Social Security is 100% self-funded: so why would Obama stop checks on Aug 3rd?

[MannyGoldstein]

http://firstread.msnbc.msn.com/_news/2011/07/12/7068367-if-no-deal-by-aug-2-obama-cant-guarantee-social-security-checks-will-go-out">If no deal by Aug. 2, Obama can't guarantee Social Security checks will go out

This just blows my mind. No matter how fucked up things seem to be, they reach a new level of fucked up the next day.

Obama's telling us that he may halt Social Security checks on August 3rd if a budget deal is not reached. HOWEVER, Social Security is not part of the federal budget. It is separate. It currently takes in more than it spends. It has $2.6 trillion in the bank, and is growing.

Unbelievable.

Seniors (and everyone else) take note - elected officials of both parties have their eye on grabbing your Social Security retirement savings.

[napi21]

1. I posted this on another thread. This is why.

Funds are paid to SS, and SS buys Treasury Bonds with the money, and of course also gets interest on their money. When money has to be paid out to its members, the Treasuries are sold and cash is transfered from the general fund to support the checks that are written.

Foolish as this sounds, it's like if you have a billion dollars, and invests it all in one stock...say B of A. You are still worth the billion $$. You buy things, and write checks to pay for them and you sell some of your stock to fund the checks. Then one day, B of A declares bankruptcy. Your invesstment is GONE!

[democrat_patriot]

3. Thanks. Great Analogy.

Simple and easy to understand.

[MannyGoldstein]

6. But income is presently more than outgo

Forget the Trust Fund. Income is currently more (or at worst a tiny bit lower than) outgo.

This should be paid.

[scheming daemons]

10. The income immediately goes into treasuries, and an "IOU" is put in the SS "trust fund"

That's the hard truth.

[Ganja Ninja]

14. There's no such thing as a government "IOU".

Their called Treasury Bonds.

[scheming daemons]

16. Which is why I put the word "IOU" in quotes...

I'm trying to explain it to simple minds like the OP.

[Phx_Dem]

44. Good luck with that.

:7

[CreekDog]

15. is it? isn't there a 2% payroll tax holiday?

for the moment.

[Ganja Ninja]

If Social Security is currently being funded at a rate greater to or equal to ..

their current outlays then there's no need to convert it to bonds. The government's cash flow can handle the payments. It's the rest of the government expenditures that won't be covered. Things like war spending and wages of government workers. Withholding Social Security money for this purpose isn't really withholding, it's diverting it.

[former9thward]

26. The SS trustees disagree with you. More is going out than coming in.

http://money.cnn.com/2010/08/05/news/economy/social_security_trustees_report/index.htm

[Ganja Ninja]

28. The only reason they aren't in the black is because of the payroll

tax holiday. And just because they aren't collecting at the same rate as expenditures in not to say they have no cash at all.

Also that article is from 2010 and you'll note this "Social Security cash flow will likely head back into the black for a few years after that, starting in 2015 it looks to stay in the red for the long haul."

[former9thward]

29. No this was before the tax holiday started.

With the payroll tax holiday they are really in the red. You put the quote in italics for some reason. You do know what "stay in the red" means don't you?

[MannyGoldstein]

31. No, this year was projected to be a surplus nt

[former9thward]

32. The SS trustees disagree with you but you may know better.

[MannyGoldstein]

34. Trustees had expected it to have a surplus of $106 million this year:

See "Table VI.C6.—Operations of the Combined OASI and DI Trust Funds,
Fiscal Years 2005-19", "Net increase during year"

http://www.ssa.gov/oact/tr/2010/tr2010.pdf

[former9thward]

37. That is not what their report here states.

http://money.cnn.com/2010/08/05/news/economy/social_security_trustees_report/index.htm

[MannyGoldstein]

41. That article is a mess in so many ways

Timmy Geithner is using carefully-chosen weasel words to spin things.

Go right to the source - the actual documents.

[democrat_patriot]

2. To put pressure on lawmakers to get a deal done.

You think when he says this it equals "I am cutting SS?"

How does Obama's statement = "elected officials of both parties have their eye on grabbing your Social Security retirement savings"

What Democrat has said they want to cut SS? Even the president says it "needs to be strengthened".

[Bodhi BloodWave]

38. everything obama says these days when it comes to this topic

seems to get translated into 'i am cutting SS' by some posters

[scheming daemons]

4. Your lack of understanding of how the Treasury dept works and where the money comes from is noted

All of the social security money has been spent on buying government bonds. There's no "bank" that has $2.6 trillion in it. It is all in US Treasury bonds.

The SS checks come from the US Treasury... not from some SS "bank".

After August 2nd, if there's debt ceiling increase, then the Treasury dept has to decide which obligations to pay and which to not pay... because there won't be enough money to pay them all.


In any case, it is a scare tactic to get seniors angry at the GOP. Tim Geithner, when forced to choose which things get paid and which don't, will surely pay the interest on the debt first and then SS next and then see what is left.



It is unbelievable how little you know about the SS "trust fund". There is none. It's all been moved into Treasuries.

[vaberella]

8. This is why knee jerk reactions have no intellectual basis.

One doesn't understand, but automatically rages. The rational is lost to others who bother to figure it out.

[MannyGoldstein]

9. The SURPLUS goes into treasuries

There is a surplus today. All benefits should be paid.

[scheming daemons]

11. Nope... the entire "trust fund" is one big "IOU" from the Treasury dept.

[vaberella]

13. Yup! So then they can later seperate the funds in all major programs. n/t

[creeksneakers2]

21. The trust fund isn't the only source of revenue

[CreekDog]

17. to redeem the "surplus" don't they need to sell bonds?

which is precisely what they won't have authority to do when debt ceiling is reached.

i've been critical of Obama --everyone knows this, but this isn't about poking anybody in the eye, it's about not being able to operate government fully once the debt level is reached.

without credit, we even begin having trouble where there is a cash flow (which is reduced by the payroll tax holiday for SS taxes).

[Ganja Ninja]

23. What the OP is trying to point out and what most of the so called experts are missing is that

the Social Security system's current intake of cash is almost equal to if not greater than it's current outlays. Not paying recipients is quite simply diverting the money meant for social security to use for other government spending. All the while they are pretending that there's no money for social security.

If they can't issue bonds for the money taken in then they stealing from the elderly plain and simple.

[CreekDog]

25. non sequitor: "if they can't issue bonds...they are stealing from elderly"

b doesn't follow a.

:shrug:

i don't know the whole suite of options, but i can't rely on your reasoning because your reasoning is totally messed up...you don't even know what you're saying.

[Ganja Ninja]

30. No I think it's your reasoning that's messed up. It's simple try to follow along.

When money is taken into social security it is used to write checks first. What's left over is then converted to bonds, that's the surplus. If money is taken in for social security and payments are not made and neither is it converted to bonds then what's that called?

[vaberella]

5. You don't really have a clue how things are set up. Link provided.

Treasury pays out the funds. There are other social programs that remain underfunded or not funded at all even if we pay off social security. What does that mean? People like the Veterans don't get any funding because we don't have enough money to pay them. And some of these programs are depended on by the same people who are on SS.

There's a great article on this:

http://www.tampabay.com/news/politics/national/what-if-the-national-debt-limit-isnt-increased/1179601
What if the national debt limit isn't increased?

In August, the government will collect $172.4 billion.

If Treasury decides to pay ...

• Interest on Treasury securities $29 billion

• Social Security benefits $49.2 billion

• Medicare/Medicaid $50 billion

• Defense vendor payments $31.7 billion

• Unemployment benefits $12.8 billion

Total cost: $172.7 billion

... then it couldn't pay for these programs, worth $134 billion:

• Military active duty pay $2.9 billion

• Veterans Affairs programs $2.9 billion

• Federal salaries and benefits $14.2 billion

• Education Department (Pell grants, special education programs) $20.2 billion

• Food/nutrition services (food stamps, Women, Infants and Children Program) $9.3 billion

• Department of Justice (FBI, federal courts) $1.4 billion

• IRS refunds $3.9 billion

• Small Business Administration $0.3 billion

• Housing and Urban Development (housing assistance for the poor) $6.7 billion

• Other spending* $72.2 billion

* Labor, Environmental Protection Agency, Health and Human Services, NASA, Commerce, General Services Administration, Energy, Interior, Federal Transit Administration, Federal Highway Administration, Agency for International Development, etc.

[MannyGoldstein]

7. We can agree that one of us hasn't a clue

The thing is self-supporting. Not paying it is sick.

[vaberella]

12. Paying it on time is the problem. Nothing is sick about the programs not funded.

Again---SS affects a lot of other problems. Don't you think it's sick that Veterans don't get paid? Or is that acceptable?

Isn't not paying Housing and Urban Development (housing assistance for the poor) equally as sick? Leaving the poor in even more of a bind and some of those who are depending on Housing & Urban development funds are on SS?

Isn't not paying the education department equally as sick? A lot of us students depend a whole hell of a lot for the funding---potential drop outs is not fun.


Isn't IRS refunds also a problem? People who receive pensions and SS are taxed---so the refund some people depend not paid---that isn't a problem?

Many people on SS participate in Food/nutrition services (food stamps, Women, Infants and Children Program) or have family members who do and a good number of the nation participates in that...so you're saying that it's not sick---not paying this as well?


You see the problem. You don't understand the magnitude of how these programs are funded and put together. In some cases---Food/nutrition services (food stamps, Women, Infants and Children Program) affects more people and more of the nation than SS. And this is the problem---why things will be delayed. Because we have to figure out how to pay for all the programs without an debt ceiling increase.

[Ganja Ninja]

18. The Social Security fund wasn't set up for the purpose of covering

veterans or any other underfunded government programs. If the government is taking in cash meant for social security at a rate that will cover the current outlays and it still decides to use it for other purposes while shorting social security recipients it is nothing short of malfeasance.

[vaberella]

19. It's not to cover those. But they all go in the same bucket.

This is the way the government has been working for a few decades or it seems since SS was enacted and the other social programs. You can decide to pay SS on time---but everything else ends up not funded or underfunded. Leaving the same drama---since some of the programs that need funding have more people on the list.


Additionally this is a great way to put pressure on the Repubs.

Read article in post # 5.

[Ganja Ninja]

27. You're missing the point.

The government is taking in money every week. Social Security is taking in money every week. The money they take in is close to if not greater than what they are paying out. So why is it the Social Security recipients are getting selected to take the hit? Social Security is getting funded. Not paying people and not issuing bonds is not something that we should just accept. It's a diversion of funds. If the government can't pay it's bills it should stop sending checks out for other expenditures starting with the underfunded programs.

[creeksneakers2]

24. Defense vendors shouldn't get priority

[Unvanguard]

20. Because the accounting fact you mention has nothing to do with the material fact.

Which is that the government has a certain quantity of revenue and a certain quantity of obligations to pay. And if its revenue is lower than its obligations, and it can't make up the limit by borrowing, then some of the obligations won't be paid. Which is, if you read the actual transcript, exactly what Obama said. He didn't say anything specifically about Social Security.

[jefferson_dem]

22. OFFS...

This is such a pitifully weak swipe at Obama, it hardly deserved the careful clarifications others provided above.

[MannyGoldstein]

36. So not paying Social Security is cool by you

Wow.

Wow.

[MannyGoldstein]

45. Ahem

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=1478750&mesg_id=1478750

[damntexdem]

33. Let's say you have a bank account. Plenty of money to pay your bills.

Then the bank is declared bankrupt and closed. Yes, you had plenty in your account; but you can no longer draw from that account.

[MannyGoldstein]

35. But I don't have to put money in the account before taking it out

I can pay my bills with what I'm earning today.

No?

Are you saying I have to keep putting all my money in the failed bank before paying any bills?

[phleshdef]

39. Please. You know good and well that he is just trying to rile people up.

And he is damn right in doing so. People need to at least be able to imagine a glimpse of the kind of pain this radical behavior coming from the right in Congress will create. He should have been doing this all along. This is exactly how the bully pulpit gets used.

[MannyGoldstein]

42. Chess again?

Obama's track record at chess tends to be that he's not playing chess.

[phleshdef]

43. I think its way too blatant to be considered chess.

The fact is, no one would say anything like that unless they were desiring a` reaction.

[golfguru]

40. It is an effective scare tactic, that is why n/t

[robcon]

46. It's political theater. There are a lot other govt. vendors to hold off paying.

Obama was just going for the 'theater' of taking money out of Granny's hands.