Understanding the Social Security scam

[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.

[/ QUOTE ]

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.

[Moseley]

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.....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.

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Really? They have never paid back any of the national debt. We are running a 800b deficit and about 300b is coming from ss tax.
How is the govt going to continue running a deficit, while also coming up with the 300b they will no longer be able to get from the ss tax?

They are probably going to do it by not adjusting the alternative minimum tax, which was created decades ago to tax the rich, but due to inflation will be hitting close to have the taxpayers in a few years.

[adios]

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.....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.

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Really? They have never paid back any of the national debt.

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So you're saying that the U.S. has defaulted on it's bond payments? Wow that's news to me and here I thought that U.S. treasuries were viewed has having essentially no default risk.

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We are running a 800b deficit and about 300b is coming from ss tax.

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So?

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How is the govt going to continue running a deficit, while also coming up with the 300b they will no longer be able to get from the ss tax?

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You answered my question with a question which is a non answer, thanks for playing though.


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They are probably going to do it by not adjusting the alternative minimum tax, which was created decades ago to tax the rich, but due to inflation will be hitting close to have the taxpayers in a few years.

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Whatever but it doesn't answer the question but I realize you have no answer because you don't like the question.

[Moseley]

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So you're saying that the U.S. has defaulted on it's bond payments? Wow that's news to me and here I thought that U.S. treasuries were viewed has having essentially no default risk.

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Of course not. They issue more bonds to retire the bonds outstanding and fuel the current deficit.

I know you're smart enough to realize that.

You are such a silly person, who must spend a lot of time trolling this site looking for fights.

[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.

[/ QUOTE ]

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).

[/ QUOTE ]

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.

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Absolutely. You sound like an actuary, or do I remember reading that somewhere? Jeremy Gold has written some interesting papers on the intergenerational transfer of risk when a Government retirement plan invests in risky (meaning non-risk free, not those that carry unusually high risk) asset classes. I think one of them was at a Wharton conference, should be able to Google it. i don't agree with him totally, because there are 4 elements of total return, the risk free rate, the inflation premium, the risk premium, and productivity (the extra return inherent in equities over and above the risk premium..Dcifrthis describes this better). Gold would strip everything down to the risk free rate, the inflation and risk premiums have the offsetting inflation and risk, but he forgoes the last element, which is costly for all generations.

[adios]

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[ QUOTE ]
...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.

[/ QUOTE ]

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).

[/ QUOTE ]

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.

[/ QUOTE ]

Absolutely. You sound like an actuary, or do I remember reading that somewhere? Jeremy Gold has written some interesting papers on the intergenerational transfer of risk when a Government retirement plan invests in risky (meaning non-risk free, not those that carry unusually high risk) asset classes. I think one of them was at a Wharton conference, should be able to Google it. i don't agree with him totally, because there are 4 elements of total return, the risk free rate, the inflation premium, the risk premium, and productivity (the extra return inherent in equities over and above the risk premium..Dcifrthis describes this better). Gold would strip everything down to the risk free rate, the inflation and risk premiums have the offsetting inflation and risk, but he forgoes the last element, which is costly for all generations.

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No I'm not an actuary but I take it as a complement that you believe I'm thinking like one. As I've read your posts on this subject I've gradually changed my viewpoint on SS as I did more thinking on it. I appreciate your efforts and thanks for the recommendations.

For the record, I'm a Computer Engineer and an active participant in the financial markets.

[TomCollins]

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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.

[/ QUOTE ]

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).