Social Security to start cashing Uncle Sam's IOUs

[golfguru]

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.

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

[golfguru]

1. What this news really means is that we are broke!

We can no longer afford to fight 2 wars.
We can no longer afford to patrol the seas world wide.
We can no longer afford to maintain military bases in dozens of
countries world wide.

It also means we better start tightening our belts all around or
else we will eventually compete with Zimbabwe in economic status.

[dflprincess]

3. Sadly, between the Republicans, Blue Dogs & DLC types it won't be the wars

they decide we can't afford. It will be Social Security.

[stevebreeze]

2. Of course cashing in those IOU's was the plan from day one

NOT cashing in those iou's would amount to a partial default of US Treasury bills. It would be disastrous for the nation and the boomer's now starting to retire.

[DGG]

6. There are so many misconceptions about Social Security

that it's hard to know where to begin (or when to stop, but I'll try to restrain myself...). You're of course absolutely right that what's happening right now is how things are supposed to work, not remotely a problem.

Social Security is a pay-as-you-go system, not a savings program. Current taxes pay current benefits. The accumulated bonds in the Trust Fund exist simply to smooth out variations when taxes are inadequate to cover all the benefits (due to a period of unemployment or changing demographics). If current conservative macroeconomic projections hold true and the Trust Fund runs completely empty in 20-30 years (which won't happen at all in a more optimistic scenario), and assuming absolutely nothing is done in the meantime, then under he law benefits will be proportionally reduced to what tax receipts will support, probably in the range of a 20-25% cut. That may sound like a major hit, but because Social Security benefits are based on wages and wages tend to grow at least a tiny bit ahead of inflation, the average benefits paid even *after* that cut, after adjusting for inflation, will probably be comparable to or even a little better than average Social Security benefits today. Some crisis! This is all public information, but hardly anyone bothers to look it up.

Another misconception worth addressing: The Trust Fund has not been "raided" to pay for other government spending as you often hear. Yes, the money is used to buy Treasury bonds (what's the alternative? convert it into stacks of $100 bills and store them next to the petroleum reserve?) and the borrowed funds are spent on everything from the Iraq war (boo!) to scientific and medical research and education (yay!), and most of that spending has the effect of stimulating economic growth to make it easier to pay back those bonds in the future. Don't fall for conservative myths about Social Security.

[westerebus]

8. Welcome to DU.

I believe it was Dick Nixon who raided SS to pay for the last few years of the Viet Nam war. Which is the real reason he was impeached. Then again that's just my opinion.

[Statistical]

10. "what's the alternative? convert it into stacks of $100 bills and store it..."

Exactly. Welcome to DU.

This is a hard concept that most people don't realize.

Having "cash" sitting in the SS trust fund (i.e. lockbox) while at the same time the US govt is in debt is stupid.


It would be like having $1000 in your checking account earning 0% and $5000 on your credit card but you don't want to use the $1000 to pay down your credit card because it would be "raiding the lockbox".

SS is working EXACTLY as designed. For 2 decades surplus from SS resulted in lower income taxes. Now a deficit in SS will require higher income taxes to payback that borrowed money.

The rich are simply trying to do a last minute "switchero" and change the rules of the game. Sadly many on DU (via misinformation) are buying it.

[westerebus]

11. Or.

They could have dedicated a portion of the funding to alternative energy and moved the US closer to a self sustaining energy policy. Instead, forty years after Jimmy Carter tried to, we are are square two and holding.

As far as having a rainy day fund and debt, that beats the hell out of debt as growth and lower taxes in terms of economic planning, IMHO.

[Statistical]

12. By legislation they couldn't "dedicate a portion".

That is .... DRUMROLLLLLLL...... CONGRESSES job. A required by the Constitution.

SS had a surplus every year for 2 decades. SS used that surplus to buy Treasuries. The funds raised from those Treasuries ($2.2 trillion) were at the disposal of Congress. They became revenue just like any other revenue.

90% of it was wasted just like Congress wastes most of the money it is given. However there isn't anything special about SS money vs income tax money vs excise tax money vs tarriffs/duties money vs gasoline tax money vs death tax money, etc.

It is all money. Money is fungible. If Congress did a good job of spending revenue they would have done a good job of spending the SS surplus portion too. Since Congress (generally speaking) does a horrible job spending money they did a horrible job with the portion that came from SS.

I agree lowering taxes was stupid. Once again Congress is not a very good financial planner.

[westerebus]

13. Good place to economize.

Might be time to reduce the Congress with lay-offs. As they don't get much done and what they do is low quality workmanship.

What America needs is more productivity and positive outcomes. So I say we start lay offs.

Give them a dose of Capitalist reality. By Executive Order.

A modest cut of 9.7% will due. That would give the rest of them some incentive.

Bipartisan, of course.

As they are exempt from EEOC regulations, a lottery would work.

It's for the greater good. I'm sure they will understand.

Anyone under 66 will just have to wait on their pension.

John Yhoo would be able to draft an executive finding without any problem.

SCOTUS might not even hear the case.

Now who can we get to sign it?



:think:

[madrchsod]

4. oh no we are all doomed!

i figure at the rate i`m going there`s going to be plenty before i go....so for all of the rest of you...good luck!!

i guess it`s time for a new reporter to cut their teeth on the "social security is going broke story"

[OHdem10]

5. What this really means is the Government knows the job situation

is not going to improve.

All those millions of people who do not have jobs are
not paying SS Taxes. All those people whose salaries
have gone down instead of up are paying less SS Taxes
than they once did. Money not going to Government.

They need to fix the economy before destroying SS.

[golfguru]

7. You are so correct n/t

[RationalAltruism]

9. A simple way to solve the massive SS problem

would be to remove the payroll tax break for the top income earners. I've heard it would completely make up the projected SS deficits.

[golfguru]

14. Right you are...so why are'nt they doing it?

[mopinko]

15. because it would totally change what ss is, unless

you also want to remove the cap from benefits, and let the top 1% get checks for thousands and thousands of dollars.
fica payments are not taxes. they are insurance premiums, designed to be the base of retirement savings. there are a lot of reasons why this is an important concept, not least of which being the political vulnerability that would come from making it a welfare/"income redistribution" program. the people who get those checks have the pride in knowing that they earned it, and that it is not a handout. your plan would take that away.
and if you fairly distributed the benefits from those "capped" earners, would it even benefit the system?

teddy kennedy railed against the idea of changing the footing of the ss system. maybe he knew what he was talking about.

[golfguru]

16. Nope, I think it is high time SS benefits be adjusted for income levels.

[mopinko]

17. the cap goes up every year.

it has doubled in the last 10 years.

[golfguru]

18. At this point, eliminate the cap and tax every dollar of earnings n/t

[mopinko]

20. you made on effort to answer my concerns.

my way or the highway tends to lead to some pretty dull discussions, among other things.

[OllieLotte]

19. Why not have everyone contribute to the solution?

Slow down the rate of yearly SS increases. Increase the age at which a person can take Social Security. Raise the amount of personal income exempt from SS. Sounds to me like everyone gets dinged a bit and the system wins, which means we all win.