Shrub raiding federal pension fund to balance tax breaks for wealthy

[BR_Parkway]

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B29B8475F%2DEABA%2D4E5C%2DAE8B%2D69EE4C007B07%7D&siteid=google

Treasury is suspending reinvestment in the so-called "G-Fund," an investment vehicle for a federal employees' retirement system. The action will free up $65.266 billion, a Treasury spokeswoman said.
"Without this action we would reach the debt limit today," spokeswoman Brookly McLaughlin said Thursday.

<snip>

"I know that you share the president's and my commitment to maintaining the full faith and credit of the United States," Snow wrote to Senate Majority Leader Bill Frist, R-Tenn., on Thursday.

Beneficiaries of the government retirement fund won't be affected by the temporary halting of reinvestment, Snow explained to Frist. The fund will recoup all payments, including interest, Snow said.

"Once I am able to make the G-Fund whole, the effect on the G-Fund and its beneficiaries will be the same as if this temporary action had never taken place," Snow wrote to Frist.

In other words Congress people, if you don't raise the debt limit, your pension is going to be tanked

[DoYouEverWonder]

1. Maybe that will get their attention?

Unless it's personal, they just don't give a shit.

[Skidmore]

2. I have mixed feelings about this.

Don't want to see it happen, and hope someone develops a sense of integrity and courage and is willing to suffer the pain that the average worker experiences at the hand of corporations raiding their plans. On the other hand, perhaps it is a good way for Congress to understand firsthand what we are going through out here. Those millionaires in Congress will not really suffer, but their staffs will. Believe me, they will be hearing about it daily. Hope there is a staffer or two to point out the similarity to conditions in the private sector.

[Nothing Without Hope]

9. They don't care. Remember the bankruptcy bill - CARTOON:

[cassiepriam]

36. You are exactly right. Until it hits them in a personal way they

are clueless. Great point!

[rodeodance]

3. "Once I am able to make the G-Fund whole"---maybe in 100 years?

"Once I am able to make the G-Fund whole, the effect on the G-Fund and its beneficiaries will be the same as if this temporary action had never taken place," Snow wrote to Frist.

[rodeodance]

4. "will free up $65.266 billion," about same amt. Jr. wants for Irag. yet

that is off budget (not counted)----We are in deep trouble.

[Kahuna]

5. Another story that the media has failed to report so that

people understand how truly corrupt this admin is.

[Arkansas Granny]

6. Maybe someone can help me understand this.

I'm not well-versed in economics, but is this similar to what they've done with the Social Security funds? Is this why there's nothing in the SS "lockbox" but IOU's?

[Warpy]

7. Exactly right

and unless they start confiscating all the wealth stolen by the rich through a skewed tax system and underpaying workers for the past 40 years, those IOUs will continue to be worthless.

He's just doing what corporations have done all along, use those pension funds like a piggy bank.

[Lasher]

16. The SS trust funds are not filled with worthless IOUs

That is the exact language the puke noise machine has been repeating for years, hoping we will be complacent when they raid the trust funds, as they plan.

As Media Matters for America has documented, the oft-repeated claim that the Social Security trust fund is a "myth" is false. The debts that the government owes Social Security are as real and redeemable as all public debts to which the government is obligated. As a January 10 New York Times editorial explained: "If the trust fund's Treasury securities are worthless, someone better tell investors throughout the world, who currently hold $4.3 trillion in Treasury debt that carries the exact same government obligation to pay as the trust fund securities."

http://mediamatters.org/items/200502140007

When investors become worried about the economy and the stock market, they "flee to safety" by selling their other securities in exchange for U.S. Treasury bonds and bills. Backed by the full faith and credit of the United States government, U.S. Treasury securities are considered to be the safest, most reliable investment worldwide. Because the federal government is legally obligated to pay back interest and principal on those securities, it would take an almost unimaginable calamity for a default to occur. Social Security's trust funds, which now amount to $1.5 trillion and are expected to grow to $5.3 trillion by 2018, hold nothing but U.S. Treasury securities.

http://www.ilcaonline.org/modules.php?op=modload&name=News&file=article&sid=1606

But the evil cartel wants to selectively default on the Treasury securities that are held by the SS trust funds, as I have said. The pukes' game here is, if they can convince us that these Treasury bonds are worthless, then who would get upset when they steal them?

[BR_Parkway]

24. And didn't they use the Federal plan to try to sell us on the whole

privatize Social Security issue? I remember them repeating how they were proposing something that Federal employees already had.

And here's the famously showcased Federal plan getting shortchanged just a few months later - hopefully this will show more and more why Shrubs plans just don't work.

And Clinton may have had to do it because he had no budget approved to legally spend - but Shrub has blown his earlier budget and run out of cash (just like every business he's ever drove into the ground, no Daddy Warbucks stepping in to write a check this time).

[Lasher]

25. Yes, that's a shell game they've been playing

That is, they want us to believe we have to choose between a 401(k) type of account or Social Security as we know it todayor a Defined Benefit Pension plan. Fact is, these programs are not mutually exclusive - all should be available to working Americans.

It's all just a smoke screen to try to make it appear reasonable, their continuing destruction of working Americans, in favor of the ruling wealthy elite.

[Yupster]

27. The IOU's in the trust fund are worthless because

they are meaningless.

Social security obligations are a promise made by the government. There is a formula to figure benefits based on progressive bendpoints. Each person gets their estimate every year or couple of years once they reach age 40 I think.

Anyway, that obligation to pay that benefit is a promise of the government. The Congress is the group which will have to come up with the money to pay that promised benefit. It will do it if it wants to. If there's not enough money in the system, it will get the money from the general fund, borrow it, raise taxes, whatever it wants to do.

But the point is that the benefits will be paid if the congress wants to pay them.

If the congress is unable to pay them, or is unwilling to pay them, then they will pass a law changing the payout formula.

The point is it is completely up to congress. They'll pay out whatever they want to.

Notice what's missing from this equation?

The bonds.

They are meaningless.

If there were no bonds in the trust fund, congress would payout whatever it decides to.

If there are bonds in the trust fund, congress will payout whatever it wants to.

The bonds are worthless, because they are meaningless. They have no influence over what will finally happen.

[Lasher]

30. Then nothing has any worth or meaning.

The US currency in your wallet is worthless, because we have no absolute guarantee that we will always be able to redeem it. It's happened before. Consider what happened to Confederate money after the Civil War.

Neither our Constitution nor any of the rest of our laws have any meaning, because our government might decide to change them.

Life has no worth or meaning.

Pretty silly, don't you think?

The fact is, the bonds have meaning. That meaning is, the federal government owes money to the SS trust funds, and has agreed to pay. This is a debt that is owed. These bonds have influence over what will finally happen, because they represent a significant promise that must be broken if they are not redeemed.

It is not true to say that Congress will do whatever they want to. If they want to change the Constitution, for example, they must seek an Amendment, which must be ratified by a majority of the States. Congress can not pass any law, without concurrence of the Executive, unless they can manage enough votes ot override a veto.

Members of Congress want to stay in office. Repukes want to do that, and also default on the bonds that are held by the SS trust funds. I say they can't do both.

I understand that it will be inconvenient for some to help pay this debt.

Tough shit.

[Yupster]

40. The bonds in the trust fund is a promise from the government

to pay itself money.

As an analogy, a family may save $ 100 a month for a vacation fund by putting the money in their underwear drawer each month.

One day the car needed an expensive repair. The only money available was the $ 2,100 in the vacation fund. So the couple "borrowed" $ 1,600 from their vacation fund to pay for the car repair. However, they put an IOU in the vacation drawer so they would remember they owed their vacation fund the $ 1,600.

Now - will the family repay their vacation fund?

Maybe. Maybe ot. If they feel like it. If they can. Who cares?

If they don't will their mortgage company ruin their credit? Their bank where they hold the car loan?

No of course not. Owing money to yourself is different from owing money to someone else. There may be a will to repay it, but there is no obligation. And none of your other creditors will care one way or the other if you do or don't. As long as the mortgage payment arrives, they will think it cute that you leave yourself IOU's, but they won't care about it one way or the other.

Anyway, the same with the social security trust fund.
____________________________________________________________________

The way it will end in my opinion is that the social security budget will eventually be folded into the general budget. At that point the debit of the general fund and the credit on the trust fund will cancel themselves out and magically, pfffft, the IOU's will legally disappear through the help of clever accounting. At that point all the surpluses will have been officially looted and will be gone, spent on medicare payments, missiles in Iraq and bridges in Alaska.

And what of the monthly social security checks?

They'll keep going out. Congress will change the formula every decade or so just as it's always done so the check amounts will change just as they've always done.

The thing is that al that has nothing to do with any IOU's in any drawers. Congress will pay out what it thinks it can payout, just as it always has done and always will do.

If the charade about the IOU's helps people, then that's fine. They don't do any harm. But they're meaningless.

Oh and a silly PS - If you look at Confederate money on e-bay, it has actually held its value. A Confederate $ 50 bill will cost you about $ 50 today. No interest for 150 years not too cool though.

[Lasher]

47. Promises from the government have meaning

Social Security became an independent agency on March 31, 1995. So they're part of the family, but not the immediate family. Here's a more appropriate analogy:

A man's wife convinces him he should loan part of his retirement savings to her brother. She promises that her brother repay the money, with interest. The brother-in-law says he will make monthly payments, starting in 5 years.

The time comes for the brother-in-law to start making his payments. However, he tells Our Hero that he's not going to pay the money back, because this debt is 'all in the family' and therefore has no meaning. Our Hero begs to disagree. He divorces his wife and remarries. His new spouse is a lawyer, who sues the former brother-in-law and collects all the money the former brother-in-law owes.

[Yupster]

26. Even with the lockbox

there'sd be nothing in the social security trust fund but IOU's.

[Gman]

8. It's free money to them

free for the taking.. They take as much as they want ane whenever they want and spend the shit out of it. Then they go back for more. They tell their buddies, "Here take some. Take as much as you want. There's plenty where that came from."

[Nothing Without Hope]

10. K & R - one more for the Gretest page, where this belongs... n/t

[MiniMe]

11. Before we get on * too much, this isn't the first time this has happened

President Clinton had to do it too when the repuke congress wouldn't pass his budget. I think thats probably around the time the government was shut down for 3 weeks. It doesn't make it right for either one of them to do it, but it has been done before.

[agincourt]

19. Totally different circumstances,

I beg to differ, it's not the same.

[MiniMe]

23. Agree that the circumstances were different, just pointing out that

it did happen before.

[leftchick]

12. I wonder if this affects my fundy freak brother in law

He retired from the VA two years ago. Is this fund for all Federal Employees or just those of a certain "rank". I would suspect somewhere in there he congress critters are exempt as well as Administrators in the system.

[SaveAmerica]

20. Available to all federal employees according to my fed. empl.

spouse. That's why I don't think it's a good idea to think of this as a wake-up call for congress, it could possibly affect millions of little people. Does the money get replaced? How do we find out?

Snow did this just before the '04 election too, there were several posts on Kerry's blog asking everyone to leave a note in their mailbox telling your letter carrier that their 'G' fund was on the verge of being borrowed from. Right before the election or right after it went through and I've wondered since if they've righted everything. How do we find this out? Is there a place where we can see what has been borrowed and when replaced?

(btw - post on Kerry's blog was by an individual, not Kerry)

[robbedvoter]

13. Kenny taught his buddy a few tricks! Enronomics!

[annabanana]

14. This is the TSP (Thrift Savings Plan)

Newer federal employees (the ones that didn't get the old pension plan) are the most vulnerable here. Although there is some risk to the longer term employees too, to the degree that they've invested in this option ("G" funds) in the TSP.

It was raided before, as a stop-gap measure, when budgets weren't passed on time, but this is the first time AFAIK that it's been used between these perennial, cyclical instances.

[pecwae]

15. I retired under the old CSRS (VA)

They were pushing FERS and TSP in the early 80's. They would never reveal details about how the money would be invested or by whom. One pretty much knew that if they were selling so hard it wasn't the best avenue to take. I'm still worried about my pension, though, and have heard from other federal employees that we could be in trouble.

[annabanana]

37. we are due to within 5-6 years..

same situation as you.
I figured that they were pushing FERS so hard that CSRS HAD to be the better option for us (vested since 1979!). Our TSP funds are about 50%G, and 25/25% C and L. So I figure with this borrowing about 1/2 of our TSP holding are "up for grabs" right now. As for the defined pension plan.. well, I guess that's up to Congress in the end, right?

[Lasher]

21. So, the TSP is like a 401(k), is that right?

And the old plan is a defined benefit pension plan? Sounds like "G" funds are an investment option in the TSP, which might actually be a 403(b) - a government employee equivalent of a 401(k).

[Yupster]

29. You're correct

Defined contribution plans should be kept away from the company.

I think it's better if the money each month is sent to Fidelity, Vanguard, wherever so the employer has no access to it once it's contributed.

The same thing with the social security trust fund. The surplus each month should be put into bank cd's or something where it actually exists, not like today where it is immediately spent in Iraq and a worthless IOU (see my post above explaining worthlessness) is put in a drawer for the future.

[Lasher]

31. Yes, I noted your other reply

I do not agree with your assessment of "worthlessness", and I offered some thoughts in reply to your contribution there.

In a manner of speaking Defined Benefit Pension plan assets are already kept away from companies. They are controlled by trustees, and there are constraints placed on contributing employers. And as such, these assets are actually managed by Fidelity and others. Under current law, employers have no access to the assets except to pay for pensions, retiree medical, and fund managers' operating expenses.

My reasoning about the SS trust funds is quite a bit different from yours. You seem to think that capital investments in CDs are more "real" than those in Treasury bonds. This is not so. Forgive me for making an assumption, but it seems to me that this idea is related to a belief on your part that private Social Security accounts are a good idea.

They are not; they are a very bad idea. If you disagree with me on this issue, please advise. I am certainly willing to defend my position on the subject.

[Yupster]

35. Very late but

Just to quickly say I am completely against privatized social security accounts. Will pick up discussion tomorrow if thread is still extant.

[Yupster]

41. I am against privatized social security accounts mainly

because I worry about inflation.

If you save your whole life and amass $ 600,000 in your social security account and then we have hyper inlation for a few years, the value of your $ 600,000 account could be reduced to the buying power of $ 100,000 in just a few years.

Not only would that be a disaster, but it would hit every retiree in the country at the same time if it happened.

I realize things like that may only happen once every 100 yearsd, but that means it happens, and would be too much of a disaster for the country to stand.

Therefore I am completely against private social security accounts.

I might be convinced about allowing a person an option to put aside 1 % or so but that would be it for me.

As far as the social security trust fund, I don't think cd's and government bonds are the same.

When the social security surplus is put into a government bond, that money is immediately spent on a bridge in Alaska or a missile in Iraq. It is no longer there, but instead is a promise. If the surplus was actually physically taken to a bank or insurance company and put into a cd or insurance fixed account the money would actually exist to be gotten to at any time with interest.

There would be default risk, but the money would physically be somewhere that could be gotten to at any time. The current system there is no money. It is spent. Gone. Pffft. It is a dead parrot.

[Lasher]

46. Treasury bonds & CDs are not the same but they are similar

They are both, as you like to call Treasury bonds, IOUs. When you invest money in a CD, what do you think the bank does with that cash? Do you believe they put it in Uncle Scrooge's vault?

They invest it, and some of these investments are made in Treasury bonds, as I said earlier. Banks also invest this cash by loaning it to individuals to build homes, buy cars, etc. But you say the money would physically exist, to be gotten to at any time with interest.

In 1929, bank runs started, where bank patrons tried to withdraw their savings all at once. $140 billion of depositor money disappeared and 10,000 banks failed. People then believed that their money physically existed somewhere, and it could be gotten to at any time. They were wrong, and so are you.

The FDIC now guarantees deposits against this type of loss. But this is only a promise from the Federal government.

You claim that the Social Security trust funds are meaningless, because the Treasury bonds they hold represent only the Federal government's promise to pay. But other securities (including CDs) are only representations of a promise to pay, and you do not assign them to the same "meaningless" category as Treasury bonds. Your argument is therefore fallacious.

CDs do have meaning, as do savings bonds and cash. And so do the Treasury bonds that are held by the Social Security trust funds.

[Lasher]

45. Have noted your replies, thanks

Now I'm the one who is busy. I'll get back to you when I can, but it might be tomorrow.

Thanks for the replies. Fair debate is fun!

[Yupster]

42. Defined Benefit versus Defined Contribution Plans

I also wanted to point out the differences between these two plans.

In a defined contribution plan like a 401 (k), money is physically sent from your company to an investment fim where an account is pt in your name which you can take with you when you leave the company.

In a defined benefit plan, a company promises to pay certain benefits for the rest of a person's life by a set formula. The company looks into the future to project how much money it will have to designate to the pension plan to meet its obligations. However, at any given point the needed money is not set aside.

Companies fall behind in their payments due to any number of reasons. Companies also sometimes downsize significantly which makes their previous projections impossible to follow through.

Companies also go bankrupt which puts a halt to any more funding from the company which is needed every month to keep those checks going.

So, in short, the money in the defined contribution plan actually exists. When you leave your job you can roll it into an IRA and put it in a money market account if you want to so you can see the interest added each year.

The money in a defined benefit plan is usually just enough to keep the checks going out for a little while longer. The plan depends on the company making continual payments into the plan for decades more and sometimes that is just not possible.

So which is better?

For the worker usually the defined benefit plan where you get a check your whole life. But for the company it's the defined contribution plan where you can shake hands with the retiree, give him his account and be done with him.

In the next 10-20 years the only workers who will have defined benefit plans in my opinion will be government workers.

[AnneD]

43. I thought it was

defined benefits (a check with a set amount) and deferred compensation (deferred taxes until pulled out at no later than 79 1/2). Defined benefits, when properly funded are the way to go. I thank my lucky stars I have a DB. They have increasing the number of years worked (age + service=90 instd 80) and it is now the average of your 5 highest salaries instd of 3. People comming on will have a harder time. It is a state pension so I actually have a chance to get it. This is going to hit many people very hard. I have always tried to save as much as I can but I have lost money in stocks (which is why I hate to see them touted as a retirement vehicle). Thank God they were only a supplement to my pension.

[Lasher]

48. Pensions

I took my Defined Benefit Pension as a lump sum. When I retired I rolled all of that, and also my 401(k), into a retirement IRA. I am now living off the return on my conservative investments. I'm a lucky guy.

Not all DBP plans offer a lump sum option. This was more appealing to me than an annuity because I can leave any remaining funds to my heirs. Even more importantly, with an annuity I would have had to depended on my former employer to continue those payments for the rest of my life. I don't trust them, and was lucky to be able to make a clean break by going with the lump sum.

A DBP plan is definitely best, but as you know it's going by the wayside. My former employer just froze its DBP plan. I hate to see so many people being left with only a 401(k). Unless there's some unforseen change, most younger folks are never going to be able to retire.

Employers used to refer to 401(k)s as savings plans. They started calling them retirement accounts in the mid-nineties, when they started reducing DBP plans with schemes like Cash Balance Plan conversions. Don't feel too bad about losing some of your 401(k) money in stocks. I did too. Some people say they made money in stocks during 2001-2003. Most of them can be generally categorized as liars.

If Democrats had been in control, I don't know if they would have prevented or slowed down this destruction of employee pensions. But I do know they would not have been enthusiastic about the demise of DBP plans, as the repukes have been.

[Joanne98]

17. Does this mean the intel community is getting ripped off?

I hope they get real pissed off.

[Historic NY]

18. Poor government employees..........

their sucking down your pension funds, soon you will be like some private sector employees.

[Road Scholar]

49. It would take a moron to vote republican gvmt. employees.

[spanone]

22. This will be dumped in the 'next' presidents lap.

You watch, the dems will get elected and be held accountable for all this bushit.

[Nikki Stone 1]

28. So the White House is taking its cue from San Diego, eh?

And we all know how well that worked out.

[SoCalDem]

32. The problem is this..

The young people are too busy working their asses off to notice, and they "assume" that 'things will be ok' by the time THEY retire..

The old people who ARE affected now, are too busy trying to figure out the new drug plan, and trying to survive to get ionvolved..

and the rest of us are trying to worry about our own survival to care a lot aboput government pensions..

These barbarians know they can get away with this shit..because they do it all the time, and get no opposition

[earth mom]

33. K & R! eom

[sandnsea]

34. Bonneville Power Surplus too

The surplus usually goes to keeping rates down, but Bush wants to take that for his debt too. They are just robbing us up, down and sideways.

[marano35]

38. yeah

[Vinca]

39. Let's see. They've cut off food and health care for the poor,

taken money away from college students, left Katrina victims high and dry, pillaged social security . . . what's left to suck dry? Federal employee pensions.

[converted_democrat]

44. ........

:wow: