The Social Security trust fund

[Guest nicemac]

It doesn't exist.

Ponzi! Ponzi! Ponzi! - John Stossel

[Guest nicemac]

It is already upside down.

Labor Dept. Data: Only 1.75 Full-Time Private Sector Workers Per Social Security Recipient | CNSnews.com

[bigwakes]

Great article!

[1gewehr]

And, the courts have repeatedly ruled that it's a tax, not an insurance program. Nobody has a right to any benefits. Any benefits are entirely at the whim of Congress. You do trust Congress, don't you? If you answered 'yes' to that, you may want to reconsider.

[ttocswob]

The SSTF ranks right up there with Santa and the Tooth Fairy on the believability scale.

[Guest Lester Weevils]

The SSTF is "solvent" from an accounting standpoint. Meaning that all the debits and credits balance for awhile yet. However the SS gov bonds can only be redeemed by more taxes, so it makes little difference that the debits and credits balance. An expert accountant could probably do perfectly valid accounting on any ponzi scheme and keep the books in balance. Balanced books wouldn't prevent the inevitable cash crunch.

Stossel's statement, "So anyone who believes Social Security is an investment plan really has only himself to blame."

Problem is, any gov bond is the same kind of "investment" as social security. If I buy a gov bond, I transfer computer bits representing dollars to treasury.gov and they flip computer bits noting that they must pay me back sometime in the future. Barring quantitative easing or more ponzi borrowing, then in the future the gov will have to collect more tax from me in order to pay me back!

That is kinda like when your minor child asks you for money so that he can afford to buy you a birthday present.

The only way to ultimately get ahead on gov bonds is if you can somehow avoid the future tax and get repaid out of somebody else's taxes. You either need a smart accountant, or maybe be a non-usa citizen buying the bonds.

[Guest nicemac]

"In its latest annual report, the Social Security board of trustees reported that the federal government’s total revenue from Social Security taxes in 2010—$544.8 billion—was not enough to cover Social Security’s total benefit payments—$577.4 billion."

Depends on your definition of solvent. They were $33 billion upside down in 2010 and we are adding how many boomers each day?

[Guest Lester Weevils]

"In its latest annual report, the Social Security board of trustees reported that the federal government’s total revenue from Social Security taxes in 2010—$544.8 billion—was not enough to cover Social Security’s total benefit payments—$577.4 billion."

Depends on your definition of solvent. They were $33 billion upside down in 2010 and we are adding how many boomers each day?

Hi nicemac

I agree. It is solvent for many years in the accounting sense that the debits and credits balance. Which assumes that SS bonds are easily redeemed for real money. Because of the economic slowdown and the current stimulus SS tax cuts, SS began paying more than it collects earlier than predicted. Given a healthier economy it would have taken a few more years to reach that point. Speaking of SS only. Medicare has been in much worse shape even in the accounting fantasy world.

This is not the first time SS has paid more than it collects. There were a few years when SS paid more than collections preceeding Reagan's "Income Tax Cut and SS Tax Hike". They were panicked about the imminent demise of SS at that time too, until Reagan "fixed" it by radically raising SS tax. It made me unhappy because I was lower than median income self-employed, and I paid significantly more tax AFTER Reagans tax cut than BEFORE Reagan's tax cut. Gee thanks for the tax cut Mr. Reagan. High income people paid less tax and I paid more. He has my undying gratitude as a true tax reformer.

IIRC there was another earlier historical period of paying more SS than collections, but may be remembering wrong and do not have time to look it up.

Except for selling Federal property or borrowing money or printing money, the only way to cash out the SS bonds is to draw it out of the general fund, primarily out of conventional income tax. Duh.

Am not claiming it desirable or sustainable. It doesn't mean that the debits and credits do not balance in the accounting fantasy world. That is the supposed reason for having the SS bonds. It was always expected that eventually the SS bonds would have to be cashed out to handle the boomers. When the bonds are cashed then the only realistic place the money can come from is conventional income tax. During the period of cashing out the bonds there will be many years of paying more SS benefits than SS tax receipts. It balances perfectly on paper for years to come. Regardless of how stupid the arrangement is in practice.

The future choice is to either pay the SS bonds or default. If we decide to default then I think that ALL gov bonds should be defaulted on an equal basis. I don't see why sovereign-held or corporate-held or privately-held gov bonds should be paid at full value if we default on SS bonds. Is one form of debt less valid than another form of debt? Are bankers more deserving to be paid back than burger flippers and floor-sweepers?

I don't know the solution but it bugs me that many politicians are speaking about ways of defaulting the SS bonds, but I haven't heard any talk of defaulting the bankers' bonds. I guess a banker's vote carries more weight than an ordinary worker's vote.

[Trekbike]