WHY AREN'T DEMS RAISING HELL: New SS Money got average of 1.8% interest for 2016!

[eniwetok]

New SS Money got average of 1.8% interest for 2016 and 1.8% is about the inflation rate meaning the Trust Fund is being used as free money by the government... AT THE EXPENSE OF THE SS PROGRAM.

New money going into the SS Trust Fund have not gotten more than 3% interest since 2008...

ANNUAL RATES: AVERAGE AND EFFECTIVE
https://www.ssa.gov/oact/progdata/annualinterestrates.html

MONTHLY RATES
https://www.ssa.gov/oact/progdata/newIssueRates.html


We are TAXED to fund SS programs and its vital purposes MUST BE PROTECTED. There MUST be a floor beneath which interest rates should never fall... and I believe that should be at least 4%.

[pangaia]

1. They have such sneaky ways of destroying things,

behind the scenes, out back in the hedgerow, under the cover of night....

[GeorgeGist]

2. And you believe 4percent ...

WHY ?

[eniwetok]

4. 4% as a FLOOR...

Right now the interest rate the SS trust funds get is a floating rate... described here...

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

Current formula
Special-issue securities bear a nominal rate of interest determined by a formula in the law. The current formula was established by the 1960 amendments to the Social Security Act. The formula sets the rate applicable in a given month to the average market yield on marketable interest-bearing securities of the Federal government which are not due or callable until after 4 years from the last business day of the prior month (the day when the rate is determined). The average yield must then be rounded to the nearest eighth of 1 percent. This formula became effective with the October 1960 rate.

But this formula has resulted in rates as low as 1.25%. Having a floor would provide assurance the rate would never fall below the rate of inflation.

[metalbot]

3. I'm confused

"There MUST be a floor beneath which interest rates should never fall... and I believe that should be at least 4%."

Are you arguing that if the US government were able to borrow money from other sources at 1.8% that it should still borrow from SS at 4%? How does that make any sense? If we're going to deficit spend, then we should be borrowing at the cheapest rate possible.

[eniwetok]

6. SS surplus MUST be borrowed by the Govt

SS monies are NOT sitting in a big safe somewhere. That surplus is almost immediately borrowed by the government to meet general spending needs. The purpose of having a interest floor would be to protect the fund from rates lower than inflation therefore protect it's vital purposes. If rates were higher all these years it might have extended the life of the trust fund for 2-3 years beyond the current 2035. Having recently turned 65... those 18 years don't seem that far away. Last we are involuntarily TAXED to serve the purposes of the SS programs. Damn it I don't want Congress to treat this as a piggy bank. Maybe it needs to be more painful for them to borrow this money.

I don't know how old you are but back during election 2000 SS WAS A BIG ISSUE. Why? Because the growing debt posed a problem for paying back all that money into the fund once retirees started to draw on the fund more than they were putting in. That time is NOW... where withdrawals are about 7% more than new SS contributions. Soon withdrawals will exceed interest as well... and Congress will have to start paying back those IOUs.

Somehow this issue has disappeared... even as the clock is ticking.

[metalbot]

11. I don't understand your argument

I'm not trying to be dense here.

You posit that:

1. SS surplus MUST be borrowed by the government (no disagreement)
2. You don't want Congress to treat this as a piggy bank, and it needs to be more painful to borrow from

I don't understand #2. You don't want them to borrow from it, so you should make it more painful to borrow from, but they are required to borrow all of it.

If we're saying that the US government should be forced to borrow from SS at above market rates, then shouldn't we just fix SS and increase contributions by raising the cap? I'd also argue that an above market borrowing rate makes it less likely that the cap would be removed, since that would then require the government to borrow more money at a higher rate every year.

We can play games with the interest rate, but all they are is games, and it makes SS an even bigger target for cuts since it would account for greater amounts of spending.

[eniwetok]

12. Why are you more concerned about market rates than the health of the SS funds?

First, there really is NO true market rate for interest... it all operates in the grander scheme of what rates the Fed sets. So should the health of the SS trust funds be held hostage to what the fed does? For the past 15.5 years the rate has been below 2.5% for all but 2.5 years and it's been below .2% for EIGHT YEARS.

https://fred.stlouisfed.org/series/FEDFUNDS

Second, yes... since by law the government MUST borrow from surpluses in off-budget trust funds they WOULD pay more than other market sources... but under my proposal ONLY WHEN THE "MARKET" RATE DROPS BELOW THE FLOOR. The low fed rates could not have come at a worst time... just as the baby boomers were going to start retiring en mass.

Look at it as a safety net to help protect the health of a safety net program. An interest floor is NOT unreasonable given the vital purposes of these SS Trust funds.

[wishstar]

5. However cost of living raises were only .3% this year and zero last year- very low for years

For US government to pay higher interest rates on borrowed Trust Funds would require imposing higher taxes or privatizing the program to allow riskier investments. However, cost of living raises paid to beneficiaries are even lower than interest earned by trust funds so there is a net gain there at least .

[eniwetok]

7. There is only one market for SS Securities... the US Govt.

Interest rates for SS should NOT be directly connected to market rates for other US securities.

You need to ask what's more important here... the health of SS? Or insuring the Govt has an easy source of money?

[eniwetok]

9. BTW... we're not imposing higher taxes... we're BORROWING more...

Since 1981 We The People have pissed away some 19 trillion on ourselves that we refuse to pay for. Where do we get that money? We borrow it... and then hand the bill to our kids, grandkids, and their grandkids. We need to stop fooling ourselves. The GOP's Starve The Beast strategy has created a generation of Free Lunchers. Instead of each generation paying their own bills... we dump them on the future taxpayers who will pay more and get less in return. WTF do we care... they have no say.

And of course the GOP wants more tax cuts. But Obama also set a bad precedent when he extended most of Bush2's irresponsible tax cuts.

[msongs]

8. banks pay us O.1 percent. 1.8 is better than that at least. nt

[eniwetok]

10. this has NOTHING to do with banks....

There's only ONE market for the special SS Securities... and that's THE US GOVERNMENT. They can set any rate they want.

Maybe it's time you thought more about the health of the SS program and the purposes they serve. These low interest rates are WEAKENING those programs because once those trust funds run out... and some are right on the edge... this only serves GOP purposes to further weaken these programs.