SSI Trust fund

[Dale00]

...Ultimately the SS trust fund is backed with the "full faith and credit" of the US just as the bonds that are sold to individual investors both here and abroad.
That's not to say they won't cut your benefits if they decide to, just that the fund is a lawful trust fund.
It does exist....

There was a time when a wall separated east and west Berlin. Then one day all the experts where shocked to see it come down.

We have a government which feels it can kill its own citizens overseas without any legal trial and put anyone in jail forever if they simply label them a terrorist. If they can cheat the bond holders of General Motors while enriching their union cronies, you can rest assured they will do as they wish with Social Security.

 

[Hobbes]

There was a time when a wall separated east and west Berlin. Then one day all the experts where shocked to see it come down.

We have a government which feels it can kill its own citizens overseas without any legal trial and put anyone in jail forever if they simply label them a terrorist. If they can cheat the bond holders of General Motors while enriching their union cronies, you can rest assured they will do as they wish with Social Security.

That's possible I guess.
Like I said, I think they will steal it silently through inflation of the monetary base because it's like a hidden tax and it solves so many of their other problems at the same time.

 

[LightningCrash]

Ultimately the SS trust fund is backed with the "full faith and credit" of the US just as the bonds that are sold to individual investors both here and abroad.
That's not to say they won't cut your benefits if they decide to, just that the fund is a lawful trust fund.
It does exist.

In the long run what I think will happen is the .gov will print a lot of money, much more than right now to pay those benefits.
The majority of politicians are far to cowardly to just cut your benefits or raise your taxes and actually tell you about it while they are doing it.
But monetary inflation solves several of their problems and they don't get blamed directly.

1. They can print a lot of money and pay your benefits with dollars that are worth say 20% less in purchasing power.
2. It's not just SS beneficiaries, they can pay all the government bondholders back with inflated money as well.

It's a very good thing when you can borrow $100 and only pay back $80 in value when it's due.

Plan accordingly.

There's a bit of disambiguation here. The trust fund is backed, but only because it has GIS bonds. Now an average person would think this would mean that the "trust fund" is sitting on top of an foolproof way to pay all of its bills. The execution is much different. There's an analogy to a powder magazine here... nobody expects the... I'll come in again.

 

[Hobbes]

The issue can be and is argued 2 different ways so I doubt we can settle that here but I'll shamelessly steal this from the Wiki since it's more eloquent than me:
_________________________________________________________________________________________________________________

The following two scenarios help illustrate the concept. Depending on which scenario is right, Social Security is either an accounting fiction or represents real economic savings.

Scenario 1 (Trust Fund is an accounting fiction):

1984: $1 payroll tax collected in 1984
1984: $1 lent by Social Security to the federal government
1984: Federal government increases spending on government programs by $1
2020: Federal government raises taxes by $1 plus interest to repay the loan to Social Security
2020: $1 plus interest transferred from Federal Government to Social Security.

Scenario 2 (Trust Fund represents real economic savings):

1984: $1 payroll tax collected in 1984
1984: $1 lent by Social Security to the federal government
1984: Federal government borrows $1 less from other sources and increases spending on government programs by $0
2020: Federal government raises taxes by $0, but may borrow from other sources, to repay the loan to Social Security. Any tax increases that occur in 2020 would have happened anyway without Social Security.
2020: $1 plus interest transferred from Federal Government to Social Security.

It is instructive to note that the $2.5 trillion Social Security Trust Fund has value, not as a tangible economic asset, but because it is a claim on behalf of beneficiaries on the goods and services produced by the working population. This claim will be enforced by the United States Government although the precise monetary mechanism of enforcement is yet to be determined. In order to repay the Trust Fund, the United States government has three options, which may all be pursued to varying degrees.

(1) The government may issue debt by selling treasuries. Thus, $1 in debt to the Social Security Trust fund is replaced with $1 in debt to a different lender. This scenario would increase the tax burden on future generations if the interest rate is higher on the new debt. If the new debt is more expensive and government revenues do not increase sufficiently either through taxes of economic growth, the government would be forced to cut spending on other programs (such as Defense, Education, Research) or else default on all or part of the debt.

(2) The government may raise taxes. If taxes are raised across the board, ironically, by reducing take home pay for workers, the government could make it harder for the younger, working generations to invest and save for retirement. However, if taxes are raised only on those whose earlier tax cuts were partially offset by these excess FICA contributions, namely those taxpayers whose marginal rates were reduced from 74% to as little as 28% during the Reagan Administration, the younger, working generations will not lose any ability to save or invest.

(3) The government may monetize trust fund obligations by transferring the treasuries held by the Trust Fund onto the Federal Reserve balance sheet. In such a transaction, the bonds would become "assets" on the Fed's balance sheet, and the Fed would create money "out of thin air" to purchase the bonds from the government. Under such a scenario, the bonds are converted into cash, which would then be used by the government to cover social security payments. This scenario would likely lead to increased inflation, as it would inflate the money supply without directly increasing the amount of goods and services produced by the economy as a whole.

________________________________________________________________________________________________________________________________

My thesis is that
Solution 1 is not practical because we already have so much outstanding debt that selling even more bonds to cover SS benefits would drive up interest rates so dramatically that the increased interest costs would be prohibitive.
Solution 2 would not drive up interest costs but the higher FICA taxes on a smaller number of younger workers would be such a drag on the economy that GDP would stall or might even decline and reduce revenue.
Solution 3 solves the problem nicely if you ignore the effects of inflation.

 

[TurboFinger]

history says they will punch button #3 until they break it and then introduce a new currency.....wash, rinse, repeat...

 

[LightningCrash]

history says they will punch button #3 until they break it and then introduce a new currency.....wash, rinse, repeat...

right now they're punching button 1 to bridge the short term obligations.

 

[TurboFinger]

right now they're punching button 1 to bridge the short term obligations.

no argument here. what's a few hundred billion when your derivative bubble is already 1.5 quadrillion? when that blister finally pops, everyone will get some pus on them.

 

[TerryMiller]

You a big dubya fan err ya Terry?

Not necessarily, Hobbes. Based on my beliefs, he wasn't conservative enough. However, he did recognize the problems with Fannie and Freddie and SSI and tried to do something about them.

However, since GWB seems to be the Anti-Christ to the liberals, I simply mentioned his name because they (specifically in Congressional hearings) were saying that Fannie and Freddie were being run well and GWB needed to back off. And, like I said, GWB is not as conservative as I am, but he still recognized that loaning money to folks who couldn't pay the loans was a losing proposition.

Obviously, the Democrats in Congress either don't understand that concept, or they are specifically enacting such programs with the hope of tearing down this great country financially.

 

[Hobbes]

Not necessarily, Hobbes. Based on my beliefs, he wasn't conservative enough. However, he did recognize the problems with Fannie and Freddie and SSI and tried to do something about them.

However, since GWB seems to be the Anti-Christ to the liberals, I simply mentioned his name because they (specifically in Congressional hearings) were saying that Fannie and Freddie were being run well and GWB needed to back off. And, like I said, GWB is not as conservative as I am, but he still recognized that loaning money to folks who couldn't pay the loans was a losing proposition.

Obviously, the Democrats in Congress either don't understand that concept, or they are specifically enacting such programs with the hope of tearing down this great country financially.

Well, if dubya's plan to partially privatize SS had passed it would have made the current SS problem even worse now wouldn't it?
With younger workers investing part or all of their FICA tax privately there would be a lot less FICA tax coming in to the SS fund every month to pay benefits for current retirees.

Maybe that's why few, including most Republicans, bought into his plans.

 

[TerryMiller]

Well, if dubya's plan to partially privatize SS had passed it would have made the current SS problem even worse now wouldn't it?
With younger workers investing part or all of their FICA tax privately there would be a lot less FICA tax coming in to the SS fund every month to pay benefits for current retirees.

Maybe that's why few, including most Republicans, bought into his plans.

Since you asked me a specific question, please allow me to do the same. With this statement are you advocating that we should forever force younger workers who will likely NEVER see SSI benefits to still continue to pay into the system? If I remember the program of GWB's correctly (and I could be experiencing a bad memory), wasn't the percentage that individuals could control a very small number?

As for me, I think the government could better help SSI by eliminating a few federal agencies that are NOT performing as they were designed to do, or are unnecessary agencies. Then the budgets of those agencies could be used to "pay back" the SSI fund.

As for the agencies, I have long believed that the Department of Education is nothing more than a central federal agency to which the unions can lobby instead of 50 state education departments and thousands upon thousands of community school boards. Close that one down and give control back to the states and communities.

The Department of Energy was begun under the term of Jimmy Carter during the "Oil Crisis" of the '70's with the mandate of reducing this countries dependence on foreign oil. (If I remember correctly, the liberals now simply say "reduce our dependence on oil.") Instead, under the controls of the Energy Department, we have seen our foreign dependence increase from the range of 35% up to 60% or more.

The next agency I feel needs to either go away or be seriously reformed in its power to regulate is the Environmental Protection Agency. That agency has become a catch-all for activists to lobby to control not only federal lands, but private property as well. Telling farmers that they can't use their farm land for its intended purpose so a supposed "endangered" creature such as a mouse or rat can be protected is nonsense. Now, they are advocating the extermination of one species of owl to protect another species of owl.

Now, I mentioned the above because they were those mentioned by Rick Perry during his short-lived campaign. However, I would imagine that even a cursory examination to a large number of other federal agencies could find examples of needless and useless agencies and departments to get rid of as well.

If this country ever hopes to sustain itself over the long haul, it has to begin to curb federal spending and regulations to eliminate a need for other governments and private citizens from having to expend additional funds to the government in the form of federal fines for violations of ignorant federal regulations.

As you can see with that last paragraph, government actions leads to a large cycle of control and further eroding of the economy by diverting state and private funds to the federal government. How about us letting folks keep more of their own money for their families and businesses?