How on earth would a SS lock box work?

[lumberjack_jeff]

Social Security is obligated to invest in government treasury securities.

Securities = loan. Those who take out a loan are "borrowing". The security for that loan is a piece of paper indicating that "I owe you."

Money is debt. What would the lock box contain, if not government debt?

[Zen Democrat]

1. The lockbox means that SS funds will not be counted as part of the Budget.

Which they weren't until the '60's. There would be NO abusive talk of using SS to lower the deficit if the funds were not counted as part of the budget.

[econoclast]

3. Not counted as part of the budget now either.

LBJ put Ss "on budget" in the 60's. THey called it the "unified budget." But that ended in the 1980's and it has been off budget ever since.

[econoclast]

2. Kind'a a moot point these days

Whether you agree or disagree, the purpose of the "SS lock Box" was to isolate the surplus funds that were accruinig in the SS Trust Fund. However, starting this year I believe, Ss pays out more than it takes in .... no more surpluses accruing so it is a moot point. Going forward there are no more surpluses to isolate.

[damntexdem]

4. There will be an outstanding surplus for another quarter century.

And some years there will likely be yearly additions to the surplus.

And if they would raise, or eliminate, the FICA cap, the surplus would continue building.

[econoclast]

5. outstanding surplus for 25 years

correct. but the outstnading balance will be getting smaller and smaller.

the LOCKBOX idea was a plan to deal with what were then the annual surpluses. No more GROWTH is the TF Surplus. That horse is now out of the barn.

[Igel]

6. I think people didn't understand that little fact.

Of course, it's possible to revise that little fact, and always has been.

I suspect a lot of people assume that the money is somehow held in a savings account and then it was stolen. As it is, they expect the Treasury dept. to take it, issue corresponding debt instruments to the SSA, and then do not very much with the money.

Of course, that would lead to the obvious question: What do you do with a multi-trillion dollar bank account? Well, you'd probably want to invest it somewhere. Perhaps a bank, but that would certainly exceed the FDIC limit on accounts. Possibly in stocks and bonds. Either way, you'd get the kind of political and ideological shenanigans that a couple of state pension funds did with *their* multi-billion-dollar cash stash: You can only invest it in certain firms or certain sectors, regardless of any potential return on investment; or you avoid certain companies, or you make sure that the money goes to prop up certain stocks and you divest of others to punish a politically incorrect company. With pension funds the repercussions on small companies was large, on large companies not so bad. That was billions. Now, with trillions it would be fairly easy for a fund manager to play pretty significant political games; it would be very tempting for politicians to exert pressure on the fund manager, even if s/he was trying *not* to engage in significant political games.

[PoliticAverse]

7. I haven't been able to find any specific explanation of what Gore's "lock box" actually was. n/t

[WinkyDink]

10. Google was MY friend:

http://www.ontheissues.org/celeb/al_gore_social_security.htm

[PoliticAverse]

11. I have already seen that page, I found it during my google search...

Where is the specific explanation of what the "lock box" was ?

GORE: I will keep it in a lockbox. The interest savings, I would put right back into it. That extends the life for 55 years.
I am opposed to a plan that diverts 1 out of every 6 dollars away from the Trust Fund. It would go bankrupt within this generation.

[Romulox]

8. The only "sensible" solution is to spend every penny we lay hands on.

It is by NO MEANS possible for the US government to invest in foreign bonds the way that foreign countries invest in US bonds. Moreover, debt is wealth!

:rofl:

[CleanGreenFuture]

9. Al wanted that thing locked for a reason. He knew it was in jeopardy way back. And I venture

that it is now completely gone.

[Yo_Mama]

12. They could actually buy Treasury securities

Marketable ones, you know?

That is what makes the difference between savings and a giant loan.

What you've got in the trust funds now are not real Treasury securities in a market sense - they are a legal authorization to issue new Treasury securities on the market to raise money in the future.

The problem is that the national debt is so high now that if we tried to do it we would become uncreditworthy!

Btw, it used to be that Social Security DID go out and buy regular Treasury securities. The law was changed under Carter, I believe. In any case, if we were still doing that, Debt Held by the Public and Total Government Debt would be very close in amount, instead of:


The problem is the total number. If we try to float most of those bonds by rolling them over into actual outstanding debt held by the public (which would force us to pay interest), then our Debt/GDP ratio would be almost 100% now, and we would be paying much higher interest rates and we would have even higher deficits than we do now. And we'd have to stop any additional borrowing.

This is not a fake issue. It's a real issue. It's not that people did not pay real money in, it's that if we try to take much of that real money out, we are going to lose our credit rating. We are already on negative watch. The credit rating agencies are requiring the US government to say how we are going to stop running up our debt. That is why this debt limit thing is such an issue.

This Wiki article is pretty balanced and I think explains it well.
http://en.wikipedia.org/wiki/United_States_public_debt