Empty Trust Fund for Social Security?

[imported_tss4]

I was reading Newsweek the other day and there was an article debating the Pros and Cons of Bush's Tax proposal. I was unaware of this but apparently the Trust fund consists entirely of treasury bonds. There's not actually any money there. So, if the government were to try and use the trust fund to pay the shortfall in benefits that will eventually come, they would have to redeem treasury bonds that would force another part of the government to raise taxes in order to redeem the bonds. So, the trust fund is smoke and mirrors. How can we as dems, honestly, take this trust fund seriously. We may not believe in Bush's plan (allhtough I think it has some merit), but I don't see how we could say there is no social security funding crises looming. Am I missing something here guys?

 

[cockeyed]

You have it right, although I would not call it smoke and mirrors. Reason being, is that when the US Treasury issues a bond, they are obligated to redeem it on its due date with interest, if not, they default. Where they get the money to do this is something else. The Bush tax cut, if not made permanent could be used for this purpose, if Congress chooses. Think of it this way: A parent borrows their childs college fund money and gives the child an IOU receipt, promising to pay back the money; child gets ready for college; parent says they don't have the money to pay the IOU. Solution: parents get equity loan on the house to repay the loan.

Maybe the SS Admin., would have been better off had they loaned the money to Corporations through buying Corporate bonds. Unfortunately, Congress does not allow this!

 

[charrison]

Originally posted by: cockeyed
You have it right, although I would not call it smoke and mirrors. Reason being, is that when the US Treasury issues a bond, they are obligated to redeem it on its due date with interest, if not, they default. Where they get the money to do this is something else. The Bush tax cut, if not made permanent could be used for this purpose, if Congress chooses. Think of it this way: A parent borrows their childs college fund money and gives the child an IOU receipt, promising to pay back the money; child gets ready for college; parent says they don't have the money to pay the IOU. Solution: parents get equity loan on the house to repay the loan.

Maybe the SS Admin., would have been better off had they loaned the money to Corporations through buying Corporate bonds. Unfortunately, Congress does not allow this!

After 2018 we are will be face with increased taxes, decreased benefits or both to pay for social security.

 

[imported_tss4]

It just seems ridiculous that the desm keep pointing to this empty trust fund as a way to keep SS going longer.

 

[irwincur]

There is no trust fund. Think of it as a giant credit card that Congress has been using for decades and paying the minimum on. Whoever fixes SS, in whatever way they choose has to cover it. So you have a few options...

1. Status Quo, just let SS die in about 50 years and increase he deficit 300 - 500 billion every year after 2018.
2. Fix in 2018, must then pay about $10 trillion into the system to guarantee retirees.
3. Fix now, must pay $2 trillion into the system to guarantee retirees.

So with those three options we are looking at either MASSIVE increases in the deficit or biting the bullet and paying it up front. The longer we wait the larger it builds. And trust me, it is growing much faster than inflation so we have a problem. So, at any point, a fix will cost us debt, and not fixing it will also cost us debt, a long term debt.

Is it just me, or doesn't it seem like a good idea to just pay the $2 trillion now and come up with any working solution? I mean $2 trillion now is better than $10 trillion in 13 years.

 

[Jhhnn]

Gotta love it- more nether orifice numbers from inwincur, and more fearmongering about the SS trust. If the trust is in trouble, then the whole general fund and the govt itself is in trouble. These are US govt securities, and there's only one way that we can fulfill the full faith and credit obligations to those bondholders and all the rest- look past the end of our noses, realize that the current looting/borrowing spree just makes it worse, not better, in the long run. The only way to include boomers in the burden is to balance the budget now, and go further, pay down he debt, so that we'll be ready for ~2018.

In case all you Righties haven't noticed it, some income redistribution is a sociopolitical and economic necessity, like it or not. So we can do it now, openly and honestly, or we can time shift the burden into the future, which is what the Repubs are doing... in a very deceptive and dishonest fashion...

 

[imported_tss4]

Originally posted by: Jhhnn
Gotta love it- more nether orifice numbers from inwincur, and more fearmongering about the SS trust. If the trust is in trouble, then the whole general fund and the govt itself is in trouble. These are US govt securities, and there's only one way that we can fulfill the full faith and credit obligations to those bondholders and all the rest- look past the end of our noses, realize that the current looting/borrowing spree just makes it worse, not better, in the long run. The only way to include boomers in the burden is to balance the budget now, and go further, pay down he debt, so that we'll be ready for ~2018.

In case all you Righties haven't noticed it, some income redistribution is a sociopolitical and economic necessity, like it or not. So we can do it now, openly and honestly, or we can time shift the burden into the future, which is what the Repubs are doing... in a very deceptive and dishonest fashion...

Jhhnn, you didn't read what I said. There is no money in the trust fund. Its full of treasury bonds bought by the governemnt from themselves. In order to redeem the bonds for money to pay out benefits, the government must a)either find that money in the general fund to redeem the bonds with (which means its costing us that money either as taxes or reduced spending) or b) sell more bonds to the actual public to redeem the bonds in the trust fund (which is adding to the debt). I'm not a doom and gloom neo-con. I'm a democrat, but I think any rational discussion has to look at the monetary facts. Now, I'm not saying priavate accounts are, or are not the answer, but we need to be honest and address the reality of the matter. Maybe SS is not in trouble, but its not because of the existance of a trust fund, because its not really there. The government borrowed against it and spent the money, all ready.

 

[Genx87]

http://www.ssa.gov/OACT/TR/TR04/VI_OASDHI_dollars.html#wp129340

If you want a scary site take a look at the trustees report. Table Table VI.F10.

Yes that is in Billions. We have a rare opportunity to see the destruction of our own country before it happens.

Medicare is actually worse off than SS. But both will bankrupt this country beyond anything you can imagine.

You think 420 billion is a bad deficit? Take a look at 2080 and get back to us.

 

[digitalsm]

The facts of the matter when it comes to Social Security and Medicad/Medicare.

There will be drastic tax hikes.
There will be drastic spending cuts.

When, I prefer sooner rather than later, but eh, not going to happen. Reforms of the systems need to happen as well, but we(the US) arent going to avoid drastic tax hikes and drastic spending cuts if we are going to keep our promises.

 

[irwincur]

Gotta love it- more nether orifice numbers from inwincur,

Well, they came from your liberal rag, Newsweek. They had a nice chart in there.

 

[Jhhnn]

Newsweek isn't "Liberal", at all, Inwincur. The numbers are hash, anyway, given that spending $2T now won't avoid the 2018 issue, anyway, which the Admin has finally conceded in a very backhanded way. We'll pay more in interest on that $2T in 2018 than it will take to meet the SS obligations that year, and will have been paying interest on every dime from the moment we borrow it..

And the $10T number reflects cumulative liabilities thru 2042, iirc, and is a raw number, doesn't account for inflation. The buying power of a 2018 dollar will be halved by 2042, even at a low 3% inflation rate. Those numbers stink, and are a deliberate distortion.

These don't, however- Republican looting will likely raise the total debt to over $9T by2009, and we'll likely be paying over 6% interest- that's over half a trillion dollars a year, essentially forever... SS liabilities won't approach that level of expense until well into the future, and then in highly inflated dollars...

And, yeh, tss4, the govt did spend the money in the trust, and all of the other money borrowed from the Chinese, Japanese, Saudis and wealthy Americans. That's why they sell bonds, so that they can spend the money. Who do you suppose will get screwed when the time comes? International bankers, or SS recipients?

The problem for Repubs is that, unlike other debt, the SS trust will need to be repaid, rather than maintained. And that's more expensive, and cramps their current style of time shifting income redistribution into the future. People might wake up too soon, before they've achieved a third world distribution of wealth and income... Right now, the financial elite are converting barely taxed income into wealth, real wealth, international wealth, and there's basically no way to get any of that back into a revenue stream without estate taxes, or revolution. Who pays then? Figure it out...

 

[BBond]

According to the following article from the NY Times it seems even Bush is changing his mind (or, so the right wingers can understand it -- flip flopping) on Social Security.

He's considering doing what many have been saying all along. Raise or eliminate the income cap for FICA wages.

Also note the following quote from the article:

If Congress did nothing but lift the cap entirely and therefore subjected all wages to the tax, Social Security would be financially balanced for 75 years, though the system would again face trouble after that, according to one economic analysis.

Another thought I've thrown around that's been largely ignored in discussion; in 75 years even the youngest of the baby boomers will be long gone. They're planning for a demographic they have NO WAY of predicting. How can anyone know if the system would again face trouble in 75 years?

What if birth rates increase in those 75 years? Will there be a Social Security surplus?

Raise the cap. Problem solved. If in 75 years there's another dilemma deal with it when it approaches, not now. Don't "save" Social Security for future generations at the cost of destroying it for the current generation because no one knows what to expect that far ahead.

No one that I know of can tell the future. Most people today can't even recognize what's happening in the present. For many it's apparently impossible to admit the past.

Bush May Raise Payroll Tax Cap to Pay for Social Security

By THE ASSOCIATED PRESS

Published: February 16, 2005

Filed at 6:34 p.m. ET

PORTSMOUTH, N.H. (AP) -- President Bush is not ruling out raising taxes on people who earn more than $90,000 as a way to help fix Social Security's finances.

At the same time, he renewed his pitch Wednesday for Congress to approve an overhaul that would include Social Security private accounts for many workers. He told 2,000 people in an airport terminal that rich and poor alike should have a chance to invest in the stock market.

``Investors aren't just Wall Street people, as far as I'm concerned,'' Bush told the crowd invited by the state's all-GOP congressional delegation. ``I think every citizen, every citizen has got the capacity to manage his or her own money.''

He gave only passing mention to options for fixing the program's long-term financial woes, but told reporters for regional newspapers on Tuesday that he isn't ruling out making more wages subject to Social Security taxes.

Asked directly, Bush said he would not bar raising the $90,000 cap, although he does not want to see the payroll tax rate go up.

``The one thing I'm not open-minded about is raising the payroll tax rate. And all the other issues go on the table,'' Bush said in the interview, according to an account in Wednesday's New Haven (Conn.) Register.

White House spokesman Trent Duffy said raising the cap on Social Security taxes is just one option among many being advocated.

``Just because he said it was an option doesn't mean he embraced it,'' Duffy added.

Under the current system, payroll taxes are paid only on the first $90,000 in wages. That ceiling rises each year with inflation -- last year it was $87,100. The Social Security tax rate is now 12.4 percent of pay, split between workers and employers.

Sen. Lindsey Graham, R-S.C., and other lawmakers have argued that Bush's plan for personal accounts, which will cost more than $1 trillion up front, would be more attractive to Democrats if it is financed by raising taxes on the wealthy.

If Congress did nothing but lift the cap entirely and therefore subjected all wages to the tax, Social Security would be financially balanced for 75 years, though the system would again face trouble after that, according to one economic analysis.

In New Hampshire, Bush vowed to continue to travel the country, convincing Americans the system needs fixing. He hopes they will, in turn, persuade their congressional delegation to act.

``I'm going to talk to the American people over and over and over again until the members of Congress recognize we have a problem,'' Bush said.

It's a case he must continue to make, said Senate Finance Committee Chairman Charles Grassley, R-Iowa. Asked about the mood of Senate Republicans toward the issue, he said Tuesday: ``Every member would like to see Social Security go away, but it isn't going to go away because the president won't let it go away.''

With his quick visit here, Bush has now hosted Social Security-focused forums in eight states since his Feb. 2 State of the Union address.

 

[Spencer278]

Originally posted by: BBond
According to the following article from the NY Times it seems even Bush is changing his mind (or, so the right wingers can understand it -- flip flopping) on Social Security.

He's considering doing what many have been saying all along. Raise or eliminate the income cap for FICA wages.

Also note the following quote from the article:

If Congress did nothing but lift the cap entirely and therefore subjected all wages to the tax, Social Security would be financially balanced for 75 years, though the system would again face trouble after that, according to one economic analysis.

Another thought I've thrown around that's been largely ignored in discussion; in 75 years even the youngest of the baby boomers will be long gone. They're planning for a demographic they have NO WAY of predicting. How can anyone know if the system would again face trouble in 75 years?

What if birth rates increase in those 75 years? Will there be a Social Security surplus?

Raise the cap. Problem solved. If in 75 years there's another dilemma deal with it when it approaches, not now. Don't "save" Social Security for future generations at the cost of destroying it for the current generation because no one knows what to expect that far ahead.

No one that I know of can tell the future. Most people today can't even recognize what's happening in the present. For many it's apparently impossible to admit the past.

Bush May Raise Payroll Tax Cap to Pay for Social Security

By THE ASSOCIATED PRESS

Published: February 16, 2005

Filed at 6:34 p.m. ET

PORTSMOUTH, N.H. (AP) -- President Bush is not ruling out raising taxes on people who earn more than $90,000 as a way to help fix Social Security's finances.

At the same time, he renewed his pitch Wednesday for Congress to approve an overhaul that would include Social Security private accounts for many workers. He told 2,000 people in an airport terminal that rich and poor alike should have a chance to invest in the stock market.

``Investors aren't just Wall Street people, as far as I'm concerned,'' Bush told the crowd invited by the state's all-GOP congressional delegation. ``I think every citizen, every citizen has got the capacity to manage his or her own money.''

He gave only passing mention to options for fixing the program's long-term financial woes, but told reporters for regional newspapers on Tuesday that he isn't ruling out making more wages subject to Social Security taxes.

Asked directly, Bush said he would not bar raising the $90,000 cap, although he does not want to see the payroll tax rate go up.

``The one thing I'm not open-minded about is raising the payroll tax rate. And all the other issues go on the table,'' Bush said in the interview, according to an account in Wednesday's New Haven (Conn.) Register.

White House spokesman Trent Duffy said raising the cap on Social Security taxes is just one option among many being advocated.

``Just because he said it was an option doesn't mean he embraced it,'' Duffy added.

Under the current system, payroll taxes are paid only on the first $90,000 in wages. That ceiling rises each year with inflation -- last year it was $87,100. The Social Security tax rate is now 12.4 percent of pay, split between workers and employers.

Sen. Lindsey Graham, R-S.C., and other lawmakers have argued that Bush's plan for personal accounts, which will cost more than $1 trillion up front, would be more attractive to Democrats if it is financed by raising taxes on the wealthy.

If Congress did nothing but lift the cap entirely and therefore subjected all wages to the tax, Social Security would be financially balanced for 75 years, though the system would again face trouble after that, according to one economic analysis.

In New Hampshire, Bush vowed to continue to travel the country, convincing Americans the system needs fixing. He hopes they will, in turn, persuade their congressional delegation to act.

``I'm going to talk to the American people over and over and over again until the members of Congress recognize we have a problem,'' Bush said.

It's a case he must continue to make, said Senate Finance Committee Chairman Charles Grassley, R-Iowa. Asked about the mood of Senate Republicans toward the issue, he said Tuesday: ``Every member would like to see Social Security go away, but it isn't going to go away because the president won't let it go away.''

With his quick visit here, Bush has now hosted Social Security-focused forums in eight states since his Feb. 2 State of the Union address.

Guess that makes you real happy that you get to leech even more money.

 

[BBond]

Originally posted by: Spencer278


Guess that makes you real happy that you get to leech even more money.

That is a completely ignorant statement aimed at fomenting hatred between the generations. I paid a lifetime's FICA tax. My employers matched it.

Even Bush is giving up. I suggest you do the same. If you feel the FICA taxes you're paying are causing you financial hardship do what I did when Reagan raised the FICA tax in 1983.

Go get a second job.

 

[nageov3t]

bah.

the solution to the social security problem is obvious.

I call it... soylent green. 😉

 

[BBond]

Originally posted by: loki8481
bah.

the solution to the social security problem is obvious.

I call it... soylent green. 😉

As much as I'd like to tell some of them to, I really don't want anyone eating me.

😉

 

[Spencer278]

Originally posted by: BBond

Originally posted by: Spencer278


Guess that makes you real happy that you get to leech even more money.

That is a completely ignorant statement aimed at fomenting hatred between the generations. I paid a lifetime's FICA tax. My employers matched it.

Even Bush is giving up. I suggest you do the same. If you feel the FICA taxes you're paying are causing you financial hardship do what I did when Reagan raised the FICA tax in 1983.

Go get a second job.

Why don't you stop stealling my money and get off your lazy leeching but. If you wheren't leeching there would be no need for a tax increase to pay for you leeching.

 

[nergee]

Originally posted by: Spencer278

[No one that I know of can tell the future. Most people today can't even recognize what's happening in the present. For many it's apparently impossible to admit the past.]

I'm with you on this point....2009,2018,2042, 75 years from now, what a joke trying to predict anything that far out..all this bed-wetting over SS....if it dies it dies....there will be something in its place and it will cost everyone a lot of money.......

 

[BBond]

Originally posted by: Spencer278

Originally posted by: BBond

Originally posted by: Spencer278


Guess that makes you real happy that you get to leech even more money.

That is a completely ignorant statement aimed at fomenting hatred between the generations. I paid a lifetime's FICA tax. My employers matched it.

Even Bush is giving up. I suggest you do the same. If you feel the FICA taxes you're paying are causing you financial hardship do what I did when Reagan raised the FICA tax in 1983.

Go get a second job.

Why don't you stop stealling my money and get off your lazy leeching but. If you wheren't leeching there would be no need for a tax increase to pay for you leeching.

I can't tell if you're actually serious with that garbage or if my sarcasm meter is broken.

Either way, keep those cards and letters coming! 🙂

 

[randym431]

OMG!!! This is US Treasury bonds, people. The safest investment IN THE WORLD. Bush and his like, trying to dunce you with the idea they are worthless shows how worthless and pathetic his SS plan really is. US treasury bonds! Wake up folks!

 

[Engineer]

Originally posted by: digitalsm
The facts of the matter when it comes to Social Security and Medicad/Medicare.

There will be drastic tax hikes.
There will be drastic spending cuts.

When, I prefer sooner rather than later, but eh, not going to happen. Reforms of the systems need to happen as well, but we(the US) arent going to avoid drastic tax hikes and drastic spending cuts if we are going to keep our promises.

The bad thing about tax hikes is that the government will instantly spend the money without even a hint at setting any asside for future SS. It will reduce the general deficit over the short run, but the government will then need to borrow money from outside sources to refund the "trust fund" in order to pay the then current SS obligations.

No way that the government gets money and doesn't set it aside, other than private accounts, IMO.

 

[charrison]

Originally posted by: randym431
OMG!!! This is US Treasury bonds, people. The safest investment IN THE WORLD. Bush and his like, trying to dunce you with the idea they are worthless shows how worthless and pathetic his SS plan really is. US treasury bonds! Wake up folks!

Ok, lets put those treasury bonds into a private account. At least I know what congress owes me at that point.