Social Security to start cashing Uncle Sam's IOUs (And Gore was ridiculed for his "lockbox")

[Bluebear]

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.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come....

For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.

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...

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

[Skink]

1. Maybe we are getting our spending priorities right.

SS is stimulus for the economy every month.

[CynicalObserver]

3. in general folks don't understand economics. The lockbox

was only going to have these self-same treasuries anyway - anyone who thinks the fedgov segregates borrowable funds when they can be used to finance debt is, while legally entitled to vote, not actually able to be informed about topics of this sort.

Fedgov is in the process of putting the final, rather large, nails in the dollar coffin. If people think 1+ trillion annual PROJECTED (meaning they will be larger) deficits for as long as CBO projects are sustainable without eroding our currency to levels most people will not be willing to believe now, expect surprises.

[Hannah Bell]

10. If you think people are going to lay down & be fucked, expect surprises.

[CynicalObserver]

34. I don't think people have much choice. Fiscal irresponsibility is

bipartisan and so out of control that this can only end in a very unpleasant economic (and possibly social) reality. History is pretty grim on this point.

[customerserviceguy]

2. Well, the day of reckoning is finally here

I figured the recession/depression would push us over the edge a lot faster than the predictions of only a year or two ago.

We have only two choices, re-borrow that money from China, on bonds that aren't going to sit in a drawer, or print money to pay the bills. If the Chinese don't want to lend, then that only leaves alternative #2.

[EFerrari]

4. Or we could ask the Pentagon to check their pants' pockets.

Nobody even knows how much money they spend.

[SoCalDem]

5. and between the couch cushions too

:)

I found 48 cents the other day :)

[Bluebear]

6. Between us we have $1.06...and a comb and a candy corn.

[EFerrari]

7. It's funny because when I used to do my brother's laundry

or my husband's and I told them that whatever cash I took out of their pockets was mine, suddenly those pockets got really empty.

lol

:hi:

[SoCalDem]

8. My dryer once paid me $50

It was after a vegas trip, and I had stashed a Grant in a back jeans pocket :)

[customerserviceguy]

11. Two things will NOT happen

The first is that we won't raise taxes in any meaningful way to cover the SS shortfall in the middle of a recession. Bumping the cap on earnings taxed merely entitles the bumpee to larger payemtns somewhere down the line.

The second is that we are not going to cut off the Pentagon in the middle of a war. We might do that once peace is reached in the Middle East, but until that happens, don't hold your breath.

[Toots]

14. The "War" is an endless war. How do you "win" a War on Terror?

Terror has always been with us and always will be with us and there is no winning a "war" against it..

[customerserviceguy]

19. We're not going to "win" it

not the way we're fighting it. In fact, unless we're willing to fight like WWII, we're just going to hold our enemies to a draw, until they poop out from loss of their own steam. With the Soviet Union, that didn't seem to take more than about 75 years, but fundamentalist strains of Islam have way more staying power than that.

I guess you make choices, you fight "fair", or you fight to win. The only time I've seen this work for a major world power in my lifetime is US vs. Grenada, and UK vs. Argentina.

[EFerrari]

16. Don't worry. I won't.

:)

[timtom]

27. I'm sorry...what "war?"

Unless, of course, you mean the continuing illegal occupation of two sovereign (once, anyway,) nations. That's very different,

[Hannah Bell]

9. This article promotes bullshit.

1. Building up "savings" that could be "cashed in" as the boomers retire was precisely what we were told was going to save Social Security back in the reign of Ronnie Ray-gun. And since the government has borrowed a couple of trillion from the workers since 1983, that's precisely what *should* happen.

2. The original Social Security legislation *requires* that all surplus SS collections be deposited with the federal government in exchange for government securities that can be "cashed in" when the funds are needed. So when the Reagan-Greenspan commission of 1983 promoted this "savings" plan, & Congress passed it, they knew *exactly* what they were doing.

3. Al Gore is a horse's ass. The Social Security Amendments of 1983, the amendments which set in motion the immense build-up in the Trust Fund, passed the House with 163 D's voting for them, 54 voting against them, & 51 abstaining. Gore was an abstainer.

Then years later he ran around confusing the population with his "lockbox" talk. Once the decision was made to collect more than necessary to fund current retirees & maintain a year's cushion, THERE IS & CANNOT BE ANY "LOCKBOX". Gore knew this, knows this, & his lockbox bull was cynical political maneuvering.

4. Yes, the Social Security Trust Fund = IOU's -- just like every other government trust fund, just like the government IOU's held by rich private investors & foreign governments.

Should the government decide not to honor the Social Security IOU's, it will not be because there's "no money". There obviously *is* money -- for the government's preferred purposes, i.e. funding foreign wars, making military contractors rich, bailing out spendthrift financiers, & giving tax cuts to rich people.

No, should the government decide to renege on its debt to its rank & file working people, it will be because the government cynically decided to STEAL from the paychecks of workers for 30 years to fund speculative bubbles for the rich & offshore "investment" -- with the PLAN to STIFF THEM when the repayment came due.

5. If you buy into their poor-mouth talk, you're fools, & you're facilitating your own robbery. They can't rob you unless you let them.

[Junkdrawer]

18. Agreed. Amplifying two points:

re 3.) Yes, once the US government collects more than necessary, it's only move is to insure it's credit worthiness when the IOUs come due. We should have paid down the national debt. Instead, everyone used the excess taxes on the poor to give tax breaks to the rich - most recently (and cynically) Bush in 2001.

re 5.) My best guess is that come December the Presidential Deficit Commission will use "poor-mouth talk" to convince everyone that the "real" crisis will come in 2040 or 2050 and that the "Trust Fund" should be saved until then. Meanwhile, we'll be told to pay-as-we-go for 30 or 40 years. The Boomers are so screwed.

[customerserviceguy]

20. I constantly encounter you as a naysayer

on this issue.

Just how do you think Social Security benefits are going to be paid for in the next thirty years? The only baby boomers collecting so far are those which have gone on disability, and those who have opted for lower benefits from early retirement. The leading edge of the boomers turn 64 this year, that means starting next year, we'll see increasing numbers of them bellying up to the window, and saying, "Pay me."

We're not going to "tax the rich", as fun as that sounds. Even if we did, there wouldn't be enough to make up the shortfall. We're not going to cut the military, even if perfect peace descended upon the planet, we'd still have outlays for veterans' benefits and base closing expenses which would cost us for another generation, at least.

As I see it, the only options left are to borrow it from the Chinese, or create more soon-to-be-devalued money. What other alternatives do you see?

[Hannah Bell]

25. i constantly encounter you as a dispenser of winger talking points -- on this issue.

[customerserviceguy]

26. I was inviting you to a reasoned debate

and you prefer to fling insults.

I have no other conclusion to draw than you have no answers to my questions, and you are living in denial of the financial realities inherent in this situation. That might be a comforting way to view the upcoming problems, but its not going to write the checks.

[Hannah Bell]

28. lol: that's why you started out with: "i constantly encounter you as a naysayer"

[customerserviceguy]

32. I've seen your comments on this topic

and I wondered if you'd change your tune, once you saw that we've finally reached the end of the road, when it comes to inflows and outflows.

I guess you're still pretty secure in that most sincere of pumpkin patches you dwell in, waiting for the Great Social Security check to rise, without cost.

[Mari333]

12. greedy bastards. how much do these occupations cost again?

the greed is palpable.


70 million plus baby boomers and I am one of them about to collect SS in 1 year.

the tsunami is coming

they had better look at priorities.

and being an EMPIRE is NOT a priority.

[dmallind]

13. While I agree in principal, the tone is and was misleading

Those "IOUs" are not shady accounting or manipulation.

The fund managers at SS simply did what most risk-averse (and we WANT them to be risk-averse surely!) instituitional investors would do with a cash surplus and bought T bills.

This is teh "other side" of the conatant need to correct people who think China is the biggest holder of US debt. The biggest holder of US debt is quite simply theUS government, and the SS fund is a huge chunk of that.

[customerserviceguy]

21. It'll be a lot easier

to flip the bird to the Chinese (when it comes time for repayment) than it will be to American retirees, in my estimation.

[dmallind]

22. ok not sure why either is necessary but hey

All we are taking about here I predictable and mandatory transactions really.

[customerserviceguy]

23. We are not going to manufacture enough wealth

to pay off either the Chinese or the SS trust fund, especially since we don't really manufacture much of anything these days.

The only way out of this is to inflate the currency by printing more and more of it. Ok, "creating" if you will, for those who are sticklers on the word "printing", but inflation always favors debtors, and flips the bird to savers.

[Hannah Bell]

30. bull.

[customerserviceguy]

33. Where's it coming from?

Other than your unexplained putdowns, you really haven't presented any answers.

[Statistical]

15. The lockbox was stupid and SS is working exactly as planned.

For two decades the projected revenue from SS was GREATER than expenses so a surplus was created.

What should the govt do with the money instead? Print out $2.2 trillion worth of $100 bills and store it in Fort Knox.

The US is a debtor nation.
The US is a debtor nation.
The US is a debtor nation.

I don't understand how people don't realize this.

So say we had a lockbox and thus $2.2 trillion in cash in Fort Knox (which earned 0.0% interest). Instead of $5 trillion in foreign debt we would have $7.2 trillion in foreign debt.


SS did the most prudent thing possible. They didn't invest in corp bonds (GM, Enron, WorldCom anyone). They didn't invest in the stock market. They didn't invest in foreign currencies. They bought Treasury Bonds. The $2.2 trillion they bought reduce the amount of money we would have had to borrow from foreigners.

Now that debt is coming due. "solving the problem" is painfully simply. Raise income taxes to repay the $2.2 trillion dollar that SS lent the general fund over the last 2 decades. That was the original game plan and it still makes perfect sense today.

For last 2 decades everyone (rich, poor, middle class) enjoyed lower income taxes because SS took up some of the "slack". That free ride is coming due and taxes need to rise.

[Zywiec]

17. Was Social Security set up to be a retirement nest egg? n/t

[customerserviceguy]

24. I wasn't around when it got started

but it wouldn't surprise me if it were being sold to the public as such. Past practices have gutted the fund, which was only supported by taxes on work. While it's nice to provide for widows and orphans, and the disabled, those burdens probably should have been shouldered by interest, dividends, capital gains, rental profits and other forms of taxable income.

By raiding the Social Security trust fund to provide those things, our Congress and Presidents have caused this day of reckoning.

[Hannah Bell]

29. it wasn't billed to the public as any such thing as a "retirement nest egg"

try doing minimal research. they started collecting for ss in the height of the depression.

reich wing talking points

[spanone]

31. just like they ridicule him for global warming.....i suspect he's right there too