Social Security Sense and Nonsense

[Omaha Steve]

http://www.afscmeblog.org/2010/10/06/social-security-sense-and-nonsense/?__utma=1.1847225545.1261531521.1276721935.1276731138.86&__utmb=1.1.10.1286654099&__utmc=1&__utmx=-&__utmz=1.1275745986.79.4.utmcsr=google|utmccn=%28organic%29|utmcmd=organic|utmctr=AFSCME%20member%20deaths%20on%209-11&__utmv=-&__utmk=130522895

October 6th, 2010

This post is from Paul N. Van de Water, a Senior Fellow at the Center on Budget and Policy Priorities specializing in Medicare, Social Security, and health coverage issues. Crossposted from the CBPP’s Off the Charts blog.

In a new paper and podcast I’ve tried to correct some of the misinformation that critics of Social Security have been spreading about the program.

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.

Investing the trust funds in Treasury securities is perfectly appropriate. The federal government borrows funds from Social Security to help finance its ongoing operations in the same way that consumers and businesses borrow money deposited in a bank to finance their spending. In neither case does this represent a “raid” on the funds. The bank depositor will get his or her money back when needed, and so will the Social Security trust funds.

FULL story at link.

[jtuck004]

1. K&R n/t

[dixiegrrrrl]

3. They are invested in Treasuries.

The Social Security fund essentially is an IOU which is paid in Treasuries when needed.


But if this guy is right:
http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html
"both the Federal Reserve and the Federal government have shot their wad.
They got nothin’ left, after trillions in stimulus and trillions more in balance sheet expansion—

—but they have accomplished one thing:
They have undermined Treasuries.

These policies have turned Treasuries into the spit-and-baling wire of the U.S. financial system
—they are literally the only things holding the whole economy together.

In other words, Treasuries are now the New and Improved Toxic Asset.
Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is. "

http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html

[jtuck004]

4. I think we will be able to pay them - after all, we manufacture

the dollar.

But as these articles suggest how people view the dollar going forward may have us eating the food we have in reserve.

scary...and with ten years of about 10% unemployement being very likely, we are losing a lot of human capital, our best resource. I do wonder what the place will look like in a decade or two.

[JDPriestly]

2. K&R

As Social Security goes, so goes the nation.

Cut funds to the military, not to the seniors.