Social Security Sense and Nonsense

[peace frog]

Here are the facts. Social Security is a well-run, fiscally responsible program. People earn retirement, survivors, and disability benefits by making payroll tax contributions during their working years. Those taxes and other revenues are deposited in the Social Security trust funds, and all benefits and administrative expenses are paid out of the trust funds. The amount that Social Security can spend is limited by its payroll tax income plus the balance in the trust funds.

The Social Security trustees — the official body charged with evaluating the program’s long-term finances — project that Social Security can pay 100 percent of promised benefits through 2037 and about three-quarters of scheduled benefits after that, even if Congress makes no changes in the program. Relatively modest changes would put the program on a sound financial footing for 75 years and beyond.

Nonetheless, some critics are attempting to undermine confidence in Social Security with wild and blatantly false accusations. They allege that the trust funds have been “raided” or disparage the trust funds as “funny money” or mere “IOUs.” Some even label Social Security a “Ponzi scheme” after the notorious 1920s swindler Charles Ponzi. All of these claims are nonsense.

Every year since 1984, Social Security has collected more in payroll taxes and other income than it pays in benefits and other expenses. (The authors of the 1983 Social Security reform law did this on purpose in order to help pre-fund some of the costs of the baby boomers’ retirement.) These surpluses are invested in U.S. Treasury securities that are every bit as sound as the U.S. government securities held by investors around the globe; investors regard these securities as among the world’s very safest investments.

http://www.offthechartsblog.org/social-security-sense-and-nonsense/

[PoliticAverse]

1. The trust funds were "raided".

The point is there is no money in the trust funds only "special issue securities" that represent a promise to pay back the money
by the government (the securities do "pay interest", and unlike regular treasury bonds/bills and notes can be redeemed by the
trust fund at any time). Since the federal government runs at a deficit, in order to redeem any of the securities in trust fund
the government would have to borrow more money, issuing more bonds to be sold to the public.

It is currently estimated that in about 2016 Social Security will have to start redeeming the securities in the trust fund on
a regular basis, increasing the government deficit. This is why Social Security is one of the issues Obama's "deficit commission"
is looking at.

[customerserviceguy]

2. It'll be before 2016

especially if the recession doesn't end very, very soon.

[PoliticAverse]

3. Yes, the economy is the wild card.

The longer the recession goes on the less FICA payroll taxes the government takes in and the
sooner they'll have to redeem the trust fund securities on a regular basis.

[customerserviceguy]

7. And there's only two ways to redeem them

One is to sell Treasury securities on the open market for cash, and the other is to just simply inflate the currency.

Oh, of course, there's running annual Federal budgets that raise taxes and cut spending to generate surpluses in the necessary amounts, but that's not gonna happen. That's why there's a commission that's been formed.

[alc]

4. any official description of these "Treasury securities"?

I see them mentioned in lots of ss articles, sometimes referred to as "special securities", but I haven't found details (preferably on a government site and stating that these securities are already included in our federal debt). It's possible the details are great and I've just missed them in my searches. It's also possible that Gore was right about the need for a lock bock, and all the attempts to avoid specifics over the last 10 years have a reason, and the various guesses at the details are accurate.

The details matter a lot. "Something" is going on that's causing a review of ss and potential cuts (from Obama and Democrats). Some things that could cause this would be if the details of the securities are NOT the same as normal Treasury securities. For example

* not transferable/sellable (useless until the government is willing to pay)

* maturity date 1000 years in the future (that's extreme, but why are we assuming they are due now/soon?)

* redeemable only with replacement securities, not with cash. In conjunction with the first point - what if they treasury says "yep, those are mature/due. here's some more with the 5% interest we promised." In that case the treasury is offering to pay with something that everyone is claiming is just as good as a normal treasury security. So how can ss not accept it as payment? There's no default on the securities, but ss doesn't get anything they can sell for normal assets or distribute.

* these have NOT yet been included in the federal debt. an accounting maneuver that would be highly illegal in business but is possible here. If it's been done, we will know next year when ss needs to redeem treasury securities and we will need to issue normal (on-the-book) securities to pay. At that point our debt shoots up another $2-3 trillion.

It seems there is a lot of distrust of both parties around here to do the right thing on many issues (and rightly so). Yet most people want to assume that they have been doing the right thing with the ss trust fund and have not been lying to us. Since the catfood commission does exist, it seems likely that there is something the government is trying to cover up or hide. And complete faith in the ss trust fund is probably not warranted until we get all the details about the ss securities. The value of the securities is meaningless without the specifics of payment.

[PoliticAverse]

5. The "Special Issue Securities"

http://www.ssa.gov/OACT/ProgData/specialissues.html

They are 2 types:
1 - short term - "Certificates of Indebtedness" that mature the next June 30th. These are issued daily as FICA revenues exceed expenditures.
2 - long term - Bonds. These are issued in June when the short term securities are due.

They are 'special issue' for 2 prime reasons:
1 - they are only issued to the trust funds. They cannot be sold to/owned by the public.
2 - unlike regular securities which can only be redeemed by the holder on the maturity date these
can be redeemed anytime by the trust funds.

[PoliticAverse]

6. For more information about the Social Security trust fund...

For more information about the Social Security(aka "FEDERAL OLD-AGE AND SURVIVORS INSURANCE") trust fund see the laws governing it:
http://www.ssa.gov/OP_Home/ssact/title02/0201.htm

[customerserviceguy]

8. I have a picture

[SharonAnn]

9. The 'something" that is going on is a desire to raid the Social Security trust funds

When asked "Why do you rob banks?", he answered "Because that's where the money is."

Financial "experts" have been trying to get their hands on "managing" Social Security funds for a long, long time. That way, the can charge "fees" and use the money for their various speculations. They've already taken us through a few bubbles, raided pension funds, crashed our 401-Ks, and taken the value of our houses. What's left to take? Social Security.

Seriously, it's all about getting their hands on the money.

Medicare and Medicaid are in financially challenged situations. They need help now! So do many other programs.

Social Security is solvent and can pay 100% of its obligations for at least 27 more years, maybe longer.

So why are they salivating over Social Security? It's not our biggest financial problem. It's not our most urgent financial problem. And, it may end up not to be a financial problem at all.

And borrowing money from someone else doesn't change the real deficit or national debt. It's still a deficit and a debt. I know they use some accounting gimmicks to hid some of the deficit by including Social Security over-payments into the trust fund as "current revenue income", but it still adds to the national debt.
"
Goldman Sachs ("a giant vampire squid wrapped around the face of humanity relentlessly jamming its blood funnel into anything that smells like money." according to Matt Taibbi) wants our Social Security money. It's that simple!