be if there were no Social Security trust fund. By 2027, Social Security would be taking in almost $400 billion less than it spends, requiring huge cash influxes. The trust fund—on paper—would still be getting bigger. In the real world, though, Social Security's cash deficit would be seriously squeezing the rest of the government. Finally, as the cash deficit nears half a trillion dollars annually, the trust fund starts to shrink, then melts away. But the fund's irrelevant, folks. It's an accounting entry, not real money. How the Democrats can cling to the trust fund with a straight face is beyond me. Maybe it's because they don't want to shatter Social Security's myths, or let people see how expensive Social Security really is.

of the "Social Security trust fund" phantom. How anyone can say with a straight face that the "trust fund" exists, I have no idea.

Almost all cities and counties and corporations have investments, and very few would argue that that is essentially pissing the money away. Why is this case any different?

Or, to put it another way, if Social Security Treasuries can't be expected to be paid back, can teh City of Miami or General Electric or Ms. Miriam Smith be expected to be paid back the money they invest in treasuries?

Bryant

that invest in Treasury Bonds can expect to be paid back. Why? Because if they don't, it will ruin United States government's credit forever, and will make it a lot harder for it to borrow from anyone. Since "Social Security trust fund" is part of US government, it is a lot easier not to repay the bonds that it owns, because that is essentially a loan to yourself.

If you loaned money to yourself, would you ever repay that loan? What would that mean, exactly? Take the money out of your right pocket and put it in the left one?

So the parallel doesn't really follow. More to the point you say the Government like it is a monolith, which confuses the issue. The "government" is made up of dozens of different organizations. The Social Security Trust Fund loaned the money to the United States Treasury; they have a right to expect the the United States Treasury to pay them back.

I'm not sure exactly what your point is in trying to argue that their is no Trust Fund. Do you support some sort of Social Security Phase Out of the kind that President Bush is advocating?

It is a fact that the "Trust Fund" is a fiction. It is an irrelevancy. Whether those pieces of paper exist in that trust fund or not, the outcome will be precisely the same - the funds to pay for Social Security will eventually have to come from general tax revenues. Do you agree?

that's why I've been arguing against that idea in all of my posts.

This is argument by assertion. You simply restate your position and put "It is a fact" in front of it. The government has to make payments on its debt every day. Whether it makes those payments to the Social Security Trust Fund or to various other governmental agencies, corporations, or individuals, it's exactly the same.

Once again, do you want increased urgancy in solving Social Security because you are hoping for a President Bush style phase out of social security?

that something is a mirage, a fiction, a phantom, if it does not make any difference whether it exists or not - as the case is (and you agreed) with the "Social Security Trust Fund". So it is not an assertion. It is an argument that you actually agreed with.

What I do want is a set up for Social Security that will prevent this trick of "loaning from yourself" a.k.a. "stealing from Social Security". Right now that money is everyone's and nobody's and, after decades of stealing, non-existent. Personal, named, accounts, where you can see exactly how much you have and what it is invested in, would drive it home and prevent (or at least make it MUCH MUCH harder) the government from stealing this money from the public.

Nice to see you have a good understanding of saracasm.

Individual retirement accounts (otherwise known as privitizing social security) are a terrible idea. You should read some Paul Krugman or Talking Points Memo.

More to the point, if we are out of money, and borrowing money to pay of the debts is such a bad idea, why is sinking trillions of dollars into creating a totally new system such a good idea?

Here is a statement:

Whether those pieces of paper exist in that trust fund or not, the outcome will be precisely the same - the funds to pay for Social Security will eventually have to come from general tax revenues.

Do you agree with it or not? And if you disagree, please clarify exactly how you disagree.

This is kind of like saying "Well how do we know that the Goverment will continue to support the military. What if next year they just decided not to give the military any money?" Could it happen? Technically I am forced to admit it could happen. Does that mean I think this is a reasonable and rational argument? No, because it is unlikely in the extreme that it would happen.

The money to pay off the debts owed by the United States Treasury will undoubtedly come from either general tax revenues or further loans. Does this mean that there is no trust fund? No.

Let me put it another way. I have some 2 grand in my local bank. Could they go bankrupt and decide not to give me that money? Technically yes. It's happened before. But it is unlikely in the extreme. And if you asked me how much money I had I would say "Well I have twenty bucks in my pocket and two grand in the bank." It would be very unlikely that you would say, "Well obviously that money in the bank isn't real because you dont' have it physically on you."

Or maybe you would.

The government has an obligation to pay Social Security to retirees. I am sure you agree.

Two scenarios:

1. The Social Security Trust Fund exists. The Treasure Bonds in it are presented to the government and are redeemed. The money comes from government's general revenue fund (that is, taxes).

2. The Social Security Trust Fund does not exist. The money to pay the retirees comes from government's general revenue fund (that is, taxes).


You see that the results is precisely the same, whether the fund exists or not (also note that in the example you gave, whether you have an account in the bank or not matters quite a bit, which makes it a poor analogy).

So - would you agree that something that, whether it exists or not, makes absolutely no difference is, in fact, a fiction?

Nor would I agree that it doesn't matter whether it exists or not.

I went into detail explaining things. Saying "I don't agree" is not enough. You would have to explain where the argument is wrong. That is how these things work, you know.

Your assertion is that whether or not the trust fund exists, the money still has to come from the tax payer so the trust fund might as well not exist and is a fiction.

Let's think about this for a moment. The Social Security Offices pays out all the social security payments they need to, and they have left a certain amount of dollars. What should have been done with the money?

1. Mattress or Bank. The excess money piles up somewhere completely untouched by human hands?

2. Invested in some form of Goverment Security? But that brings us right back to where we are now, doesn't it? Investing Social Security in Goverment Treasuries is exactly the sasme as pissing it away.

Are you arguing that the first option would have been the "right" option? That by investing the money in Treasury Securties (considered by most to be the safest investments available) they have esentially destroyed that money?

The United States benefited from being able to borrow that money, so the United States (which includes us as taxpayers) should pay the money back. If that means that a certain amount of our tax money goes to the Social Security program how is that a problem?

Consider this--Treasuries have durations, as I'm sure you know. Ten years, 50 years and so on. Frankly I would be surprised if their weren't many many treasuries held by the Social Security office turning over this year. They will, of course, reinvest that money as they are legally required to, in Social Security Treasuries. But the money to pay those individual bonds goes from the taxpayers to the Social Security Trustees (who then reinvest it immediately). Is that a problem?

yes, here is this huge $200B surplus - *every year*. What is Social Security to do with it? There is no mattress big enough. Banks cannot handle this kind of money on an annual basis - there is just so many mortgages you can write and loans to give out, it would skew the whole banking industry and not make a very good return if any. Treasury Bonds - it is just sleight of hand, allowing the government to raid the fund with impunity.

So - there are only three solutions that I see.

1. Spread the Social Security "trust fund" among millions of taxpayers' private accounts (if you don't like the word "personal"). This way the individual decides where to invest, and even if it is the same Treasury bonds, it is MUCH harder for the government to weasel out of redeeming them when they are explicitly owed to an individual.

2. Run Social Security Trust Fund as a "mutual fund" - investing in the markets in US and abroad. Also would not allow the government to raid it, but has "conflict of interest" issues - whichever companies/governments/currencies it invests in, it would create the image of US government favoritism towards them.

3. Use the surplus to reduce national debt by paying off existing Treasury Bonds etc. Not much better than the current solution, because as soon as it is reduced, you KNOW the politicians will just borrow that much more for their favorite programs. It is another sleight of hand, just a more roundabout one, to allow the government to steal from Social Security.

You have any other suggestions?

Why not just pay back the money we owe the Social Security Program as we have been doing for decades? I mean that's been working all along, and, yes, there have been times previous when Social Security out going has exceed in coming funds and they've had to cash securities.

1 is an enormous expense. If your argument is that we don't have enough money to pay off Social security benefits because there is no money in the trust fund, well, than it seems foolhardy to take on the additional expense of setting up individual accounts.

2. What happens when the market has a bad years? More to the point, United States Treasuries are the most secure investments you can make--mutual funds don't even come close.

3. Is basically an argument to rip up those "IOUs." Again doesn't make much financial sense to me, as you seem to acknowledge.

liability for US treasury (starting in 2018, when Social Security will have to start to be paid out of general government revenues) with no end in sight. I don't see how that is better than any of my suggestions.

Your plans and President Bush's plan, which don't seem all that dissimilar to me, would destroy it.

You do know the difference between destroying a program and preserving it don't you?

you would preserve Social Security by raising taxes, starting in 2018, and having to raise them again every couple of years, with no end in sight. Eventually this kind of thing breaks under its own weight, you know.

(meant this to be a reply to qwghlmian's post above)

cthrumatrix pointed to this article down below--I'd read it a while back, and it makes some good points.

Myth #3: Social Security's trust funds are filled with worthless IOUs.

When investors become worried about the economy and the stock market, they "flee to safety" by selling their other securities in exchange for U.S. Treasury bonds and bills. Backed by the full faith and credit of the United States government, U.S. Treasury securities are considered to be the safest, most reliable investment worldwide. Because the federal government is legally obligated to pay back interest and principal on those securities, it would take an almost unimaginable calamity for a default to occur. Social Security's trust funds, which now amount to $1.5 trillion and are expected to grow to $5.3 trillion by 2018, hold nothing but U.S. Treasury securities.

Alan Greenspan, now the Federal Reserve chairman, led a bipartisan commission in 1983 that recommended changes to Social Security explicitly to produce the large trust funds that the system will draw on to pay for the baby boom generation's retirement from roughly 2008 to 2030. Those reforms, signed into law by President Ronald Reagan, were widely hailed at the time by both parties as a model of effective government. If anything, those reforms have turned out to be even more successful than originally imagined, as the improved forecasts in recent years for the program demonstrate. The central reason for that success was the Greenspan Commission's idea of building up trust funds invested in safe U.S. Treasury securities.

Myth #4: The real date to worry about is 2018.

President Bush and others have argued that Social Security's problem begins not in 2042, when the trust funds would be depleted, but 2018, when Social Security's trustees project that payroll taxes will no longer exceed that year's benefit obligations. But the whole reason why President Reagan and Alan Greenspan created the trust funds was to guarantee that benefits could continue to be paid in full when payroll taxes did not fully cover the system's expenses. Remember that the trust funds will amount to about $5.3 trillion at that time. Just the interest on the trust fund's Treasury securities will be more than sufficient to finance payments fully for another ten years. Indeed, the trust funds still will grow another 25 percent from 2018 to 2028, reaching about $6.6 trillion because of the interest earned on those securities.

From the standpoint of the federal budget, after 2018, some general revenues will be needed to pay for the difference between each year's payroll taxes and guaranteed benefits as part of the interest owed on the trust fund's Treasury securities. But in each of those years, the expected cost will be relatively modest. The Center on Budget and Policy Priorities calculates that in 2025, for example, the difference between Social Security's benefit costs and its non-interest revenues will be less than 10 percent of the projected federal deficit. By comparison, the Bush administration's tax cuts, if made permanent, and the new prescription drug benefit for Medicare will cost five times as much in that year.

the first argument is plain silly - as I have shown you before, and you blissfully ignored, it does not matter whether the IOUs are "worthless" or not - the end results is EXACTLY the same - that is, Social Security will have to be paid from general revenues.

The second argument is the same thing. In its first part it relies on "interest from Treasury securities" - see above. It is a mirage, it is an accounting trick, it is pumping money from one side of the government to another, why do you (and the authors of that article) fail to understand that?

The rest of it just proves my point. The Social Security payments will have to be augmented from general revenues more and more until by 2042 almost the whole of it will be coming from general revenues. That destroys Social Security just as surely as anything else - and that is your plan.

You know I'm done with this--I've made my point plainly enough. If you want to continue parroting Bush Propoganda that's your right.

Bryant
Check it out --> http://politicalcomment.blogspot.com

Don't just tell us to go read someone else's opinion, tell us why personal accounts are a bad idea.

It depends on what you mean by Personal accounts, but what most people mean are individual investment accounts, where the government will take some money out of each paycheck and invest it in ways that you determine. That might be a good idea on top of Social Security. But it is a bad replacement for social security. I'll give two reasons.

1. The expense of creating the system which will run into the trillions. Look at the example of Chili. If we are facing a budget shortfall, it seems strange to me to implement a strategy that involes spending trillions of additional dollars.

2. It is a defined contribution plan as opposed to a defined benefit plan, borrowing terminology from Talking Points Memo. To quote a bit more from Mr. Marshall

Is it fair to say that President Bush is trying to "phase out" Social Security? Well, what is Social Security? For seventy years it has existed as a defined benefit social insurance program. What does that mean? It is a social program in which everyone who works during their lifetime gets a guaranteed benefit in retirement. It's not meant to be a sole means of support. Those who pay in more get more back; and those who pay in less a bit less. But everyone who works is guaranteed a benefit which provides at least a modicum of comfort and dignity in old age. Have the benefit structures changed over time? Yes. But they change for everyone together, not by the vagaries of chance or individual fortune.

Social Security envisions a retirement in which recipients, hopefully, have three sources of income: Social Security, some employer-based pension and personal savings. The latter two, in varying degrees depend on how hard you work, how much you make, how wisely you invest and the vagaries of chance. Social Security, as a defined benefit program, is meant to be the one leg of the stool which is a flat guarantee.

At root, with all the statistics and flimflam over words, President Bush wants to change that. He wants to phase out Social Security in favor of private investment accounts. In the latter case, there is no guarantee at all, just as there is no guarantee in private nesting, which of course is just as is should be. He wants to get rid of the defined benefit program and change it to a defined contribution program -- not partially, but totally. -- from here http://www.talkingpointsmemo.com/archives/week_2005_01_30.php#004700

How would you feel about personal accounts that invested only in US Treasuries? Basically that arrangement would be no different from the current system except for putting money outside the reach of politicians, which is my main concern...

only correct way would be that your private account be
invested in profit making outfits which actually have
material assets.

if you believe that SS money should only be invested in profit making outfits that have material assets, that pretty much eliminates the existing system that invests in the US government. The US government almost never posts a "profit" (i.e. runs in surplus).

MOre to the point if we are to accept that Treasury Securities held by the Social Security Trust Fund are meaningless, why would Treasury Securities held by individuals be meaningful?

I said elsewhere (but not to you) that any solution had to involve tax increases to pay for transition costs...

Sorry about that.

"personal accounts" huh?

Who's going to manage those accounts? Who's going to pay those fees? Where are the transition costs going to come from? How are you going to pay CURRENT retirees if you're taking money out of the system to invest in Treasuries (which is what's already being done)? Why not just put SS in lock box and make it illegal to touch it? That would actually fix the system w/ no extra costs. But NOOOOOOOOO. There's no profit for private firms if you do that and Bush can't get his greedy paws on the money that way.

Frankly the simplest argument against Privitization/Personal Accounts/Phase out is that it is a Bush Plan. How many other Bush plans have gone well over the last couple of years? Why should this be any different?

Who's going to manage those accounts?

The people that own them. FYI, managing an account consisting solely of US Treasuries is trivial.

Who's going to pay those fees?

There are no fees. The government merely issues bonds to the people.

Where are the transition costs going to come from?

Higher taxes.

How are you going to pay CURRENT retirees if you're taking money out of the system to invest in Treasuries (which is what's already being done)?

Higher taxes.

Why not just put SS in lock box and make it illegal to touch it?

Because Congress makes the laws and can always change their mind later to make it "legal".

For whom? What planet do you live on? Do you seriously believe they could get away w/ raising taxes for this scheme? If that were the case that would be the ultimate death knell for this idiocy so I HOPE they try to do this, because you and I both know that those will be higher PAYROLL TAXES, which means middle class and poor get whollopped for a new program that they are going to lose money on in the long run anyway.

Higher taxes my ass. It would be paid for by BENEFIT CUTS and you know it.

People are going to manage their own accounts? Praytell, HOW are they going to do that? Who's going to administer them? The accounts are going to spring into being full formed magically somehow and people are going to directly buy their own bonds from the governemnt???? Yes, because we all know how intelligent your average American is that they can easily just become there very own bond trader. Yeah, that'll work, in Fairyland maybe.

I was descibing a plan that I would support, not a plan that Republicans would necessarily support.

:shrug:

If Democrats in Congress backed this type of plan they could easily grab enough moderate Republicans to pass it.

Why in the world would Dems back this or Moderate Repubs for that matter? They KNOW SS is not broken and doesn't need to be fixed. The crisis is NOT w/ the SS system. It's w/ the huge budget deficits.

Fantasyland. Raise taxes on the lower and middle classes for this and guess what? The economy will not improve becuase your taking money out of the hands of most of your consumers and guess what? You're still fucked. Fix the deficits, that's how you make sure SS is solvent.

It's like trying to fix a severed artery by cutting off your feet.

The only way the coming revenue shortfall is going to get fixed is by tax increases or spending cuts. I don't believe that either party in Congress has the balls for spending cuts, so that leaves tax hikes. There are enough Republican deficit hawks out there to pass a bill that would raise the SS cap (effecting only rich people, BTW) and fix the problem so long as you agree to the principle of personal accounts. Republicans will give in on the tax hike issue if Democrats give in on the personal account issue.

Ha! No balls for spending cuts???? I guess you haven't seen the new budget.

You want to increase the cap? That's a good idea though it doesn't mean only rich people will be affected, unless you consider someone making 90k rich. Still no need for PRIVATE accounts though. I see your still using the WH propoganda. Why is that?

The new budget came from the White House, not Congress. You'll note in my post #112 I said that nobody in Congress had the balls for spending cuts. And guess what? I was right. People in both parties looked at the WH budget and declared it DOA. Like I said, no balls.

"Personal Accounts"??? What a pathetic joke. You are so transparent.

But you think they have the balls to raise taxes??? Hahahahahahahahaha! Again, what planet do you live on?

They will make cuts before they raise taxes. Maybe not all the cuts Bush wants, but they will make them.

You would rather change the subject than answer my questions. Totally pathetic.

I use the term personal accounts because its accurate. The fact that the White House also uses the term is irrelevant. The White House also uses the terms deficit, WMD and Social Security. Are you going to stop using those terms simply because the White House uses them? What's your real problem here? Are you irritated that you can't win this arguement on a factual basis that you resort to nit-picking my choice of words?

What a pathetic joke. You are so transparent.

How does it feel to be livestock? Groupthink ain't pretty.

So, tell me Einstein, how DO you buy a treasury bond?

"Hi! Is this the gov't? I'd like 3 treasury bonds please!"

The creators of the SS "scare" are missing a very important point in all the fear and confusion.

Their major point is that there will be more retirees than workers in a few decades, which means that not enough taxes will be going into the system.

This is a HUGE fallacy that is not backed up by history.

In the past, when the economy has grown beyond the means of the 'native' population to support it, the country has taken in immigrants by the thousands. The "shortfall"-mongers make the faulty assumption that the workforce will not grow beyond the reproductive capacity of current Americans, not taking into account that more workers will naturally be drawn to the jobs available here.

We've seen this happen in economies all over the world, especially since WWII. The British and French in particular imported workers from their ex-colonial holdings to take jobs that could not be filled by their existing populations. The same thing has happened in the US, too, when the economy has been growing. And it will happen again.

Once again, don't believe the hype of the SS privateers.

...is massive immigration and larger families? Good luck with that one.

If the economy continues to grow at the rate it's currently growing, and the reproductive rate of the current "native" population does not keep up with this growth, then the US will have NO CHOICE but to import workers from outside the country.

To assume that the economy will grow while the workforce remains stagnant or declines violates all laws of common sense AND economics. It goes against all economic history and experience.

*****

Furthermore, the projected economic growth (the ones that put the 'bankruptcy' of the SS fund in 2042) assume an economic growth rate of 1.5% per year, until then.

To put that number in perspective: the growth rate of the US economy during the depths of the Great Depression was 1.9%.

If the economy grows at a paltry 1.5% per year for the next 37 years, I will guarantee you that the solvency of SS will be the very least of our worries.

Read this and this for a good evaluation of the so-called "crisis".

There will be a huge expense, to a very small payoff. It would be easier to take such steps as are necessary to preserve social security as it is.

Bryant

The expense is no higher than the expense that is coming down the road when SS outlays start exceeding SS revenues (2018, I believe).

Setting up this program will take trillions. The Social Security going bankrupt (which is in 2042 when the Trust fund is emptied, not in 2018) will take billions. Billions are smaller than trillions (although neither is to sneeze at).

The system I am proposing is no different than the current system, except that in my model the US Treasuries purchased by SS revenues have individual names on them and in the current system they are owed to the so called SS Trust fund. I agree that preventing the system from going bankrupt will take lots of money, but why exactly do you believe that my proposal would take more? Its exactly the same, minus the ownership switch.

Hmmm? Just call the gov't switchboard and say "I'll take three please! And give me an order of fries w/ that to go!"

Nobody is buying any bonds in either scenario.

Which ARE bonds...Same question applies...But you knew that..:eyes:

If you had personal accounts which invested only in tresuries, that wouldn't "take the money out of the hands of politicians" at all.

Ask yourself two questions:

1) When has Congress failed to pay a US Treasury bond that was due?
2) When has Congress raided the SS trust fund?

Answers:

1) Never.
2) Last week.

1) When has Congress failed to pay a US Treasury bond that was due?

Never. Thus there is no reason to say they won't in the case of the SS trust fund.

...

But my point was a much simpler one than that. If individuals buy treasuries, that money winds up in the general fund, hence "in the hands of politicians."

I really can't see why you would think it makes any difference if the treasuries are bought individually as opposed to en masse.

a US Treasury bond that is in private hands, it will be in DEEP trouble financially. If it fails to redeem a US Treasury bond that it owes to itself, that's just an internal accounting juggle.

so it amounts to the same thing. If the government defaults on what it owes to SS, SS will have to default on what it owes to retirees.

And don't think people wouldn't know what caused that, and wouldn't start to wonder if it could happen with their treasuries too.

US government owes money (through Treasury Bonds) to the Social Security Trust fund. It does NOT owe money to individuals. There is no money you can point to and say "that's mine". That's the whole point of the new "personal" (or "private") accounts that are proposed.

And if the geovernment defaults to Social Security, then Social Security will have to default on its obligations. And everybody who was expecting a bigger check than they got will damn well know why.

Seems obvious enough to me.

and an individual. There is no piece of paper that says there is. There is no contract. There is no bond. Nothing. There is a piece of legislation that can be changed at any moment. That's all.

would be damn lucky to live long enough to get his ass kicked by a 99.9% landslide if he had the balls to stand for re-election.

All kinds of insane things are possible in theory, if you're inhabiting a fantasy world where politicians have no interest in survival.


Edit: Odd - this isn't where I posted it. This is a reply to #131

did you miss that? They have pushed the retirement age up beyond 65 - and they will push it up higher in the future. They are still getting reelected. So the precedent of changing the legislation is set.

as defaulting on trillions of dollars of treasuries.

Still, even such incremental changes in the benefit structure were an extremely hard sell.

BTW the private accounts idea screws up the functioning of the system as an insurance system and annuity big time too. What are you going to do about people who die before retirement? Do their relatives inherit? What about people who live much longer than statistically expected? Are they out of luck?

obligation between Social Security and an individual. If the rules can be unilaterally changed at any time, then it is not an "insurance" - it is a ripoff. When you buy insurance, you have a contract, and that contract cannot be arbitrarily changed by the issuing company.

If the bond holders were indivuals, the government would have to reflect the true size of the deficit, not the fake one that it currently calculates. Politically, that makes a huge difference.

I didn't like it when Clinton talked about running a surplus either, because it employed the same fiction.

So let's push for a law demanding the elimination of the "unified budget" from our bookkeeping. That would solve that problem just fine.

If we continue the deficit path we are presently on, we will be paying the same amount or more in excess of the present deficit simply to service the debt. What difference does it make if we spend on Social Security or Halliburton or other defense projects or whatever? The crisis is with the other side of the ledger. If we do not control the present insane spending binge, Social Security will be the least of our problems.

as Alan Sloan so succintly explained, when that short fall
occurs in social security department in 2018, the treasury
will have to come up with that money from somewhere. The
treasury has only two sources. 1, taxes and 2, borrowing.

Remember when you purchase US Treasury bonds, the money is
spent, not invested in a private corporation, or foreign
bonds etc. It is spent and gone. When your bonds mature,
the US Treasury pays you back by either 1. taxes or 2. more
borrowing.

So this $5 Trillion trust fund Treasury owes Social Security
is not invested in any entity outside of US Treasury. It has
been spent and an IOU sits in SS's drawers.

What it all boils down to is, payroll taxes will start
increasing at higher and higher rate to pay for the more and
more older people retiring. It is projected that 2 people will
have to support 1 retired person. Currently average retiree
gets about $1100/month. So average tax payer will be required
to pay $550/month (all in current dollars). And that ratio will
get even worse as people are living longer.

when it must be paid back.

The pay back is not a Social Security problem -

It is a Bush deficit via tax cuts for the rich problem.

Good grief - I like Sloan - but I thought he was smarter than to buy this load of crap.

Sloan is merely saying that to claim that we will not be facing hard choices in the near future is putting your head in the sand. You can try to make the distinction between the crisis being caused by excessive spending (payments to SS recipients) or by insufficient revenue (caused by Bush tax cuts), but your splitting hairs. Regardless of ideology, a problem will exists when the government spends more than it takes in. We are approaching the point where that number is about to become huge.

await the GOP saying there is a problem - while not blaming Soc Security.

But that is not going to happen.

So the push back to get a split hair closer to truth is to scream END THE TAX CUT FOR THE RICH.

what is to stop them from "Repudiating" US Savings Bonds, or "Repudiating" the Treasury Notes held by, for example, China, Japan, and Saudi Arabia, or "Repudiating" the Federal Reserve Notes in your wallet.

Central Bankers do not like to hold securities backed by the "full faith and credit" of countries that repudiate their public debt. See the analysis in International Economics: Theory and Policy (6th Edition) by Paul R. Krugman, Maurice Obstfeld and in Microeconomics by Paul Krugman, Robin Wells. If Central Bankers sell our public debt (i.e., "sell dollars") the economy and the dollar are in "deep doo-doo."

A further point - Social Security is NOT a "retirement plan" like a 401(k) or an ERISA "Defined contributions plan." It is "Social Insurance" -- against leaving your family destitute - and includes survivors' insurance and disability insurance. This point is not mentioned by President Bush (a Harvard Business School MBA). And what do insurance companies do when they are "running out of money" (as in medical malpractice, product liability, homeowners in the earthquake zone, homeowners in tornado alley, homeowners in hurricane alley) -- THEY RAISE THE RATES!!!!

Myth of Empty Promises
President Bush referred to the current system of Social Security as dependent on “empty promises.”
The “worthless IOUs” myth is one debunked by The Century Foundation’s Social Security Network:

“When investors become worried about the economy and the stock market, they “flee to safety” by selling their other securities in exchange for U.S. Treasury bonds and bills. Backed by the full faith and credit of the United States government, U.S. Treasury securities are considered to be the safest, most reliable investment worldwide. Because the federal government is legally obligated to pay back interest and principal on those securities, it would take an almost unimaginable calamity for a default to occur. Social Security’s trust funds, which now amount to $1.5 trillion and are expected to grow to $5.3 trillion by 2018, hold nothing but U.S. Treasury securities.

Alan Greenspan, now the Federal Reserve chairman, led a bipartisan commission in 1983 that recommended changes to Social Security explicitly to produce the large trust funds that the system will draw on to pay for the baby boom generation’s retirement from roughly 2008 to 2030. Those reforms, signed into law by President Ronald Reagan, were widely hailed at the time by both parties as a model of effective government. If anything, those reforms have turned out to be even more successful than originally imagined, as the improved forecasts in recent years for the program demonstrate. The central reason for that success was the Greenspan Commission’s idea of building up trust funds invested in safe U.S. Treasury securities.”


http://thinkprogress.org/index.php?p=189

... I've tried to explain this to many DUers many times, and they REFUSE to get it.

The facts are simple. We are collecting tons of money that is supposed to be for future SS benefits, and spending it and writing an IOU to ourselves.

The IOU is as good as our future ability to tax workers to pay back this money. No matter how you slice it, it will be a difficult proposition.

Now, that does NOT mean I'm for the "privatization" scam. That won't do jack shit. What I'm for is a balanced budget so that when the government needs to raise money, it is not already in debt up to its eyeballs.

By creating a deficit on the non-SS side (by overspending and under-collecting) and using the the SS money to fund the shortfall.

and not Social Security.

It's like borrowing from your kid's college fund to finance your frivolous lifestyle, then saying the college fund is the crises, not your spending.

Yes, the college fund is in crises. But so is your house, car, mistress, way of life.

So what's the solution, to borrow more money, and gamble on the stock market? Give me a break.

(Not directed at you BES, just continuing on your theme).

Well and succinctly put. I'm going to steal that analogy for argument elsewhere, if you don'tmind.

and let the federal government spend it. Instead they
should have been forced to invest the payroll tax money
in entities which actually have material assets.

Those material assets could be foreign currencies tied to
gold such as the Swiss Frank, manufacturing companies making
useful products which have a demand in the market place, land,
oil reserves, precious metals....whatever.

But to simply writing IOU's to yourself is the biggest joke
in the universe.

It's the old IOUs argument. The Social Security Trust Fund is invested in Securities Treasuries. What does Sloan expect the Social Securities Trustees to do, buy a reall giant matress and put all the money under it? Treasuries are considered by almost all finanical experts to be one of the safest investments one can make.

It also says something about our nation doesn't it? We can't be trusted to repay our debts.

He's right in a sense, the pressure on the Social Security Trust Fund is exacperated by the fact that our current fiscal policies are insane, creating a huge deficit. But certainly if you compare the money that will have to be repayed to Social Security to the ammount of money lost by the Bush Tax Cuts it puts this situation into perspective.

Bryant
Check it out --> http://politicalcomment.blogspot.com

I doubt most holders of such "IOUs" would take kindly to having them treated as mere "accounting entries".

Allan needs to get a clue. Rather than chiding Democrats about the "IOUs", he ought to be launching full bore into the Republicans for their dam-break deficit spending and borrowing spree.

yourself (the Social Security "trust fund") and owing money to outsiders (regular Treasury Bonds). You don't repay outsiders on Treasury Bonds, you create a huge confidence crisis, and ruin US credit standing forever. You don't repay Social Security trust fund, and no such fallout will occur.

Your saying that if the United States suddenly decides it doesn't have to pay off it's debts, there will be no economic reprucussions?

to itself, as long as it regularly pays off the loans to outsiders, no, there will be no economic repercussions. Why should there be?

have money in United States Treasuries. I'll bet the answer would surprise you. At any rate I don't see the distinction that you do. In either case, the United States is admiting to being a deadbeat nation that doesn't pay it's bills. Whether the treasury owes the money to the City of Detroit or the Department of Transportation or the Social Security Trust fund, the upshot is the same. We choose not to pay our bills.

Provided that the debts it choses to not pay off are those it owes to itself.

issue.

Good that the GOP see there way clear to screw the aged so as to not repay the bonds they gave the aged for their payroll tax surplus monies.

The fact that selling the aged those bonds gave the gov the money to finance the tax cuts for the rich - well that is certainly a lower priority than our faith in NO TAX INCREASE (on the rich)

See the analysis in International Economics: Theory and Policy (6th Edition) by Paul R. Krugman, Maurice Obstfeld and in Microeconomics by Paul Krugman, Robin Wells.

See my append #21 at http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=1576790&mesg_id=1576850&page=

should care about how US government does its internal accounting - as long as its external debts are repaid regularly and on time.

a nation that repudiates its internal debt will "usually" repudiate its external debt.

meaning money owed by government to individuals, corporations and municipal bodies inside the country, and money that the government "owes to itself".

are risk aversive in the extreme. While the distinction that you draw may be valid -- it will not effect a "risk premium" on US public debt. If we "repudiate" our internal debt - our external debt will carry a higher risk premium.

of a case where the government that regularly and timely paid its external debts had its "risk premium" increased because of internal accounting procedures.

got into a PhD program -- and got my Lyndon Baines Johnson Traveling Fellowship in South East Asia studies -- so the PhD in Econ went south (or to South East Asia -- to be replaced by a PhD in engineering after my LBJ Fellowship).

There were a fair number "between the Wars" (between WW1 and the Great Depression") - for some reason Argentina and Hungary stick in my mind - not sure (that was 40 years ago that I took the course). There were many others.

The repudiations and the resulting turmoil was said to motivate the Breton Woods Conference and the IMF.

their debts to internal lenders (individual and corporate), and governments changing their internal accounting procedures. The two situations are not equivalent.

is more then a change in accounting.

but not paying back to the Social Security Trust fund would just be an accounting change.

baseball and football, PC and MAC, Freepers and DUers.

We have an honest difference of opinion and interpretation of facts. Nobody is 100% wrong -- nobody is 100% right.

takes the money from corporate treasury and has it built.
Now if that particular factory turns out to be a flop, the
corporate treasury is the one who loses out. But investors
who buy GM bonds and stock will be happy so long as GM pays
off their dividends and capital back. Outside investors could
not care less that one division of GM screwed the corporation
internally.

such as GMAC or GM Land Development, or from "trusteed" funds, such as one of its Defined Benefit Pension Plans to build the plant - it has certain IRS and SEC filings to make. And, if the plant turns out to be a flop - it has still more IRS and SEC filings to make --- and the result of those transactions and filing could/would be to drop its stock price for a while. That is one example of risk premium.

Further point (since we are talking about GM, and I saw Michael Moore's "Roger and Me" as part of a double feature with "Preston Tucker: The Man And His Dream" at a neighborhood, "mom and pop" theater in Ferndale MI), if GM has a layoff, or discontinues a product line (like Oldsmobile) or a marque (like Bonneville) or has a string of product liability suits (like Corvair) -- all require filings and all impact the "risk premium" of GM stock.

My point was the risk premium - even short of a repudiation - will impact the dollar and the economy (especially in the eyes of the foreign central bankers who hold our bonds).

Repudiating the bonds is not a mere "accounting change." It's kind of a "mini-Chapter XI" to some extent.

pertains to how could US Treasury sell any bonds if they
default on paying back social security IOU's. My point is,
they will still be able to sell them so long as they have
not defaulted paying any of the external debtors. You are
quite correct though that the ratings on their bonds will
drop and the debtors will demand higher rates.

characterized the "Time Between The Wars" - which was not just "Flappers" and "Prohibition" and the fall of the Kerensky Government in Russia (actually during WW1) and the German Wiemar Republic, and the election(?) of Mussolini, and the default on Hungary's debt and Argentina's debt, and the suicide/execution of Japan's pre-Tojo cabinet.

The world monetary system was in absolute turmoil.

The academic economists (beyond Paul Krugman - who I think is very good; and definitely not including Bushie's Manikw) think that treating the Social Security Trust Fund Bonds as if they were in some kind of quasi-default or pseudo-default would have a negative effect on the dollar --- and our foreign debt.

Hopefully not a return to the time of "Cabaret" and "Three Penny Opera".

and I will be 92 then, so I am not worried he he.

But if I was in my 20's or early 30's I would be pissed.
Cuz, not only the social security would start cutting
benefits by law, but I would have no nest egg to call my
own.

but the combination of mega-deficits (from the tax cuts for the richest 1.5% and the unfunded war of choice) -- and the threat of default on the Government Debt held by the SS Trust Fund would not be encouraging to the conservative, old fuddy-duddies who are the world's central bankers.

I tell my kids - go for a Camry/Accord instead of a BMW --- and save the extra money.

It's just that in the face of mega-deficits --- I don't know what a "safe" investment is anymore. And, that is why we need "social insurance" backed by the "Full Faith and Credit of the United States."

Read the fine print -- the Bush "Personal Account" is not a nest egg. It is subject to a "claw back" to pay for the "transition" plus a surcharge on part of the return.

Treasury bonds are something you, I and the rest of the world can purchase and resell. They have value, because you can exchange them for cash. The SS "trust fund" (who are we trusting? Congress?) is placed in "special edition" Treasury notes that CANNOT be bought or sold by law. Therefore, they are not placed in "Treasury Bonds" as they are commonly understood.

1) The "IOU" argument has not been fleshed out properly by either side. It can easily be called B.S. and nobody will know who is talking about what. Personally I don't know which position is correct, that the trusts are "IOUs" or that they're U.S. securities - on which the country has never defaulted.

2) The projections for the future of S.S. are quite conservative and assume terrible growth projections, according to CEPR. Assuming standard growth, SS is viable for a much longer period. Assuming above average growth, or some redirection of funds, SS is viable well into the foreseeable future.

If we take the projections that show a very slow economic growth (1.5% or so?), how aer individual accounts going to provide a 6% return rate? Or, if individual accounts are going to return a 6% return rate, the economy will be doing strongly enough that there will be no Social Security Crisis.

Kind of a catch 22.

http://www.cepr.net/

Plenty of articles on SS.

now why is there a discrepancy? That is a very intelligent
question. My humble answer is, the stocks represent the most
efficient entities and therefore grow faster than the economy
as a whole. The economy includes dollars spent on welfare,
health care, bad loans and defaults, building infrastructure
etc, which are all necessary but do not provide a direct yield.

In the 1990's, we ran surplusses in the treasury. Those surplusses could have shored up SS; in other words, the treasury could've payed off it's debt to the SS department. Of course, that didn't happen, b/c Bush took office, and with his wars and massive tax cuts, gave us the largest deficit in history. So, SS is now in crisis because of the fiscal crisis that Bush gave us.

You also agree there is a crisis. However, I'm interested in hearing from those that insist there is no crisis.

caused by tax cuts for the rich that the GOP have chosen to keep and to finance via cuts in Social Security.

The alleged "Social Security Crisis" could be solved by

1. Raising the tax base above $90K
2. Raising the tax by about 3/8's of a percent on both employer and employee.
3. Most extreme and painful (for people who "work" instead of sit at a computer terminal) - extend the retirement age.

We could create private accounts in addition to Social Security by "add on" private accounts - encouraged by a "refundable tax credit" for low bracket workers. And we could fund the "refundable tax credit" by partial rollback of the tax cut for the richest 1.5% (the centerpiece of Bush's economic policy - along with killing the New Deal and the Great Society)

The "Social Security Crisis" is as real as
1. Saddam has WMD's
2. Saddam was deeply involved with Osama in 9/11.
3. The next 9/11 will be nuclear.

Bush has as much credibility as Ann Coulter.

The only suggestion that you propose that would work is #3. The others involve raising SS taxes, which would do nothing. All that would happen is that Congress would continue to loot the extra revenue to pay for general expenditures, just as they have done for the previous 30 years under Congresses controlled by both parties.

which may or may not be valid.

Based upon looking at the past 30 years.

The bottom line is that only way to prevent politicians from using SS money for something other than SS is to put it in personall accounts beyond their reach. I'm sick and tired of having the safety of my retirement money fluctuate based upon which political party is in power.

Furthermore, you're treating SS like a giant pension plan-- which it most certainly is not, nor was it ever designed to be one. The money you put into SS is as much YOUR money as your income or property taxes.

Many people are under the misconception that SS is a government-funded pension plan. It is not. It is more like a poverty insurance program, with the premiums funded by payroll taxes.

SS benefits go not only to retirees, but to widows and children of the deceased. Even minor children of retirement-age SS recipients get checks, too.

The money in your "personal account" is no more "your money" than your property tax payments. Nor should it be. There are PLENTY of mechanisms available for regular people to save for retirement-- most of them tax-deferred.

If we want to create additional, subsidized vehicles for low-income workers to save for retirement, we can do it WITHOUT modifying SS.

If you really want to ensure SS's future, don't buy Wall Street's hype. As long as the American economy keeps growing at an average rate, SS will be in good shape.

Any procedure that leaves the accounting and "rights" to the government - as in these private accounts - is subject to GOP theft.

You have some rights of ownership under Bush Priv Accts - but most of the "rights" remain with the gov.

We cam kill the IOU nonsense by selling the bonds and investing in equities - so let's invest in equities.

at current time. Do not lose sight of the fact that
they are lending our payroll taxes (all of them) to
the US Treasury, from which the polticians are spending
every dime we pay in payroll taxes.

In fact, at the current time, more is coming in than being
paid out to retirees, so they are getting this windfall to
spend every year. All the social security gets is IOU's from
the Treasury.

looted money comes from rich.

DO gov bonds represent an investment in America? I do not know.

But I do know the IOU arguement/problem is easy to end/solve - just buy non gov bond assets.

along with any surplus Medicare taxes, and we are still running outrageous record deficits.

"Maybe it's because they don't want to shatter Social Security's myths, or let people see how expensive Social Security really is."

Actually, 40% of your FICA premiums have been used for 20 years to cover up how expensive those GOP tax cuts to the rich and corporate have been!! As FICA payments become used more and more to support the elderly, Congress won't be able to embezzle them, and then we will know just how expensive cutting taxes on the richest really is.

That's the real "crisis" in Social Security. Everything else is just pure bullshit.

...and it was caused by GOP tax cuts. That I believe. However, I'm more interested in hearing from those that claim there is no crisis.

crisis now the GOP see is to not pass on to future generations a problem - of course the National Debt birth tax is not passing on to future generations a problem.

You are asking for "no crisis" when we havw 700 billion a year deficts (before stealing the social security payroll surplus).

It would be insane to say there is no crisis - that is why you need to go back to FreeRepublic for those thoughts.

The numbers say there is no crisis in Soc Security - Do you think Dems on DU are so stupid as to say the numbers are wrong and that as an article of political faith there is a crisis that requires the end of social security?

I'm also interested in hearing from those that claim there is no crisis caused by the tax cuts for the rich. Do you feel that way?

What I do feel, as opposed to most people at DU, is that personal accounts are the only way we can prevent a Social Security "crisis" from occurring every generation. Quite simply, so long as the money lies where politicians can get their grubby hands on it, we will have a problem. If there was a plan to switch to personal accounts and pay for the transition costs with higher taxes on the rich I'd be for it in a heart beat. I suspect, but do not know, that most DUers would disagree with that type of proposal.

First, a mandatory, pay as you go insurance program, which we have. Second, that it start immediately, supporting elderly people who hadn't had enough time to build up accounts and who had been wiped out in 1929, which it did. The third proposal was for voluntary government annuity accounts, something that was never instituted, thanks to the howls coming from Wall Street which wanted the boodle in the stock market.

Anything that is done either to make this country solvent as a whole (which would end any "crisis" in social security) will have to begin with higher taxes on the rich. Their greed has caused all the fiscal problems we now find ourselves in, including the crisis of no longer being able to embezzle FICA contributions from the poorest to cover up the largesse to the richest.

Any other proposal is bullshit.

:-)

making the next generation pay for it.

You will never find an actuary who did not prefer a funded plan, all other things being equal, over a plan based on intergenerational promises.

But all other things are not equal until one gets the rich to front the cost so as to not transfer the debt to the future generations.

:-)

Our leaders all seem to be making one assumption - that they will continue to spend irresponsibly, and not even bother to pay back what is owed to S.S.

There is no crisis right now. There will be no crisis if we keep to responsible budgets and pay back the trusts. If, however, people continue to loot SS, then there will probably be a crisis.

Has gone on a long time and was performed by both parties.

but how do you stop them? I say the only way to stop them from looting the SS trust fund is to convert the fund to personal accounts.

It's the huge budget deficits created by Bush's massive irresponsible tax cuts and the obscene spending on the war.

Destroying SS is not going to "fix" the problem it's only going to create MORE deficit spending to transition the system. Not to mention that privatizing SS will mean that you add the management fees on top of the already existing costs. Additionally whether or not you choose to open a private account your benefits will STILL BE CUT across the board. You don't make something more affordable by adding a middleman who charges a fee. Duh.

Additionally, the privatization scheme assumes huge growth for the economy in the future in order for it to be in any way feasible. If you have that sort of growth, then there's NO CRISIS. If you DON'T have that growth then the private accounts will LOSE MONEY. So what you end up with is retirees getting their guaranteed benefits cut AND probably losing money on their private accounts.

I notice you use the WH propoganda when discussing the issue. "Personal Accounts" huh? Who are you? Karl Rove?

You want a private account? Open a 401K. SS is INSURANCE.

Those who think the only way to solve a problem is Lord Bush's way are pretty far gone.

The WH propaganda on this thread was starting to make me nauseous! :puke:

In his 2001 SOTU address Bush said:

"To make sure the retirement savings of America's seniors are not diverted in any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security, and for Social Security alone."

http://www.whitehouse.gov/news/releases/2001/02/20010228.html

It's not a crisis.
We could fix everythig with one simple change in the tax code that would basically affect no one except infintessimally.

That a crisis can't be fixed by tax increases? (besides the Republicans...)

help in fixing the hole caused by tax cuts for the rich under Bush.

SS current finds its doomsday date moving out 2 years every year.

So in 10 years from now it will be 20 years further out - so 2052 become 2072 in the projections that are done in 2015.

There is no real problem.

EXCEPT FOR THE TAX CUTS FOR THE RICH AND THE DEFICIT THEY ARE CAUSING.

MONEY BACK IN.

And STOP dipping into it.

PROBLEM SOLVED.

every dollar that the government takes in and spends
does not create wealth, products or marketable services.
That kind of spending is just a drag on the wealth creating
entities. On the other hand, tax breaks given to wealth
creating entities increase the wealth in the country, part
of which can then be used to help the needy.

What many people fail to understand that the economy is not
a fixed sized pot. It is dynamic. If less profits are being
made, less taxes are being collected. A good example is when
Reagan reduced taxes, the US Treasury actully collected more
in taxes! The problem was we spent even more, so deficits got
larger.

Spelled out on a napkin at a drunken cocktail party.

BTW, I think you're wrong on those numbers. Reagan's deficit was HUGE.

LOL or are you being sarcastic? Sorry, if you were! :P

revenues doubled during Reagan's 8 years. You can check
on that from US Treasury data. Like I said, Reagan spent
massive amounts on military expansion and congress spent
massive amounts on soical programs, the sum of which was
greater than the Treasury intake.

ballooned? Yeah, he spent a lot of money on defense, but did he spend like 10 times more than we normally would? That's the only way you could get those deficits if the revenues doubled.

To give a simple example, let us say your boss doubled your salary,
but your wife spent 3 times your old salary. Now your revenue has
doubled but your household will have a net deficit = your old salary.

Total Receipts:

1981 $599,272 million
1988 $909,303 million

About a 51% increase.

in contrast for Clinton:

1993 $1,154,401
2000 $2,025,218

Here there is closer to a 75% increase.

From data found here

on goods and services, which helps the economy and the money ends up in the hands of the corporations anyway... That's thanks to money taken in and spend by the government.

Bush is taking a short cut, bypassing the people, much to the detriment of a large part of the population and the economy. And exclusively to the benefit of large corporations.

Most large corporations evade taxes anyway, and if they don't they still benefit from low caps on taxes. The "profit uber alles" paradigm isn't all what it's made out to be. All it does is help concentrate wealth in the hands of a few.

MIDDLE-CLASS TAX CUTS.

They SPEND it- on things they actually NEED! WHAT could be better? :)

You don't get it. There is no SS Trust fund and there cannot be one.

Well, replace them with real money by stopping cutting taxes!

Or, alternatively, what the hell are you talking about?? You said it was supposed to have 2T's. WHERE was their supposed to be 2T's? Put the money back in! Isn't that the point of IOU's? You can give the money back?

Every year SS generates hundreds of billions of dollars of surplus revenue. Where are you going to put that money? Under a mattress? In a checking account?

then there's obviously some kind of place for the money!

All I know is that you DON'T let these pig Repuke pieces of crap play games with it. You don't let ANYBODY play games with it, especially if you're talking about a "crisis" years down the road.

If you have to create a SS bank, to lend out to small businesses or something else where it would be useful but also paid BACK at the same time, that's fine. But NO stock markets. NO GAMES.

real estate or equities.

THERE IS NO REASON THAT CLINTON's REQUEST FOR PERMISSION TO PUT 15% OF THE TRUST INTO EQUITY WAS DENIED BY THE GOP IN 1998 - EXCEPT OF COURSE THE REASON WAS THE GOP'S PLANNED TAX CUTS FOR THE RICH.

THE TRUST FUND WORKS.

If we let it.

Its been raided for general spending by both parties ever since it was created.

INCREASE the benefits for now, and decrease them as needbe.

Or, another alternative: Decrease FICA payments now, and increase them later.

to get back the money owed to SS by the feds in a timely manner (e.g. when it's needed). That's all it takes.

We need some kind of a schedule, is all. When SS starts falling short, the feds will start having to back it up. That's it. And, hopefully, if it's managed correctly and the feds stop dipping into it, we'll fall into some kind of SS "pay as you go," so there won't be all kinds of money laying around.

There HAS to be a way to do it without playing stock market games. And there is.

...is exactly what got us into this mess.

SS survivors benefits, in the event of the untimely injury or demise of a younger worker?

That's why it's called SS INSURANCE.

We all contribute as part of a shared risk pool. Some get more, a few break even, and the rest don't get as much as they could have through a private retirement account.

If you want a private retirement account, go to a financial institution and open one up.

What they are talking about will be a private account in name only. The Federal Govt. will be the ones holding the funds, and they can just as easily change the payout rules on this 'private' account as they can for the current system.

This is just a scheme to pump $2T of taxpayer backed borrowing into the stock market. And I think we all know who will benefit from that.

It makes capital market management harder - but then we are into free markets - right!

The screams of the GOP right wing is that if the money invested in equity and real estate is the Trust Fund, we have SOCIALISM BY THE BACK DOOR

But if in individual accounts limited to 3 options/funds selected by the W/H GOPers, that is really free market!

which invest in TOTAL STOCK market such as the Russell 5000.
Which means the fund buys shares in all 5000 largest corporations
in proportion to represent the size of each.

Even if you own just ONE such fund, you are getting tremendous
diversification, a safer method of investing. And as for free market
angle, the unsuccessful companies get dropped out each year of the
5000, so only the most efficient stay in the pool. That is what makes
the S&P 500 so great because it always represents the 500 most
successful corporations. Competition ensures that only the most
efficient survive. Companies like Enron have disappeared from S&P500.

"...and Bush wants to change the transmission system."
(AAR Majority Report)


Bush, the neocons, are trying to make it seem as though it's a crisis that the tank is 1/4 empty. And the mass media are playing along nicely, being the well trained lap dogs that they are. How else would we know there's a crisis, if they wouldn't tell us there is?

The so called "crisis" is that if nothing is done there will be a crisis several generations down the road.

According to that standard of what a crisis is, all government programs are in crisis for decades already.

The crisis is not that SS is beyond repair and therefor needs to be abandoned all together. It is not that SS isn't working in principle. There really is no crisis. Not now at any rate.
We only need to fill up the gas tank. Tax intake needs to be increased a bit.
Increasing the tax cap a bit would do the trick. And that bit of increase could be spread over several decades, there's no hurry really.

Increasing the contribution a bit for those who have benefited and are benefiting well above average from being part of society isn't unfair is it? It's not like those people are going to be poor or anything because of an increase of the tax cap.

If Bush gets his way, primarily large financial institutions will benefit.

In the mean time there are real crisis that go largely unmentioned by the government and the mass media: health care, minimum wage, environment, civil rights, monopolization of the media, GE crops. to name a few.

:-)

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because it is a good and necessary program. I hope the
purpose of all this privatization is to increase the
return on our money we contribute as payroll taxes.

There is simply no question that with people living longer,
a smaller number of workers will be supporting a larger no.
of retirees. I hope everyone agrees with that.

The problem is the return currently we get on our payroll
taxes is not high enough to sustain this diminishing ratio.
The only thing that can solve the problem is higher returns
on payroll taxes. Because then your personal account can
carry a larger portion of the load, and the treasury can pay
you less.

But there needs to be a guarantee that IF a person chosing the
approved investments ends up with a smaller nest egg than what
the social security would have otherwise provided, THEN the
government must be responsible to make up the difference.

So by privatizing it, it is in effect abandoned and replaced by something else.

It would go from 'collective saving' to 'individual saving'.

Needles to say some people have more to save then others, depending on income and capital. It is yet another ploy by the RW to screw the poor.

What reason do we have anyway, to think that Bush actually wants the best for all people? When was the last time Bush has been fair and honest about such a thing? Remember the tax cut for the rich, Bush's environmental measures, Bush's plan to save public education? What reason do you have to trust Bush?

that the Bush proposal calls for one third of your contributions
going into a private acount (4% out of 12+% we now contribute).

Half of my posts on this board are basically this message, but I'll repeat it yet againg:

If potential defecit spending on Social Security in the future is supposed to be a huge problem, then why the fuck aren't we freaking out about the current budget defecit?

It's not quite true to say that the Social Security holds nothing more than IOUs, as if they're simply worthless pieces of paper. Those "IOUs" happen to be Treasury securities, which have historically been the among the safest investments in the world. Clearly they have some value. While they may not fetch 100 cents on the dollar, the Social Security trust fund could sell the Treasury securities on the open market at a reasonable discount.

Of course, the news is not all rosy, since sooner or later those Treasury securities will need to be redeemed, and the U.S. government will have to come up with the money. Thus, putting Treasury securities in the Trust Fund does absolutely nothing to reduce the future liability of the U.S. government. In my opinion, it would have made far more sense to require the government to invest social security surpluses in a diversified portfolio of AAA rate private bonds. Sure, the government would end up going even deeper into debt to cover current expenditures, and we would quickly face a massive budget crisis. But social security would be largely insulated from the problem, as it should be. And the truth of the matter is that we have a budget crisis, and we're better off dealing with it now rather than later.

Every Western Nation faces a demographic crunch. And some like Canada can import immigrants and double our cities and get over it that way. We also encourage private saving by giving people a tax break on money they put in a registered retirement savings plan. But such a plan only works if there are taxes to be saved. If your government has a policy of lowering taxes to nil (as some tax plans propose) then you cannot have a RRSP plan and expect it to work. Because there will be no taxes to save and no tax rate to lower by saving the maximum each year.

This crisis in the USA could be fixed by ending the tax cuts for the rich. But that isn't going to happen as the end game is to end all taxes altogether and replace it with a value added tax.

Also - the rich and the corporations desperately need a huge amount of investment to go into China, India, Russian and Brazil and take over. These four countries in 40 years will make up an economy 10 times the size of the current Western economies together. So leaving social security alone - would leave all that money invested in
American bonds and that would just frustrate the corporations to no end.

They cannot come out and tell you that the USA will face deflation and fewer jobs and that you really want to be not invested in the American Market but do want to be invested in World Markets cause that will be where all the growth is.

So if you think slow growth in the USA (that is how you get the 'bad date' 2042) you get a crisis at 2042. And to get out of that crisis (caused by investing in America) you invest in the stock market (the World Stock Market) and make better returns. That is how the math works out for Bush. But he will not tell anyone what his assumptions are. He will keep quiet and let the Senate and House debate SS with the wrong assumptions because he doesn't want to admit his assumptions: that the American economy will tank during the next 50 years and that the only wealth generated will be by going abroad.

How I see his silence and his crisis anyway!!

Why even today in Canada the Business Community tried to push the Canadian Government to make the money in RRSPs investable in World Markets and not 70% that must be invested in Canada. They want to get rid of that rate!!

Bush has done everything in order to pay for his damn mistake!Now he plans to mess with Social Security?
Did you guys hear the jokers statement the other day when he said he does not want to bring a deficit into another presidents term or to the people of the UNITED STATES! What is this guy? I think he is a jerk!
Also, I think he has plans on attacking Iran as well !

at http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=114&topic_id=14302&mesg_id=14302&page=

Is this Bush crazy? YES.