Understanding the Social Security scam

[tomdemaine]

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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.

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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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How is this any different than the following?

I have two bank accounts, my savings and my "fun money" account. I spend half of my savings account on hookers and blow, but write an IOU from my fun money account to my savings account (plus a little interest).

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Ok what should happen to the surplus going into the trust fund? I don't think hoarding cash is a good idea. Any others?

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How about giving it back to the people you stole it from in the first place??

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Doing away with SS is an alternative but not likely to happen anytime soon. Is that all you've got?

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That's not enough? Also this isn't even doing away with SS it's just countering the "ooh we've taxed way too much money well we've got to spend it on some god damn ridiculous thing we can't go giving it back to the people it actually belongs too that would be crazy talk"