Social Security to start cashing Uncle Sam's IOUs

[FreakinDJ]

Source: STEPHEN OHLEMACHER, Associated Press Write

Social Security to start cashing Uncle Sam's IOUs

PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.



Read more: http://news.yahoo.com/s/ap/us_social_security_ious

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Well - here is where the "Shit Hits the Fan"

[dkf]

1. We are so screwed. We owe the deficit plus social security. Are we going to just sell more bonds?

[FreakinDJ]

3. Remember Al Gore's "lockbox,"

Remember Al Gore's "lockbox," the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on "Saturday Night Live."

Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

http://news.yahoo.com/s/ap/us_social_security_ious

What a difference 1 AssHole can make

[marasinghe]

16. thanks for the reminder & for the original post.

i may be quite wrong on this; but - didn't The One Asshole also promise, during that same 2000 campaign, that he supported Al Gore's idea of an SS 'lockbox'? of course, he manifested the congenital repuke disease as soon as he was elected, fixed his bloodshot gaze on the oil oozing out of iraqi soil & forgot his own lies.

[No Elephants]

18. Imagine if the lockbox had always existed and those trillions had been invested conservatively

(no pun intended) since the 1930's?

That should have been the case. But, noooooo.

[WriteDown]

28. And it hadn't started paying benefits until the 70's

People would get what they paid into their lockbox.

[LeftHander]

36. and Lehman Bros would still be with us...nt

[golfguru]

45. We can no longer afford 2 wars, military bases all over the world

playing the policeman of the world by patrolling every
ocean to protect commerce for OTHER countries.

Heck we can't even afford foreign aid any more. How do
you justify foreign aid by using borrowed money from China?

[customerserviceguy]

7. No, we're just going to print money

It's the only way out of the debt problem with Japan and China, too. Of course, it won't be worth a damn, but inflation always favors debtors over savers.

[dkf]

14. Exactly what is the mechanism used to "print money"?

And how does that fit with the expected draining of the excess liquidity we are expecting?

[No Elephants]

19. Wait! I think I know this. Leonardo Di Capril did it in a movie with checks instead of cash..

There are these huge machines in a big room. You put special paper and special ink and you turn on the machine and whoopie!]


I don't think the part about fitting the printing with the expected draining we're expecting was in the movie, though. :shrug:

[customerserviceguy]

27. It's a euphemism

The government is just going to electronically "create" money to pay off obligations that it cannot borrow or tax to meet. The government has absolute control over the money supply in the long run, and does this every so often, as needed. A lot of it was created in 2009, we just haven't felt the inflationary effects of it yet.

What "draining of the excess liquidity" are you talking about? We're headed for stagflation like we've never seen in this country.

[bossy22]

29. LMAO!!!!!

if we have a massive debt problem then japan should have sunk already. Their debt is close to 200% of GDP (ours is only about 60%). China isn't a super fiscal star either....they have a national debt of about 40%

[customerserviceguy]

38. Japan has had a fairly stagnant economy

for quite some time now. There are two things they have going for them, though: they don't have a massive defense burden, and they have a thrifty population that knows how to save for a rainy day.

Americans aren't quite that lucky.

Where do you think the money to pay SS benefits is going to come from?

[bossy22]

39. but americans are lucky

unlike japan, our population is going to increase instead of decreasing. Also our economy is actually growing. What you said is equivalent to a doctor saying "patient A is brain dead and has cancer spreading all around his body; but his heart is just dandy". Japan is far from lucky; no country that relies on a stable population to keep its social programs alive is lucky when they have almost a birth rate of 0.

and the defense budget arguement is played out too much. We can spend big bucks on defense and still support our obligations. Right now we spend less than 5% of our GDP on defense (our cold war average was 6%). In fact many countries have higher percentages and manage to take care of their citizens (israel for example). Hell in the clinton admin we managed to have a large defense budget and run a surplus. Also the soviet union ran a defense budget of close to 15% of GDP for most of the cold war. So i think we will be just fine

The U.S. future looks much better than the Japanese one.

[golfguru]

43. You are forgetting most impostant thing....Japan Vs USA

Japanese people have loads of savings invested all
over the world. US citizens & Government are in debt
up to their eyeballs.

[customerserviceguy]

47. If you discount immigration

our population is becoming stagnant as well. I didn't mean to give the impression that the Japanese weren't having problems, just that they have a few advantages that we don't.

As for our economy growing, I don't think that's been the case for the last two years (funny number crunching notwithstanding), and if it does start to show real growth again, you'll see massive inflation roaring back. That's going to be fine when it comes time to pay off the Chinese, but with COLA's in the Social Security scheme of doing things, it will put us on a long run of constant price and benefit increases, until the baby boom generation subsides.

[hollowdweller]

40. I'd like to see it come in the form of cuts in defense and taxes on Wall Street

After all a good % age of the money owed on SS was spent on our ever increasing defense budget and the numerous bailouts of the finacial sector.

[jody]

2. Yet some DUers proclaim that SS does not face bankruptcy even though it can not pay 1/4 of

its obligations after 2037.

[happyslug]

11. only is worse case scenarios, any any other scenarios SS breaks even or better

i.e. if the economy does substantially WORSE then it has over the last 70 years, then Social Security will have to cut back benefits 25% to break even (and in this worse case economic scenario NOTHING does as well as Social Security, but that fact is NOT stated when the 25% cut is mentioned for Social Security stills come ahead of all other alternatives in such worse case economic scenario). If the economy follows what the economy has done over the last 70 years then Social Security pays everyone at 100% out of Social Security Taxes (This is the economic pattern we are still on, even with the recent recession).

One last comment, the expected loss in a "worse case scenario" is only 15% not 25%. The 25% figure probably comes from the 15% reduction would be equal to about 25% of what you received AFTER the deductions. The GOP has used such "inclusive" language when it is to their advantage. i.e. if what you expect is 100, a 15% drop means you get only 85. 15 out of 85 equals 17.6% thus in "inclusive" terms it is a 17.6 % drop not a 15% drop. I suspect something similar is being done to get the 15% expected drop to be a 25% drop. How that is being done I do not know, but I would like to point out even Social Security Administration points out it is only a 15% drop in the worse case scenario.

http://www.ssa.gov/OACT/TRSUM/index.html
http://wfhummel.cnchost.com/socialsecurity.html
http://www.ncpssm.org/news/archive/financestatus/

Please note given the severity of this recession we are into the worse case scenario, but only during the depth of this recession. Thus Social Security has to deep into the trust funds for the first time ever. If the economy does any form of improvement that will reverse and we will return to excessive payments to Social Security till about 2018. The 15% cut in payment is based on the scenario that we NEVER come out of this recession, an unlikely scenario at best.

[dkf]

15. Does breaking even mean that outflows equal inflows?

If so then were already there right?

[happyslug]

34. Yes, the economy has gone down that far that fast

But this can be solved in two simple ways:
1. first eliminate the Cap, this would bring in additional revenue and as such income from Social Security Taxes can once again exceed outgoes AND
2. Do NOT permit the Business Income tax cut done by Bush to become permanent. Under Senate rules unless 60 Senators signed off on the change in the Tax code, any change can only be for ten years. That was the rule under Bush when he had the tax cut passed. As such the tax cut ends this year (The older higher tax rate kicks in 1/1/2011). This also brings in additional revenue and unlike removing the cap on Social Security Taxes, is automatic WITHOUT any congressional action.

[quakerboy]

55. Thats like saying you are bankrupt if you take a vacation

You are often spending plenty of money on a vacation, but even if you are getting paid time off, you still have your usual bills to pay with it. And yet you are not bankrupt, because it is a temporary condition, and one that you have, or at least should have been saving money for.

All of which to say, Handle government responsibly, and we won't have any trouble using the SS trust fund to cover the times when outflow is equal or greater than income. Remove the wealth protector cap, and we won't even have to do much of that.

[pnorman]

26. i was looking for those links. Thanks

I'll check them out later, as well as the other comments on this thread,

[Romulox]

32. If it's "only" 15%, let's just cut benefits by that amount NOW so we can put away the money

for future generations! That's precisely as fair as passing the loss on to the next guy. :hi:

[happyslug]

33. Cut benefits now on the less then 20% chance we have to cut benefits in the future?

Now I have NOT reviewed the actual statistics but the general rule of thumb is the best case is the top 1/5 (or 20%) and the worse case is the bottom 1/5 (20%) chance of occurring. Generally there is a 50% chance of the what has happened in the past will continue. Thus you are asking for people to take a cut in benefits NOW to cover a 20% chance of NOT having enough money to may people in 30-40 years? Even during the years between WWII and Reagan, business did NOT plan that way as does no one else. You look at it and take precautions, but plan for most likely case scenario. Remember we have the same chance of having a worse case situation in 30 years as we have of having the best case, thus to plan for EITHER is foolish given that both have less then a 40% chance of occurring. You plan for most likely case (Which is what the economy up till 2008 was doing) NOT best case or worse case UNLESS such worse case is truly terrible, and a 15% cut in benefits while bad most people can live with.

My point is simple, leave Social Security as it is, remove the cap (Which brings in more money from the wealthy) if anything, but just leave the system as it is. The Social Security system is intact, has massive political support and more then adequate funding. Do NOT listen to the Right Wing that it is broken, they have been saying that since the 1930s, it is almost like a old vinyl record with a scratch, just repeats over and over again.

[Romulox]

37. < 20% my eye. The program IS insolvent as it stands today, and no Deus Ex Fish and Loaves is going

change that.

And I'd LOVE to see the cap entirely removed, but there's one (massive) problem--as it stands now, any increase in SS revenues beyond what is needed to make present payments must be "lent" to the general fund (read: spent to subsidize deficit spending).

So raising the cap doesn't really help the scheme's long term solvency without some other huge changes.

[hollowdweller]

41. It really makes me sad to see so many parroting GOP talking points

It shows how good they are at propaganda that you got people taking up their mantle on a democratic site (or are they paid shills?)

[customerserviceguy]

48. "GOP Talking points"

What people use as logic when they cannot refute the substance of an argument around here.

[DGG]

42. Of *course* the funds are put to use!

Here are our options for the money in the Social Security Trust Fund:

- Withdraw it from circulation. Bad idea. Not good for the economy and the funds lose value over time to inflation.

- Hand it over to Wall Street or the banks. They'd love it, but it's not our best option.

- Buy government bonds -- a good, conservative investment. Government spending stimulates economic growth, and a fair amount of it gets invested for the long run into eduction, scientific research, infrastructure, and so on.

Not lending Trust Fund money to the government won't make the deficit go away; the money will be borrowed from somebody else. And yes, the debt will have to be serviced, preferably by a more progressive tax system than the one that currently has Warren Buffet paying a much lower rate than his secretary. I'd rather see money paid back into the Trust Fund and ultimately going to Social Security recipients than to China.

[Romulox]

51. Just like a crackhead puts the funds he takes from your purse "to use"

it's just that that "use" is not in any way shoring up SS's future solvency--in fact, the "use" has always been to spend the money to avoid raising other taxes.

"Buy government bonds -- a good, conservative investment"

Bond issued by other governments are an "investment". Bonds issued by the US government are obligations of the US taxpayer. There is no third party payor to pay off this "debt". Current workers have to pay it.

[Iowa]

17. This was explained to you in great detail in another thread by two DUers...

...yet you continue to perpetuate the notion that Social Security is facing bankruptcy. It is not facing bankruptcy.

There are some actuarial issues that need to be addressed. Such issues are not the equivalent of "facing bankruptcy". According to projections in the last trustee's report, if those issues are not addressed, benefits would need to be reduced by roughly 24% in 27 years. What you repeatedly fail to understand is that these are actuarial issues that are faced by ALL large pension plans on a periodic basis. It is simply the nature of the beast. Nothing is ever static. Occasional adjustments must be made due to variables that cannot be predicted with 100% accuracy. Such issues are to be expected; it simply goes with the territory. Despite your repeated claims to the contrary, such actuarial types of issues are NOT an indication that Social Security is facing bankruptcy - not even close. They are important issues to address, but they do NOT foretell the doom that you claim. What you are claiming would be akin to declaring that a millionaire who is living off his assets is "facing bankruptcy" if his present spending trajectory might force him to reduce his spending by 24% in 27 years (unless, of course, he elects to reduce his spending and/or increase his income by a small amount NOW). Our millionaire is not facing bankruptcy! To claim that he is would be goofy.

The Social Security Trust Fund is only one part of the SS system's funding mechanism, and it does not exist in a vacuum. The national debt and ongoing deficits matter in the sense that a default on U.S. treasuries or the collapse of our economic system would obviously take many things down with it. One cannot declare, however, that the Social Security system is facing bankruptcy today because of some doomsday scenario that is conceivably possible in the future. It's a matter of concern, of course, but so are many other things.

It has been pointed out to you before that the right is on a mission to destroy Social Security, and one tactic they employ is to undermine faith in the system. You are assisting in that mission when you knowingly post false information declaring that the SS system is facing bankruptcy. As I said before, it doesn't appear that you are doing this deliberately or in an effort to cause harm... you simply appear to lack a fundamental understanding of how the system is designed to work (or how ANY pension is designed to work). Yet you continue to do it anyway. No amount of information seems to have even the slightest effect on you. I see that happyslug has already ably refuted your post, but I think it's important to point out that this isn't the first time that you have repeated misinformation about Social Security "facing bankruptcy" despite having been provided with ample information to the contrary by other DUers. What we say here matters.

This is a very important issue, and because it is a rather complex one, it is very easy to see how the right is able to score points and undermine faith in the system. Just look at your post, for example. Even you, someone assumed to be a progressive DUer, has bought into their claim. You simply made a brief, one-sentence declaration that the Social Security system is facing bankruptcy, along with a disparaging remark about DUers who know this to be false. Your post would take 30 seconds to write, and although it is completely false, it's a very quick read, it is very easy to grasp, and it feeds into the sense of cynicism that many of us are feeling. Spreading disinformation is quick, easy, and effective. No knowledge is required because the intent is not to inform. The only way to counter your post is to spend the time necessary to provide facts, and that is more difficult and time consuming due to the complexity of the topic. Disassembling disinformation is much more difficult than spreading disinformation. Those who spread disinformation can do it without breaking a sweat, and in doing so, they can wear down those who make an effort to clean up after them and spread the truth. It's just very difficult to understand why you would continue to do this.

Good progressives like yourself shouldn't be helping to spread FUD about the SS system. You wouldn't cross a picket-line, right? Well... you shouldn't be perpetuating misinformation about SS either. If you insist on continuing to post about it, at least take the time to study the matter first. Unlike many of the things we post about here, this is about facts - not opinion. There are right answers, and wrong answers. I guarantee you that you will be embarrassed to go back and read your posts if you will just take the time to study the matter in more detail.

Please join other progressives and your fellow DUers in supporting the Social Security system by learning the truth, spreading the truth, and beating back the lies spread by the right. At the very least, please don't spread disinformation. Because they WILL come for Social Security. How can we possibly hope to defeat them if their lies are allowed to flourish - even among progressives on a site like DU? Thank you.

[Romulox]

31. To be a pedant, SS is *insolvent* in my lifetime. BK is not available to gov't trusts... nt

[customerserviceguy]

49. Bravo

I wonder if Bernie Madoff was that persuasive when he was running his insolvent scheme?

[Iowa]

53. Unbelievable...

Even the biggest loons on the right aren't suggesting that the Social Security system is equivalent to Bernie Madoff's ponzi scheme.

This place is hopeless. I give up.

[golfguru]

44. they are smoking something really good

because the baby boomers are just coming on line
to retire and collect SS. It looks bleak.

[raouldukelives]

4. This is nothing serious

Apparently the Department of Defense has been running in the red since inception and they haven't run out of cash yet.

[madrchsod]

5. i`ll get mine!

i`ll be long dead by 2037.......


O8)

[liberation]

6. Isn't money really a form of "IOU?"

I guess some IOUs are more IOUs than others or something?

[No Elephants]

20. Hey, those federal reserve notes are as good as gold. Just ask Nixon.

Oh, wait. Maybe that's not right.

[Iowa]

22. All bonds are debt (or IOUs)...

The Social Security Trust Fund holds bonds. The bonds in the trust fund are US Government bonds that are backed by full faith and credit of the U.S. government - just like the bonds that are held by investors.

[golfguru]

46. Yeah...and the debt holder (US Treasury) has NO COLLATERAL

try getting a personal loan without collateral
from any bank.

Also, Moody's rating services just announced they are
seriously considering reducing the AAA rating of US Bonds.

You know what that entails, don't you? It mean interest rates
on all future bond issues will have to go higher, which
means less money for everything else and/or higher taxes.

[Romulox]

52. Right, but not all bond obligors are the US taxpayer. That's true only of US Gov't bonds.

The US Gov't gets its money through regressive payroll taxes. Not magic. :hi:

[OHdem10]

8. All those people with no jobs are paying no SS Taxes. All those

people who have jobs but whose salaries have gone down instead
of up--not paying as much as they once did in SS Taxes,

It begins to add up.

This must tell us the Government does not expect very much
in the way of improvement in job and salary situation.

[WCGreen]

25. Collection this year is down so that they have to tap a minute portion ot

the trust fund. This is, after all, the worst economic downturn since the depression. Cash flow matters. The fund uses short term cash to fulfill short term obligations. This really amounts to what we take in we send out.

Since the early 80's, The SS fund has taken in more than it has sent out. Even during all the other recessions that have come and gone since 1980.

All that time that the fund was running a surplus, they purchased those special bonds from the Treasury which increased the not touched until now trust fund.

What is happening now is the inflow does not equal the outflow so they have to take down some funds from the trust.

I think as soon as we get under 9% unemployment, the fund will again be running a surplus and money will flow back into the trust so that you and me and our children and their children will have money when we all retire.

[Threedifferentones]

54. EXCEPT

As the article points out, and as you should have already known, that SS trust fund has been tapped in to MANY times to cover the federal gov's huge deficits. When SS "lent" that money to our govt, our govt didn't invest it to make a profit and then pay back the loan, it spent it all. Instead of borrowing even more from foreigners, we borrowed from our SS "trust."

Dipping in to that trust now requires our government to borrow or print money, or raise taxes, since the federal budget is once again in the red.

Every other year before now, Congress has simply used the SS trust to cover the federal deficit, which they made up for by issuing bonds to SS, ie IOUs to us taxpayers. Of course, the government is supposed to make money via taxation. So, to pay back tax payers, you collect taxes...huh?

Now, SS is adding $29 billion to this year's deficit.

In other words, the trust fund is the pocketbooks of we the people, and the diminishing credit of our govt. That is not an acceptable plan for hard times, and it is not guaranteed to continue working. When you think about it, it really seems like it OUGHT not to work...borrowing from yourself?

SS is fucked. It's a great idea, we don't need to scrap it, we just need to tax the fuck out of rich people to keep it afloat, and cut defense and "intelligence" spending to level the federal budget.

[pattmarty]

9. You're right, but there is a lot more "shit" coming from many.............

............different directions.

[DJ13]

10. The fix isnt to F around with Social Security

The fix is in getting people back to work so they're paying into it.

Anything else is just an excuse to ripoff those who already paid into it.

[No Elephants]

21. So job creation is all it's going to take, Well, no problem then.

[salib]

12. this should not be necessary

Roll back the Reagan tax cuts, this time on Social Security.

He RAISED taxes on the poor and middle incomes, creating the concept of the "trust fund" that we are now "tapping". However, if we simply taxed everyone at a FLAT RATE, i.e., if you make OVER 105K, you still pay SSN (which is not the case now), then there would still be plenty to pay-as-you-go, which is the ONLY STABLE SOCIAL SECURITY SOLUTION.

Quit falling for propaganda.

[progressoid]

13. Not to worry. Congress will get this thing fixed ASAP.

:banghead:

[No Elephants]

23. I just hope this story doesn't give China any bright ideas.

[OneBlueSky]

24. the whole fucking financial system (including SS) is a house of cards . . .

some day soon someone's gonna have to pull one of the supporting cards, and the whole thing will be the largest game of "52-Card Pickup" you've ever seen . . . more like "2 Trillion Card Pickup" . . .

[Romulox]

30. Where are the "debt = wealth" crowd to argue that none of this matters? nt

[Psephos]

35. Another bubble about to pop.

As with the other bubbles, there's no shortage of elites and soothsayers telling us why it can't happen, right up until the moment it does.

[AlphaCentauri]

50. So it would be impossible to lower the retiring age to 55 n/t

[unkachuck]

56. do not....

....look at our federal deficit or our governmental debt and cry, "Whoa is me..." whilst you wring your sweaty hands over Social Security....

....no, look at our obscene deficit and governmental debt and ask, "These rich corporate bailout pigs on wall street and in Washington have made out for decades like the corporate bandits they are; what the hell do I get out of this crooked government?"

....if the answer is 'nothing but taxes and debt', revolt!