One big thing never mentioned on Social Security

The wealthy, back in the days of estate taxes, passed along fortunes using gifts and loans to trust of their children at the lowest level required by the IRS That is just the way it was done.

One thing that is never mentioned and I cannot find with a reasonable search is the balance that the operating fund owes the Social Security Trust Fund. That is an important figure, yet it is left out of the dozens of articles I have read on Social Securtiy.

Another thing you do not here is that the government pays only 2% on all this borrowed money to that fund. That would be in more IOU's instead of cash of course. This is a way of depleting the fund. Governments do budgets by fund accounting. Now what if this fund were to have received the some kind of average of T-bills as if an administrator had lent the money to the government at current rates. The 3 billion or so that is owed the trust fund would more likely be closer to 4 billion. With the current trend to ever higher interest rates, this "robbery" through accounting will be even more considerable.

It is just unreal to me how nobody mentions this. Sure Social Security taxes will have a hard time paying future benefits in 2052 when the fund has been robbed with accounting for thirty or more years.

Well, what do you think?

is if the gov't borrows from the SS Trust Fund, instead of IOU's give the taxpayers stock in those companies that benefitted from this borrowing of money. And make it Preferred Stock. That would be a way to pay back the money the trust fund is owed.

. . . get the money to purchase that stock?

should be legally obligated to repay the taxpayers, giving the stock to the gov't. It would end this socialism for the wealthy capitalism for the poor mentality that pervades government now.

Any money spent by the federal government is done so pursuant to an appropriation voted by Congress. Some companies (such as defense contractors) do indeed receive federal monies. But in exchange for those monies they produce something for the government (airplanes, ships, etc.). If the government determines that it isn't getting value for its money, it can take steps for reimbursement accordingly. Given this, why should companies that provide a produce or service in exchange for government (i.e., taxpayer) monies also be obligated to "repay" the government? Why would any company then do anything for the government? Nobody willing works for free.

I don't follow what you're saying.

Dipping into the SS surplus to fund pork barrell bullshit and then later whining about SS running dry.

Thats was Gore's major campaign promise to lock up the funds so they could no longer be raided. And of course fucks like SNL could only laugh and joke about his "lockbox" promise.

http://www.ssa.gov/OACT/ProgData/fundFAQ.html#n11

http://research.aarp.org/econ/fs40r_ss_trust_1.html#FIRST

I think the trust fund has about $1.2 tillion right now and by 2012 will reach $2.6 trillion. Those funds are invested as indicated in the above links.

it is there to fund a guaranteed benefit, so in has to be invested in a low-risk manner, specifically, u.s. treasuries. that the interest rate is lower than on other investments makes complete sense given the low risk.

and please do not call u.s. treasuries "iou's". it makes the safest investment in the world sound like a marker from your second cousin with the gambling problem.

if the rate has been averaging 2% lately, (link please?), then that would suggest that they have been investing in short term debt. given that the trust fund is for the expected shortfall years from now, they could stand to invest a good chunk in longer term treasuries, increasing the yield. then again, this would lock in historically low interest rates.

so, all in all, it's not clear to me that anything nefarious is going on here.

not bad, actually.

. . . is paying that interest?

who, in turn, must raise the funds through the usual combination of revenue, including taxes and floating additional bonds to the public.

. . . the interest that the Trust Fund is earning isn't actually money, in the way that interest paid on, say, a savings account is money. Do I have that right?

when you deposit money in the bank, the bank turns around and lends (nearly) all of it out as loans. your savings balance is actually just an iou from the bank to you. the interest they pay just enlarges that iou.

this is why calling it an iou is a bit silly. yes, it's debt, but "iou" has completely the wrong connotation.

If I have $1,000 in a bank account, and it earns $10.00 interest, I can turn around and write a check to myself drawing $10.00 (or, for that matter, the entire $1,010) off of the acount, and so that $10.00 constitutes money. That is, the check can be negotiated for actual currency to purchage goods or pay for services. Or the check can be written to a third party (say, a credit card company or the power company) to pay for goods and services.

In that respect, the "funds" Social Security Trust Fund don't constitute or other represent "money." Rather, they represent "debt," as you say, a promise by the U.S. Treasury to pay the Social Security Administration the amount indicated. Unlike the entry in my hypothetical bank account, however, those funds cannot, in and of themselves, be negotiated to pay actual money to a third person (in this case, future Social Security benefit recipients).

So it seems to me that "IOU" has exactly the right connotation. I don't dispute that it is an enforceable IOU, but it is an IOU.

although of course there are now many accounts that offer both savings and checking privileges. with a pure savings account, the only way to get at your money is to go to the bank and demand payment.

the trust fund's assets work the same way. they're actually special issue treasuries that can be redeemed on demand. in this one respect, they differ from normal treasuries, which are redeemed from the treasury only at maturity; however, an extremely liquid market exists for treasuries, so in fact you can cash them in at any time, albeit subject to market forces.

"iou" has the wrong connotation because "iou" is not normally used for rock solid debt. "iou" is normally used for private, individual debt. the connotation therefore is of a debt with extreme risk. it's the risk connotation that is all wrong with calling it an "iou".

. . . regarding the negative connotations associated with IOUs. But I still dispute your assertion that the Social Security Trust Fund's assets are equivalent to deposits in a savings account. Deposits in a savings account constitute real money, even if they are just electronic entries on a ledger. In contrast, the Social Security Trust Fund's assets represent debt. I don't dispute that the Social Security Trust Fund can redeem the treasuries on demand. But the money will have to come from someplace else.

In any event, the real issue is not whether the U.S. Treasury would make good on its obligations. It surely would. But the U.S. Treasury will never have to make good on its obligations if it is never asked. That is, if Social Security benefits were to be drastically reduced (and/or the Social Security retirement age raised), the effect would be that the Social Security Administration would never call on the U.S. Treasury to make good on its obligations.

It seems to me that this is where the Social Security battle will be fought. Arguments over the value or validity of the Trust Fund's assets are something of a red herring.

check out whistle's excellent links, above, regarding the on-demand redeemability of the special issue treasuries held by the trust fund.

...the real issue is not whether the U.S. Treasury would make good on its obligations.

I can't disagree with you more. The full faith and credit of the United States government is at stake here. Shaking confidence in the US Dollar has worldwide ramifications.

The Trust Fund was created for the express purpose of dealing with baby boomers' retirement. They will start tapping into the trust fund in ten years so it HAS to be redeemable. No amount of cuts can prevent that.

Investing in US Treasuries is always the safest because...the US owns the mint. They can always print more money. But its the government's job to make sure that $1 treasury note in your wallet is worth more than a similarly-size scrap of toilet tissue.

They are given a promise to repay, I agree. It has no such treasury bills as sold on the open market. And I do not agree that they receive 5% as submitted below. I agree that I cannot produce a link for the 2% number as it comes from memory. I would appreciate a direct copy and a link the interest rate they recieve or the composition of any treasury bills you say that are in that fund. I still say it is an IOU from the general fund for 2% and will gladly yield to fact.

Do you agree that undermarket borrowing from the Trust Fund would be a subsidy to the general fund and a type of raid on the fund?

What I would like to see is a revision of the balance if market rates had historically been paid. That would really be hard to find from any serious source.

but i'm not convinced that has happened.

$1.5 trillion was trust fund balance - it is growing and will be $6.5 Trillion by the 2020's.

The balance that the operating fund owes the Social Security Trust Fund at any given day is tiny - as bonds are issued ASAP.

The amount that the general fund owes the trust fund stays above a trillion until they repay it. What you say makes no sense. Where does the 5% figure come from?

What you are calling "owed" appears to be the Trust Asset value at a given date - which as posted above is about $1.5 Trillion now and is growing to $6.5 Trillion in the early 2020's.

The interest rate being paid on those bonds are available on the Social Security web site - and are discussed in the Trustees report.

The 2% number you appear to recall hearing is a bullshit number put out by the GOP and is calculated ignoring the insurance aspect of the system that has costs and instead pretending that there is an investment fund that is laying around waiting to be used for your retirement - all GOP lies - but used on Fox. Survivor and disability benefits do not count to the GOP.

I am sorry you can not "accept 5% figure" - but that is correct rate and reflects the higher rates on the bonds put into the Trust fund in the years 1997 to 2004 (the fund bond duration runs about 7 years) when interest rates were higher. It is found in the Trustee's report.

Please let me know what you can not understand and I will try to explain it.

:-)

and that will keep Social Security solvent, although not at the rate of payout that the WWII generation enjoyed.

The only way to recoup the 40% of FICA premiums that have been looted over the past 20 years is to remove the earnings cap and have FICA taxes apply to all unearned earnings over, say $50,000/year. Our insurance premiums have been looted to disguise the disaster giving the rich a free ride has caused; it's only fair that the rich repay what they've stolen. Repayment should be just that, though, and forcing them to pay after the IOUs are repaid should not occur.

Social Security was always supposed to be a pay as you go program. The pubs have a long and colorful history of trying to kill it, starting at the beginning when they exempted the incomes of the rich. It succeeded without them. Then Reagan jacked up the premiums six times to make the burden as onerous as possible, and robbed the overpayments so people wouldn't see what his tax cuts to the rich really did. The program was still popular, and it still worked.

They feel they HAVE to kill it. It's a SOCIALIST program that WORKS, and that makes all their antisocialist ranting look like the lie that it really is.

They do not deserve to have while others suffer. Fucking parasite manipulating thugs.

I've probably learned more about Social Security in the few minutes reading this forum than in the last five years.