Social Security Interest Rates... an insult to workers and the disabled.

[eniwetok]

Now before any hothead here says I have a secret agenda to privatize SS... they're dead wrong. I'm at retirement age... SS needs to be protected... and I would never want to see the thieves and sociopaths on Wall St get anywhere near SS money.

But those who aren't hotheads need to seriously look at these abysmal interest rates SS has been getting... and how that that affects the health of the trust fund.

Here are the monthly rates NEW money coming into the trust fund are getting

https://www.ssa.gov/oact/progdata/newIssueRates.html Some of these rates ARE BELOW INFLATION!

Here is are the average and effective rates

https://www.ssa.gov/oact/progdata/annualinterestrates.html

The interest rate is set by Congress... https://www.ssa.gov/oact/progdata/intrateformula.html

There is something radically wrong when we're being taxed for our retirement etc... and there is no minimum floor beneath which these interest rates should fall. I think that should be at least a 4% minimum. And maybe we'd get more bang for the buck if this SS money were actually invested in our infrastructure where the improved efficiency of the economy could be taxed as income for the fund... something along the lines of Gore's lockbox. Just lending money to the government to get shit for interest is an insult to all those who depend on a healthy SS program.

So where TF are the Dems on this issue?

[Johnathan146]

1. The problem is the government is loaning money to itself

It can raise interest rates, but then we shoud raise taxes to pay for it.

Social security could use some of its money to buy municipal bonds, which would pay a little bit more.

I wouldnt have a problem if a small percent was invested on AAA corporate bonds.

[Wounded Bear]

2. No way...

that is the camel's nose into the tent. Pretty soon, the whole animal is in.

We desperately need to overcome the Repub stranglehold on gov't. SS is not in any real danger for quite a few years yet, and some simple fixes would extend its life for many years, like raising the min wage and the cap, which would result in more funds going in.

Never privatize any part of that fund. Never.

[Johnathan146]

3. Which is fine, but then we have to accept low interest rates

A government loan is very very secure. I dont think the government should pay 4% interest, even if it is paying it to itself.

[eniwetok]

5. this is money held in trust...

We're taxed for a PURPOSE. The Trust Fund is OUR money. That purpose deserves more respect than getting shit interest.

[eniwetok]

6. I wonder if anyone's ever looked into the effect free trade and lower wages has on SS?

It's a question I brought up years ago at the Thom Hartmann forum... that lower wages AND lower interest rates are having a negative effect on SS... because after all, if wage growth stagnates... SS still has use new contributions at lower rates faster to those who once received higher wages.

[Wounded Bear]

9. It has to have an effect...

simple fixes would dramatically increase long term viability of the program. Even a modest increas in min wage would boost SS income.

Allowing any outside "investment" of the funds is something I am very leery of.

[eniwetok]

11. I want no privitization...

But buying state or municiple infrastructure bonds doesn't sound like a bad idea... except that they're also probably getting shit for interest (but fees aren't market driven). In federal spending, if SS money were used for bridge and highways, then in theory a SS surcharge could be added to the gas tax.

[eniwetok]

4. other government bonds... hmmm

I was think in terms of using SS money to, say build federally funded energy infrastructure.... something that could be taxed for a return. But since much infrastructure is also conducted at the state level and municipal level... I would not have any problems with SS money going into state bonds. For example cities have to routinely take out bonds to finance EPA sewer projects etc. Water users have to pay EPA surcharge on their water bills.

Of course these approaches are a bit late and should have been tried decades ago. The Trust fund was designed to become exhausted and at that point it returns to pay-go.

[eniwetok]

8. does this mean raising taxes...

"It can raise interest rates, but then we should raise taxes to pay for it. "

Yes, there SHOULD be a penalty government pay for thinking SS is free money. The trust fund could easily be making 40-50 billion more a year in interest... and higher interest rates would force politicians to spend money more wisely.

[sab390]

7. The Reagan-Greenspan solution

The Social Security Trust fund was always a scam. It raised the taxes on the poor as they cut the taxes on the rich from 70% to 20%. It also gave SS and Medicare access to the general fund. Before the fund congress just stole the money and no one was the wiser. If we had every dollar paid for SS and Medicare they would both be solvent but congress has been stealing from it since before the ink was dry on FDRs signature. The Republicans are now screaming because they have to pay back the money out of the general fund. A problem is that SS is capped. The rich only pay $17,000 into the fund. CBO and the fund administrators say releasing the cap would not save them. OK. But capital income is also not taxed for FICA. Add in capital gains, dividends and interest and the funds would be solvent. That’s not the point. The system would have worked just fine. Reaganomics stole the American dream from the young. If the middle class were getting the same piece of the pie we got in the 70’s all would be well. Income has gone up at 1.5% while the 1% take 26% out of the system which is not available to FICA. Except for a short time in the 90’s the young have entered the market with huge debt into a market with few jobs. Their pay is horrid. FDR gave us the American dream and Reagan stole it from our children and grandchildren.

[eniwetok]

10. you're conflating 1981 and 1983

I have nothing good to say about Reagan... but at least he did take action to save SS which then was pay as you go... and what little money there was in reserve was soon to be exhausted.

But you're conflating the 1981 Reagan tax cuts with the 1983 law to strengthen SS.

And let's remember that the Dems have dropped the ball. Strengthening SS was a big issue back in the 2000 election. Even Bush was paying the issue lip service. http://romcache.tripod.com/bush2000.pdf

Where has this issue been since then? There have been some proposals about the cap... which the GOP will never allow. But who's been educating the public on the trust fund, interests, and connection between debt and the ability to pay back those IOUs?

[Uben]

12. How the hell can one plan for retirement.....

...when they keep changing the rules? For most, the vast majority of their retirement income will come from SS benefits. We get a letter from the SS administration telling us how much we can expect to receive when we retire. We use that figure and have to plan on having additional income from savings or retirement benefits to survive. If you receive retirement benefits, you are fortunate, most of us do not. My private health insurance went up 58%, or $400/mo. My savings are drawing near zero interest. I was counting on getting at least a 4% return. I'm 4 years away from drawing full SS benefits and 3 years away from being eligible for medicare. By the time these ass-wipes are through, 90% of us will be screwed and be forced to live in poverty while the bigly rich folks skim more and more from the poor.
So what's the answer? I don't see anything short of a revolution making any difference. Why do the 90% permit the 10% to flourish while the majority suffers? After the Great Depression, income tax rates for the wealthy were near 90%. Nowadays, they pay next to nothing. Why? Probably because our leaders can all be bought. When will we make profiting off of leadership positions treason?

[eniwetok]

13. Why do the 90% permit the 10% to flourish while the majority suffers?

Well we know the GOP are the whores for the interests of corporations and the uber-rich. The REAL question is what's wrong with the Democratic Party.

I think Thomas Frank hit the nail on the head... that the corporate, neo-libs have bought into meritocracy and so they favor the professional class in that 90-99% range... and there's no solidarity in a meritocracy. They may be for social programs like ACA but they've been undercutting organized labor since the mid 80's with the DLC and especially when Clinton favored NAFTA.

So who's left that watches out for the bottom 50% if not for the progressive Dems?

[duffyduff]

15. Thomas Frank can go to hell

People like him never tell the truth about the GOP. It is always, always, always blame the Democrats, and it is false.

[eniwetok]

20. you do realize that's not a valid argument, right?

So WTF is Frank supposed to do... take up half of his books bashing the GOP... and you're still not going to like his critique of corporate Dems only then you'll find some other excuse?

Sorry... corporate Dems ARE the problem with the Democratic Party. It's not the progressive wing of the party that sold out organized labor, brought us irresponsible free trade deals, etc.

[Igel]

14. First, SS isn't an investment.

It's an income tax. Congress has no authority for much else (it's either that or a tariff or a fine for violating some law).

SS is pretty much pay as you go, and unless you're self-employed strictly speaking you only pay half. In the '80s they upped the rate to provide a cushion for baby boomers when they retired. But most of that outlay will still be from current revenues. They keep track of what you pay because it's run as insurance--you get out something related to how much you paid in. But you can't add up the dollars in any sensible way.

Take my mother. She started paying in, IIRC, in the '40s. She retired in '83 or '84, and in the last 5 years of her job she pulled in a lot of time-and-a-half and overtime, so a year before she retired she grossed over $80k working hourly. She paid in low rates for 35 years. But because of inflation, her monthly payout was much greater than the amount she paid in any given year--even at good interest rates. She's still alive, aged 89, and collecting $1300 or so a month.

The excess SS collection has been falling over time, albeit with short-term changes. In the last decade, most of the increase in the trust fund is because of interest. https://www.ssa.gov/oact/STATS/table4a1.html

As for the interest rate, again, it's not investment. It's a holding pattern. To prevent the government from controlling even more of the economy, unspent tax dollars can only be returned to the government for government expenses. It also keeps politics from playing with OASI to some extent. Since it's dedicated tax dollars, when money's taken from OASI that budget category gets an asset (special t-bills) and it replaces debt on the generl funds that would have to be sold to the general public. To keep that from being a good way for the government to increase debt on the cheap, that internal debt gets the same interest as they'd pay to the public. (See how much simpler it gets when you call the SS money not what we want to believe it is, but what it really is--income tax dollars collected by the federal government?)

Of course, real soon now they'll start drawing down on the OASI trust fund, and then the government will either have to actually reduce the internal debt or replace that government-held SS debt with privately held debt. (Remember--there's also nothing legal, just political, to keep Congress from forgiving the debt it owes itself, or reducing either the interest rate or giving itself a haircut.)

[eniwetok]

16. never said it was an "investment"

SS is a social insurance program. That being said its health of the program in some large part depends on how that excess money in the Trust funds, now 5.4 trillion, is treated. And from your post I'm unsure what your position is on the absurdly low interest rates the trust fund gets. Yes, this money must be lent to the general fund... but there's nothing in the law I can find that says the return MUST be the market rate for other bonds. It would seem Congress could make it anything it wants.

[rgbecker]

17. The social security fund should never be invested in any thing but US Government instruments.

These other investments suggested all have risks involved and the last thing we need is a SS system going down the tubes because of investments in private or even state or local government bonds. Maybe you'd like to learn about your ss funds being invested in Detroit? The point of SS is to take care of those who have worked at least 10 years at least in some way no matter how long they live. It isn't a retirement plan as much as an insurance that guarantees at least some income, paid for by currently working Americans, not from some personal retirement investment. Ask your neighbor how his IRA or 401K retirement plan is doing after the 2008 crash or worse, ask the neighbor who actually had to start taking benefits when the market was down. He's thankful the ss is based on the government who can print money if necessary to meet its obligations rather than private parties, foreign governments or state and local government entities.

[eniwetok]

18. fair point about risk

Fair point about risk on some things I suggested... but then I originally suggested two totally federal options... a floor beneath which interest rates could not sink... and investing in federal infrastructure with some mechanism to tax the benefits. The thought of state or municiple investment didn't occur to me until post 9... but I wondered if the return on these bonds would also be too low. But bonds attached to fees... such as the $25 a quarter we pay for an EPA surcharge per property, are disconnected to low rates.

So your suggestions are to get a better return on the trust fund? Or... pump more money into the fund.

In the latter dept... we could look at lifting the cap... but why are capital gains are exempt? I don't believe even Sanders asked that question.

[rgbecker]

19. I'm not concerned about return on trust fund.

The system is to have current workers pay for retired and disabled workers. If there isn't enough money coming in to do that (and apparently there won't be, but not until 2035 or something) then more needs to be "taxed" from somewhere. The obvious easy hit would be to include incomes even over the $118,000 current cap as these high earners are least likely to suffer much from that percentage going into the pot. Another idea would be to include income from capital gains, but that is even hard to get included in the regular taxable income for tax purposes. I've always wanted to see more workers included in the system....for example many local government workers are not included (many Teachers for example). It was just recently that Federal workers finally got included in the system. A real boost would of course be the 11 million "illegals". If they participated in the tax system like they should , regardless of the system to do that (path to citizenship or work permit) that would be a huge boost to the income for the ss system.

I certainly wouldn't support the federal government having to pay more in interest for the trillions they owe, even if it would be only to retired workers rather than the population as a whole. If the US government can get the funds they need from the Japs and Chineese etc at almost zero percent interest, I say more power to them. The trust fund will be gone soon as it was only set up to get through the baby boomers retirement surge and the SS will be working on only funds paid in each year by current workers.