YASST: Common Ground?

[CADsortaGUY]

OK, so we all have our different opinions on how to "fix"/get rid of/ or keep SS, but if there was to be a place for some common ground would it not be in how the money is collected, "stored", and "budgeted"?

Can we all agree that the SS funds AND expenditures should be on their own separate type budget? Basically what I mean is it would have it's own funding source separate from the "main" budget. As it currently sits - it's a complicated mess of on/off budget and allows for a bunch of accounting BS to take place - something no one but the gov't can get away with. Now along with that, it would be all out in the open for the public to see. I happen to think some of the problem is that it is such an unknown expense and people couldn't even see it's true costs and receipts even if they tried. Shouldn't the budgeting of our money by the gov't be open for all of us to easily see and understand? - Especially when it comes to "entitlements" such as SS.

Comments? Suggestions? Clarification needed?

Agree? Yes/No?

CsG

 

[conjur]

Bush had the chance at the start of his first term to set aside $1 trillion for SS. What did he do instead? Pissed away in tax cuts. Now we have this alleged "crisis" a mere four years later? Hmmm...

But, for your topic, I agree a separate fund should be set aside for funding SS benefits. And, having younger workers opt-out will only worsen the problem since there are already fewer workers paying in than are receiving benefits. How will having them opt-out help out SS? Once the baby boomer generation passes on, we'll be back to having more pay in than are receiving benefits. It will be an eternal cycle of ebbs and flows.

 

[CADsortaGUY]

Originally posted by: conjur
But, for your topic, I agree a separate fund should be set aside for funding SS benefits.

Thanks for your reply.

CsG

 

[Engineer]

Before I answer, I need to read and analyze your question 3 times....it might be a trick!

Yes, it needs to be pooled in a separate account and kept totally from the general funding.

 

[Darkhawk28]

SS isn't an entitlement. It's not even a retirement fund, but rather an insurance policy, because not just retirees get SS.

I have no problem with transparency. None at all.

As for idea of not being able to touch the money with other parts of the federal budget.... sounds like a "lockbox". I could be wrong though.

 

[3chordcharlie]

Absolutely. Bad accounting in social security programs is one of the biggest flaws in modern government finance.

We have a similar problem in Canada with the Canada Pension Plan and Unemployment Insurance both being financed through funds that exist only in thoery, with premiums actually devoted to general revenue. As a result, the deficits of the 80s through mid 90s mean the programs themselves have funding problems because the money colleccted was not dedicated to servicing only the program in question.

When the current federal government finally dealt with the deficit problem, they also made what I consider a huge ethical lapse, using 'surplus' from the Unemployment Insurance fund to pay down debt (good result), and cutting general taxes. Since Unemployment is a regressive 'tax' (you reach the maximum premium at substantially under $100K in annual earnings), and for reasons of basic accountability, I think the correct solution would have been a cut in those premiums (which would have benefitted everyone, instead of only the middle and upper classes) instead of taxes, first, then cutting taxes more slowly as debt was retired through surpluses in general revenue. The end result was 'similar' except for low-income earners (including students) who received no benefit at all, but I still think it was an error in judgement.

Programs like Social Security are immensely expensive, and require accountability to be a major consideration if they are to exist at all.

 

[CADsortaGUY]

Originally posted by: Darkhawk28
I have no problem with transparency. None at all.

As for idea of not being able to touch the money with other parts of the federal budget.... sounds like a "lockbox". I could be wrong though.

No, it's not a "lock-box" as Gore was suggesting, it's keeping things out in the open and keeping the revenue portion seperate from the main budget.

CsG




The following included for informational purposes:
*******
linky

How the Trust Fund Operates.Workers pay their Social Security taxes through their employers. Each employer periodically sends a lump sum payment to the U.S. Treasury that includes all of the income taxes and Social Security and Medicare payroll taxes paid by both the employer and its employees.

The Treasury both receives the payroll taxes (and income taxes that higher-income retirees pay on their Social Security benefits) and pays monthly benefits on behalf of the Social Security Administration (SSA). The money stays in the Treasury's hands until it is either paid out as Social Security benefits or otherwise spent by the government. In fact, no money ever goes into the trust fund. Instead, the trust fund balance is the result of two accounting entries by the Treasury.

First, the Treasury estimates how much of the aggregate tax receipts are Social Security taxes and "credits" the Social Security trust fund with that amount. Then the Treasury "subtracts" the total amount paid in monthly Social Security benefits from the trust fund balance. No money actually changes hands; these are strictly accounting entries.

Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs. In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs. These are also strictly accounting entries, and again no money changes hands. After crediting the trust fund with the proper amount in IOUs, the government spends the extra Social Security tax collections just like any other tax revenue--to finance anything from aircraft carriers to education research.

 

[irwincur]

Good luck telling the money hungry losers in congress to keep their hands off SS funds.

Actually, people are looking at this the wrong way. For some reason, people actually think that there are any assets in the SS program at all. I have news for you, there are not, and there have not been for quite some time. At this point, it is basically working as a credit based program. Think of it this way, I (the young) am loaning a part of my retirement to my parents (the old) so that they can get the money that was promised them. The problem is, when I retire, I will not have the same guarantee as the worker to retiree ration will have dropped. From 16:1 when the program starter, to 3:1 now, and close to 1:1 in the next few decades. When a 1:1 ratio is met, there will be no chance to fix the program.

So the facts...

There is no real SS budget, it exists soley on paper.

There are not real assets in SS, everything is based on future credits.

2054 is when the program will no longer be able to work - at all. SS will be functionally damaged by 2013.

If you started saving at the age 20 for 40 years, SS would pay you out about $200,000 until you die.

Do the math on private savings... Age 20, 40 years of work, making only $25000/yr, 3% inflation, 11% growth (lower than long term market average), no raises ever. If you save 10% of your income, you will retire at age 60 with... drumroll...

$1,611,792

Looks like the Dems may just be looking to keep the poor, poor, and keep their voters in line.

A more realistic scenerio. Start at age 20, work for 55 years, make an average of $45,000, invest 10% (between 401K and private SS) at 11% return with 3% inflation and you have...

$11,421,000 - - - - SOME RETIREMENT YOU CAN HAVE WITH $11 MILLION DOLLARS.

NOW TELL ME HOW THIS DOES NOT MAKE ANY SENSE.

Calculations done with http://www.dinkytown.net/java/RetirementPlan.html

 

[CADsortaGUY]

Originally posted by: irwincur

There are other threads for that - please stick to the OP common ground question so this doesn't turn into a flame-fest. Thanks.

CsG

 

[irwincur]

Threads for what? Posting the math behind SS and private accounts?

 

[3chordcharlie]

Originally posted by: irwincur
Threads for what? Posting the math behind SS and private accounts?

Yes. This thread isn't about private accounts.

 

[NesuD]

Ok so in effect what they do is any surplusses are automatically loaned to the federal general fund which the feds have an obligation to pay back eventually with interest right?

Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs. In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs.

Tell me please if I am not interpreting that correctly. Is what your proposing is that rather than loan the money to the general fund via T-bonds which do in fact accrue interest (probably not to much though I imagine) we should just leave it sitting in a cash account doing nothing and earning nothing? Aren't private individuals trust funds typically invested various securities as a matter of normal business? I guess you would have to say that those assets are also just on paper. As I read it the SStrust does not typically contain any cash but it does contain interest bearing assets in the form of federal T-Bonds. Personally I don't think T-bonds are a particularly good performing investment although historically they are good as gold from a safety perspective. In the future though I am having doubts as to whether the Feds are going to be able to pay the obligation when the time comes. the only thing that really bothers me about the way it is done is that it is used as an accounting trick to hide the true deficit. As I understand it since that money goes directly into the general fund it is counted as revenue which it is not. when the feds issue the T-bonds the feds don't actually account for that amount as a negative on the balance sheet thus giving an innacurate picture of the true deficit. Maybe i have that wrong but that is how i have understood the practice. I guess my biggest problem is not necessarily what they do with it but rather how they account for it. It needs to show up in the federal budget as an outstanding liability until it is paid back so the people can easily get an accurate picture of what is really owed to the fund. In the past 20 yrs or so there have been several attempts to make the accounting of the SS trust more straight forward by making the feds actually account for it correctly but every attempt has met with huge resistance form both of the major parties. As I said Maybe i have some of this wrong so feel free to correct me on it.

 

[CADsortaGUY]

Originally posted by: NesuD
Ok so in effect what they do is any surplusses are automatically loaned to the federal general fund which the feds have an obligation to pay back eventually with interest right?

Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs. In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs.

Tell me please if I am not interpreting that correctly. Is what your proposing is that rather than loan the money to the general fund via T-bonds which do in fact accrue interest (probably not to much though I imagine) we should just leave it sitting in a cash account doing nothing and earning nothing? Aren't private individuals trust funds typically invested various securities as a matter of normal business? I guess you would have to say that those assets are also just on paper. As I read it the SStrust does not typically contain any cash but it does contain interest bearing assets in the form of federal T-Bonds. Personally I don't think T-bonds are a particularly good performing investment although historically they are good as gold from a safety perspective. In the future though I am having doubts as to whether the Feds are going to be able to pay the obligation when the time comes. the only thing that really bothers me about the way it is done is that it is used as an accounting trick to hide the true deficit. As I understand it since that money goes directly into the general fund it is counted as revenue which it is not. when the feds issue the T-bonds the feds don't actually account for that amount as a negative on the balance sheet thus giving an innacurate picture of the true deficit. Maybe i have that wrong but that is how i have understood the practice. I guess my biggest problem is not necessarily what they do with it but rather how they account for it. It needs to show up in the federal budget as an outstanding liability until it is paid back so the people can easily get an accurate picture of what is really owed to the fund. In the past 20 yrs or so there have been several attempts to make the accounting of the SS trust more straight forward by making the feds actually account for it correctly but every attempt has met with huge resistance form both of the major parties. As I said Maybe i have some of this wrong so feel free to correct me on it.

What I'm saying is that the money coming in for SS - goes to SS directly - not into the general fund like it currently is. It has it's own budget, and all the revenues collected for that purpose should make it all the way there - not sit in the treasury. This would show, as far as the SS budget is concerned, that it currently takes in more than it hands out in entitlements. The surpluses shown can be put into whatever investments the SSA wants to, but they must be in asset backed investments - not the current black-hole.

This would accomplish two things - An open SS budget that has to follow the same rules as the rest of us and allows us to see exactly what is going on, plus it would actually get the funds all the way to the SSA so it doesn't drop into the current black hole(the infamous IOUs that are really nothing).

CsG

 

[NesuD]

Looks to me like you and I actually see it similarly. The reason there is this black hole isn't so much that the assets are in the federal treasury but rather the way they account for it. I agree that there has to be an accounting for the funds within the SS administrations budget showing total SS tax revenues and expenditures. I also don't like the IOU/special T-bonds either. They are calling it a trust fund but it certainly doesn't resemble any trust that i have ever heard of. A properly managed Trust is typically a little more diversified than that.

Their accounting methods kinda put you in mind of Enron type accounting.