What Happened to the $2.6 Trillion Social Security Trust Fund?

Here’s how President Barack Obama answered CBS’s Scott Pelley’s question about whether he could guarantee that Social Security checks would go out on August 3, the day after the government is supposed to reach its debt limit: “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”

And Treasury Secretary Timothy Geithner echoed the president on CBS’s Face the Nation Sunday implying that if a budget deal isn’t reached by August 2, seniors might not get their Social Security checks.

Well, either Obama and Geithner are lying to us now, or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.

Read more here
http://blogs.forbes.com/merrillmatthews/2011/07/13/what-happened-to-the-2-6-trillion-social-security-trust-fund/

It's invested in treasury securities. You need to understand how our government's cashflow works.

Yea I know how it works alright.

keywords: cash flow.

Voodoo magic and gobbily goop words. Definition of Treasury Securities I.O.U's. They took the money everyone paid in and spent it.

about?

Let me explain it to you. Most hard working Americans put in a +40hr a week. Sometimes working more than one job. They end up and the end of the month with a little hard earned money left over. Maybe it's only $20.00 but it's money left over. Money should be produced from a persons production from some kind of goods or services. Since hard working Americans have money left over at the end of the month and have given graciously to their government why doesn't the government have a little money left? They are spending more than they make. You most of all should know this, I have seen your posts. So why do you act so coy? WAR, subsidies, tax breaks for the rich, tax loopholes etc. etc. It sure as hell isn't SS or Medicare or any other social "Entitlement Programs". I personally think it's about "We don't know what the frick is going on because" nothing is disclosed to us. The FED won't disclose what needs to be disclosed. Hell, Clinton couldn't get into a top secret facility while he was president. Doesn't that mean something to you? Not to be offensive.

dramatically.

have risen. That's the problem.

And Obama never even mentions it.

If you want to engage in an economic debate, it helps to think of economics as something other than "Voodoo magic and gobbily goop words."

They printed trillions to do TARP. Not so much "printed" as created with keystrokes and mouse clicks, but same difference. No significant inflation came of it.

You want to end up like Zimbabwe under that dictator Mugabe where there is 10,000% inflation because no bondholders would want to finance their paper money?

There is a limit to how much of this sort of thing they can do, but the market suggests we are no where near that point. Trillions were "printed" to do TARP, and no significant inflation resulted.

In order to get 800 billion, the government had to issue 800 billion in bonds in order to round up the cash (which is already in the economy) to loan it to the banks. If the US had done the same thing as Mugabe in Zimbabwe, it wouldn't bother selling bonds. It would simply just print new money. That would be 800 billion more in cash chasing around the same amount of goods, which is the definition of inflation.

There's only so much selling of bonds that can be done, though. Eventually, there's a saturation point where prospective bond investors don't feel like purchasing more US gov't bonds to finance US deficits. At that point they're going to ask what the US will do to answer the deficits, and it's going to reflect in the form of increasingly higher interest rates on those bonds and rising prices for foreign-made goods and energy prices, as value of the Dollar begins to decline relative to other currencies in the money markets.

All the nations that have well developed infrastructure have a high debt to GDP ratio.

The problem is our "free" trade policy. We buy too much stuff from nations that have little infrastructure to support -- Mexico, China, etc. They have low debt to GDP ratios but who would want to live there?

We cannot buy everything from the cheap labor countries and expect our tax base to support the cost of our military, our road maintenance, our flood control, our fire protection, our schools, our public health and all the myriad of things that make us a great country with an expensive infrastructure.

How much do you really want to pay to have running water flowing into your house?

How about the sewer system? Costs a lot to maintain that.

The more the Republicans refuse to face the facts that they must pay their taxes unless they want to live in a city surrounded by open sewers and "free" trade may mean that there is no money to maintain the airports of the roads leading to them, the further we are from regaining our economic independence from our foreign creditors.

making it official that the working class has been systematically robbed to fatten the rich since 1986.

and compromising with Republicans would backfire big time on him.

He would lose the support of the nation. It is unlikely that the Republicans would do any better, regardless of how much money they spent on ads to repair the damage to their reputations.

Obama should have refused to get into these extended talks.

He should have gone straight to the country -- traveled across the country and talked not with his big donors but with ordinary people to explain why we need higher taxes on the rich.

He has made a mistake that could well cost him his career.

Let's see he will soon be 50. If he lives another 45 years, how soon will he spend down his $5 million. He is a very pleasant person and a good speaker. He should be able to get a job doing motivational seminars.

But he is going to have a hard time keeping the presidency. I don't know who will challenge him, but someone with a lot of chutzpah is bound to come along.

I hope this person is a real Democrat and not a phony one.

I have to decide which candidate to cast my vote for in 2012 but it will not be Obama. This entire problem could have been avoided by allowing the Bush tax cuts to expire.

Aside from Pelosi and a few other good Democrats who fought for it?

in life does not predict what they will be worth at a later time.

:grr:

SS taxes are adequate to finance payments to retirees.

What Obama is saying is that he intends to redirect that cashflow from retirees to whatever he deems appropriate.

It is apparent that in his mind, Social Security taxes don't pay for Social Security. They go into the big pot, from which many things, including SS benefits are distributed.

Since that's the case; FUCK FICA TAXES. In the administration's mind, Social Security is simply another form of welfare irretrievably commingled with the rest of government. Eliminate the SS tax and raise cash for bombs, missiles and various forms of welfare, personal and corporate through the front door; income taxes.

It did last year and it is now projected to run a permanent deficit. Last year the shortfall was 45 billion, and it will be near that this year. So no, revenues are not sufficient.

of $637B in payroll taxes, $23.9B in taxation of benefits, & $117.5B in interest income = $778.4B. In addition to that there was $2.4B in regularly scheduled redeemed US securities = $781.

Benefits paid were $701B, plus $6.5 administrative & $4.4 railroad retirement.

Net increase to the trust fund was $68.6B.

I don't know where you got $45B.

http://www.ssa.gov/OACT/TR/2011/II_B_cyoper.html#96807

And Welcome to DU!

This was part of the bill (backroom deal) that extended the Bush tax cuts. As if this tiny addition to a pay check would stimulate the economy. So, if allowing the Bush tax cuts to continue didn't undermine social security and medicare enough Obama decided to also cut social security's dedicated funding mechanism. Why would a Democratic president propose anything that would UNDERMINE social security?

Oh, if that wasn't enough, now Obama has proposed another additional cut in social security's funding, this time on the employer side. This is just beyond belief!

Why is our Democratic president the enemy of social security?

If you simply look at cash flow going into Social Security and then cash out-flows to recipients, yeah, there's a deficit there. However, Social Security also gets cash on the interest generated by money in the trust fund. The interest plus the revenue generated by taxes minus the pay-out to recipients is still a positive number. Whoever has been pushing the line that SS is running deficits already is being intellectually dishonest.

It's just another chapter in "bait and switch economic policy", like "lowering taxes on the wealthy will let them invest, and create jobs" or "the new economy".

Back in the 80's, SS taxes were doubled in order to create a surplus in SS funds inorder to ensure SS's solvency through the expected shortfalls as the wave of Baby Boomers started to stop paying and start collecting SS. That sounds like a "trust fund" to me.


If anyone tries to tell you those funds were "spent already", the correct word is "stolen". And mostly for tax cuts for the wealthy, and whole wars put on credit cards.

SS account surpluses must be invested in treasury securities.

But they aren't

I could take a loss in a bad market but all those assets could be sold or withdrawn with cash in hand in a few days.

to do so.

it's nothing to do with them being "ious", and nothing to do with lack of assets.

$2.5 trillion in Social Security bonds stored in filing cabinet in downtown Parkersburg, W.Va.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs - in the form of Treasury bonds - which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.


They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.

http://www.dispatch.com/live/content/local_news/stories/2010/03/14/social-check.html

what does the fact that you can't sell the securities in the trust fund have to do with anything? they don't belong to you individually.

i assure you, the us government can redeem those bonds at any time, in whatever quantity necessary. as they have been doing since the inception of social security 70 years ago.

jeez, there was enough money/resources to set up social security during the great depression, but people believe that there's not enough now, when we are multiples richer per capita, and have a larger percent of the population in the paid workforce than ever before, and are multiples more productive.

i don't understand why people are so easy to sucker.

Or Obama would have guaranteed the payment right?

"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it," Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.


http://www.cbsnews.com/8301-503544_162-20078789-503544.html

and since you seem determined to represent social security as a failing, bankrupt institution, i don't see any point in talking to you further. in my opinion, people who wish to represent social security as "bankrupt" have an agenda that is not democratic.

just my opinion.

I cannot understand why you have to argue these points with a "Democrat".

Not that you don't have a sound argument. Great point about setting up social security during the depression.

I can answer the question of why people are so easy to sucker. It is because media power has been consolidated. Just look at Murdoch and the scope of his world wide media empire as an example. This empire should be broken up to restore a true editorial Independence.

Without a free and open media we cannot sustain our democracy.

here, to say the least.

I agree with you about the miserable excuse for a media we have in the US.

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I can not fathom why Skinner has not tombstoned you.

just as good as anyone's T-bills, therein lies the problem. A default means we are not capable of cashing in T-bills.

But you can sell it to someone else in the open market because it is negotiable. The SS bonds are different because they are non negotiable.

and georgee spent it all.

it got screwed up when they started treating it as an "investment fund".

If we don't want to pay off T-bills, let's start with China.

Their lips are moving.

and they want it. The Wall Street thieves just haven't stolen enough.

The only reason the deficit has been so "low" is because the surplus FICA tax has been budgeted in the genenral fund since Reagan was President.

Support for farmers, building insufficient levies, congressional trips overseas, the war on drugs, Faith-based inititives, and the list goes on and on and on ....

in power wants to allow those Treasury Bonds to be redeemed to honor those obligations, because that would require the general funds to raise more revenue to pay for non-SS (mostly military) spending. In other words, it would require the taxes that were artificially lowered by means of borrowing from the Trust Fund, to be raised to a self-sustainable level.

Bill Clinton when he borrowed money from SS to help balance the budget. The original deal was to borrow from SS and pay it back at a future date. When government started running a surplus, the money hung in limbo. It should have been used to pay back the SS trust fund, but Bush came along and gave the money back in the form of tax cuts when he should have used it to pay back the monies borrowed from SS.

Clinton made a deal with the devil, and we're the ones getting burned.