Understanding the Social Security scam

[mosdef]

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The surplus is those contributions made in the past, that were not distributed as ssi benefits, and "loaned" to the general fund, plus the interest those surpluses have earned.

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This doesn't make sense. "Surplus" is assets greater than those needed to meet obligations. If I owe you $1,000 tomorrow, and I set aside $10 in my bank account today, I don't have $10 of "surplus", I have a $9,990 deficit.

[Copernicus]

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The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest > benefit payments + expenses. Its that simple.

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Do you know the details of how the surplus is calculated? Is it the present value of all expected contributions plus the trust fund's current balance less the present value of all expected benefits and expenses? Does it take into account current Americans only or is it an open group projection with future births taken into account.

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The surplus is those contributions made in the past, that were not distributed as ssi benefits, and "loaned" to the general fund, plus the interest those surpluses have earned.

When I was doing research on ssi, berkley college had a website, which is now down, that showed all these calculations, and showed that by 2017 (I believe) ssi taxes would not be greater than than the ssi benefits that would need to be paid out.

Therefore, congress is going to have to start paying back the 3 trillion each year, to make up the difference.

That's a big difference between being able to tap a surplus of 300b to feed the deficit and now (in 2017) come up with 100b (or whatever it may be) to pay back.

Based on berkley's calculation, the 3 trillion surplus will be used up by 2038 I believe.

In any event, congress has no way to pay back the money, without cutting the general budget or raising taxes.

If you ck one of my earlier posts in this thread, you will find the link that verifies the surplus is in excess of 3 trillion.

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You dont need a Berkeley study, the trust fund actuarial studies are online at ssa.gov and the numbers you cited are consistent with the intermediate assumption projection.

[Copernicus]

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The surplus is those contributions made in the past, that were not distributed as ssi benefits, and "loaned" to the general fund, plus the interest those surpluses have earned.

[/ QUOTE ]

This doesn't make sense. "Surplus" is assets greater than those needed to meet obligations. If I owe you $1,000 tomorrow, and I set aside $10 in my bank account today, I don't have $10 of "surplus", I have a $9,990 deficit.

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First, be careful using "SSI", that is not Social Security it is a different program and has never run a surplus.

Re the surplus I think there is just confusion about the accumulated surplus (a prior cash flow calculation which is clearly positive) and an actuarial surplus (deficit) which takes into account future anticipated benefits vs future contributions plus current trust fund balance (which is a surplus under some assumptions and a deficit under others).

[natedogg]

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Nothing is "given" to the general fund. Treasuries are SOLD to SSA. The proceeds from the sale pay the deficit like any other borrowing pays the deficit.

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For anyone who is being misled by this, ask yourself: If you buy a bond from yourself, have you done anything?

The next time you want to spend a big chunk of money, write the amount down on a piece of paper first and call it a "bond". Then start making payments to yourself later to pay off the bond, and tell yourself you are doing anything more than playing around with some numbers that are irrelevent to your actual financial position.

That's the social security trust fund.

natedogg

[natedogg]

If you believe that it is moral to have a graduated income tax (as I do), then it becomes obvious that the Social Security wage tax should be eliminated and income taxes increased to cover the amount necessary to fund SSA. (ignoring the issue of whether the SSA should exist)

If this needs further explaining I can provide it but it should be pretty obvious.

natedogg

[Copernicus]

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Nothing is "given" to the general fund. Treasuries are SOLD to SSA. The proceeds from the sale pay the deficit like any other borrowing pays the deficit.

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For anyone who is being misled by this, ask yourself: If you buy a bond from yourself, have you done anything?

The next time you want to spend a big chunk of money, write the amount down on a piece of paper first and call it a "bond". Then start making payments to yourself later to pay off the bond, and tell yourself you are doing anything more than playing around with some numbers that are irrelevent to your actual financial position.

That's the social security trust fund.

natedogg

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Even if you think its appropriate to treat all government agencies as one big agency, your criticism still is only valid as a criticism of the spending. If the spending is justified (eg if you must have a new car to be able to produce an income) then you have two choices for that spending, reduce your assets or increase your liabilities. There is no difference on an accounting basis.

Buy that car from your savings ("borrow from your savings account", and pay your savings back with the cash flow that isnt tied up in repaying a finance company. Is that playing with numbers? No, its either a prudent or imprudent financial decision depending on your circumstances.

If you don't like the government to have the alternative of deficit financing then stop the spending, because even if borrowing from another agency = borrowing from themselves, its still a spending problem, not a financing problem and doesnt have a damn thing to do with Social Security.

[natedogg]

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Nothing is "given" to the general fund. Treasuries are SOLD to SSA. The proceeds from the sale pay the deficit like any other borrowing pays the deficit.

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For anyone who is being misled by this, ask yourself: If you buy a bond from yourself, have you done anything?

The next time you want to spend a big chunk of money, write the amount down on a piece of paper first and call it a "bond". Then start making payments to yourself later to pay off the bond, and tell yourself you are doing anything more than playing around with some numbers that are irrelevent to your actual financial position.

That's the social security trust fund.

natedogg

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Even if you think its appropriate to treat all government agencies as one big agency, your criticism still is only valid as a criticism of the spending. If the spending is justified (eg if you must have a new car to be able to produce an income) then you have two choices for that spending, reduce your assets or increase your liabilities. There is no difference on an accounting basis.

Buy that car from your savings ("borrow from your savings account", and pay your savings back with the cash flow that isnt tied up in repaying a finance company. Is that playing with numbers? No, its either a prudent or imprudent financial decision depending on your circumstances.

If you don't like the government to have the alternative of deficit financing then stop the spending, because even if borrowing from another agency = borrowing from themselves, its still a spending problem, not a financing problem and doesnt have a damn thing to do with Social Security.

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That is an impressive prevarication except that congress isn't borrowing money from a third party, they are borrowing it from their own revenues, which qualifies the excercise as nonsense.

Yet again, I must challenge you to actually articulate what it is you think Social Security's goals should be, what it should accomplish.

I understand that you might be confused about the trust fund because it's very easy to get confused about this, and that is part of the scam.

The issue is not deficit spending. It is that your Social Security Tax is just another tax and not in any way bound to your benefit. It is a just tax like any other, and your benefit is just an expenditure like any other, which you keep trying to refute but haven't. And this undermines much of what Social Security pretends to be, and serves to justify an onerous tax on the working class, which you have also failed to refute as you go off on tangents.

Try imagining that the "Social Security Tax" was to be renamed "Paying for the war" tax. All the money collected goes into the same communal general fund and all the allocations by congress are the same. And Social Security benefits remain unchanged, not to mention your (lack of any) right to the benefits.

Do you understand now?

natedogg

[adios]

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...That is an impressive prevarication except that congress isn't borrowing money from a third party, they are borrowing it from their own revenues, which qualifies the excercise as nonsense.

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Looking at it another way, government (trust fund account) is lending money to itself (financing other government spending). Let's say the U.S. government decided that it didn't want to have the trust fund money being lent to finance other government spending so the government either borrows from bond investors, cuts spending in kind, raises taxes, whatever to make up for the shortfall. Now the SS surplus can go right into the trust fund. What you want it to sit there in cash wasting away due to inflation? Perhaps it would be better to lend the money to a worthy creditor(s) and get a return on the cash to beat the effects of inflation. If so you'd certainly want to lend the money out to creditors with low to non existent default risk. Probably would want to be careful in lending it to emerging market creditors since many blow up so often (default). Remember Clinton was talking about taking the surplus and putting it in the stock market but then the stock market blew up. U.S. treauries are viewed as having no default risk more or less, at least close to the safest creditor there is. I believe many countries in the Eurozone are running budget deficits so maybe those places would be better options. The government issues non marketable bonds to the trust fund so it's not clear to me the effects of the government defaulting on those. I'm kind of thinking the stock, bond, and the US $ might rally. I think if the government is going to lend money to itself the trust fund ought to receive marketable securities where the government has a vested interest in making those coupon payments and redeeming the bonds.

[Copernicus]

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...That is an impressive prevarication except that congress isn't borrowing money from a third party, they are borrowing it from their own revenues, which qualifies the excercise as nonsense.

[/ QUOTE ]

Looking at it another way, government (trust fund account) is lending money to itself (financing other government spending). Let's say the U.S. government decided that it didn't want to have the trust fund money being lent to finance other government spending so the government either borrows from bond investors, cuts spending in kind, raises taxes, whatever to make up for the shortfall. Now the SS surplus can go right into the trust fund. What you want it to sit there in cash wasting away due to inflation? Perhaps it would be better to lend the money to a worthy creditor(s) and get a return on the cash to beat the effects of inflation. If so you'd certainly want to lend the money out to creditors with low to non existent default risk. Probably would want to be careful in lending it to emerging market creditors since many blow up so often (default). Remember Clinton was talking about taking the surplus and putting it in the stock market but then the stock market blew up. U.S. treauries are viewed as having no default risk more or less, at least close to the safest creditor there is. I believe many countries in the Eurozone are running budget deficits so maybe those places would be better options. The government issues non marketable bonds to the trust fund so it's not clear to me the effects of the government defaulting on those. I'm kind of thinking the stock, bond, and the US $ might rally. I think if the government is going to lend money to itself the trust fund ought to receive marketable securities where the government has a vested interest in making those coupon payments and redeeming the bonds.

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A good explanation of why natedogg's so wrong about the government "lending to itself". Its done all the time at the personal level.

Im not sure why you think that special issues are less credit worthy or give the government less reason to "make those coupon payments and redeem the bonds" though. They are a higher priority debt than regular issues, with a guarantee of return of principal prior to maturity if interest rates rise and their value drops below $1. Default on any Treasury security will have the same effect whether its a special issue or marketable...economic chaos (actually the chaos would precede the default).

[adios]

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...That is an impressive prevarication except that congress isn't borrowing money from a third party, they are borrowing it from their own revenues, which qualifies the excercise as nonsense.

[/ QUOTE ]

Looking at it another way, government (trust fund account) is lending money to itself (financing other government spending). Let's say the U.S. government decided that it didn't want to have the trust fund money being lent to finance other government spending so the government either borrows from bond investors, cuts spending in kind, raises taxes, whatever to make up for the shortfall. Now the SS surplus can go right into the trust fund. What you want it to sit there in cash wasting away due to inflation? Perhaps it would be better to lend the money to a worthy creditor(s) and get a return on the cash to beat the effects of inflation. If so you'd certainly want to lend the money out to creditors with low to non existent default risk. Probably would want to be careful in lending it to emerging market creditors since many blow up so often (default). Remember Clinton was talking about taking the surplus and putting it in the stock market but then the stock market blew up. U.S. treauries are viewed as having no default risk more or less, at least close to the safest creditor there is. I believe many countries in the Eurozone are running budget deficits so maybe those places would be better options. The government issues non marketable bonds to the trust fund so it's not clear to me the effects of the government defaulting on those. I'm kind of thinking the stock, bond, and the US $ might rally. I think if the government is going to lend money to itself the trust fund ought to receive marketable securities where the government has a vested interest in making those coupon payments and redeeming the bonds.

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A good explanation of why natedogg's so wrong about the government "lending to itself". Its done all the time at the personal level.

Im not sure why you think that special issues are less credit worthy or give the government less reason to "make those coupon payments and redeem the bonds" though. They are a higher priority debt than regular issues, with a guarantee of return of principal prior to maturity if interest rates rise and their value drops below $1. Default on any Treasury security will have the same effect whether its a special issue or marketable...economic chaos (actually the chaos would precede the default).

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Thanks for the info about the nature of the debt owed to the trust fund. My main point though, after thinking about this some, is that given all the possible things that could be done with the trust fund, the safest and most prudent course would be to lend the money out to the borrower with a minimal amount of default risk. That borrower happens to be the Unitied States government. Hoarding cash is a dumb idea, lending it to less credit worthy borrowers is about as dumb, many problems with putting it in stock market(s), lending the money to the Eurozone doesn't seem like a good alternative, etc.