Debt-limit delay would jeopardize Social Security payments

[Soggy in NOLA]

the point I am making is, SS is a pension fund, and as such, a trust fund. As such, it should be self-sufficient. The payments into the trust fund should be generating enough revenue to cover the costs and the outflows.

But.. it ain't because SS receipts have been used for decades to finance deficit spending.

"It ain't" only because you have decided that government bonds are "worthless". By your standard, virtually every pension fund in this country is "bankrupt".

You'd better do some reading on the subject of "Unfunded Pension Liabilities".

 

[Wry Catcher]

The SS fund is full of IOU's. And if those IOU's can't easily be converted into cash (which they can't) then it is insolvent. It's called a liquidity problem and is at the heart of most bankruptcies. Oh, and if you did this kind of pension theft in private industry, you'd go to jail for a very long time.

BTW... I am a CPA.

You maybe a CPA, you are without doubt a right winger. That said, who is the "I" in IOU?

Piss on Leftwingers.

Your sexual kinks aside, who is the "I" in IOU's

 

[Toro]

Then why are they claiming that if the debt ceiling isn't raised, SS checks won't go out?

They can go out, but SS, Medicare and defense are $2.4 trillion in expenditures while total revenue is $2.2 trillion. Interest is $200 billion so we have to find at least $400 billion from somewhere, assuming that the $1.4 trillion spent on everything else goes to $0.

That's a valid assessment, but he point I am making is, SS is a pension fund, and as such, a trust fund. As such, it should be self-sufficient. The payments into the trust fund should be generating enough revenue to cover the costs and the outflows.

But.. it ain't because SS receipts have been used for decades to finance deficit spending.

The economics are still the same. If you were to sell bonds out of the trust to meet payments outside the normal course of liquidation to meet pension obligations, the government would merely be borrowing from the pension plan (which is what they are essentially doing with federal government employees pension funds to keep moving the debt ceiling). So the government can borrow from either the trust or from the general public.

BTW simply because something isn't liquid does not mean it isn't an asset. There are all sorts of assets that have no liquidity.

 

[WillowTree]

You maybe a CPA, you are without doubt a right winger. That said, who is the "I" in IOU?

Piss on Leftwingers.

Your sexual kinks aside, who is the "I" in IOU's

Why don't you tell us clevererthansnot?

 

[Toro]

The SS fund is full of IOU's. And if those IOU's can't easily be converted into cash (which they can't) then it is insolvent. It's called a liquidity problem and is at the heart of most bankruptcies. Oh, and if you did this kind of pension theft in private industry, you'd go to jail for a very long time.

BTW... I am a CPA.

I'm an MBA and a CFA and have spent my career in and around pension funds.

SS is about the single worst way to design a pension plan IMO but the IOUs are as much assets as are government bonds. If SS were instead composed of 100% Treasury bonds, the economics would be the same.

And had I filled my client's poension funds with IOU's, where would I be today?

Government bonds are IOUs. They are promises to pay at a future date. The only difference is that SS liabilities are nonmarketable.

 

[Soggy in NOLA]

They can go out, but SS, Medicare and defense are $2.4 trillion in expenditures while total revenue is $2.2 trillion. Interest is $200 billion so we have to find at least $400 billion from somewhere, assuming that the $1.4 trillion spent on everything else goes to $0.

That's a valid assessment, but he point I am making is, SS is a pension fund, and as such, a trust fund. As such, it should be self-sufficient. The payments into the trust fund should be generating enough revenue to cover the costs and the outflows.

But.. it ain't because SS receipts have been used for decades to finance deficit spending.

The economics are still the same. If you were to sell bonds out of the trust to meet payments outside the normal course of liquidation to meet pension obligations, the government would merely be borrowing from the pension plan (which is what they are essentially doing with federal government employees pension funds to keep moving the debt ceiling). So the government can borrow from either the trust or from the general public.

BTW simply because something isn't liquid does not mean it isn't an asset. There are all sorts of assets that have no liquidity.

Well, of course. That was my point. But as you well, know, this is unsustainable. I can see the need to do this in the short term from time to time. But, it has become a way of life.

I worked in a prior life as Bankruptcy Consultant for both the the courts and attorneys... you know how many millionaires sitting on millions of assets... go bankrupt because they can't pay their bills? More ofetn than not, all those great assets, end up being worthless.

 

[Soggy in NOLA]

All I'm really saying is, if you are borrowing money, and continually having to increase your debt, to meet pension obligations, you have a problem.

 

[Soggy in NOLA]

I'm an MBA and a CFA and have spent my career in and around pension funds.

SS is about the single worst way to design a pension plan IMO but the IOUs are as much assets as are government bonds. If SS were instead composed of 100% Treasury bonds, the economics would be the same.

And had I filled my client's poension funds with IOU's, where would I be today?

Government bonds are IOUs. They are promises to pay at a future date. The only difference is that SS liabilities are nonmarketable.

The answer I was looking for was... "you'd be in jail".

 

[Wry Catcher]

Piss on Leftwingers.

Your sexual kinks aside, who is the "I" in IOU's

Why don't you tell us clevererthansnot?

And put your deviant desires aside? Sure.

Soggy in NOLA hinted at the answer and Al Gore offered a possible solution. Put the payroll tax in a locked box. Just think (ooops, I almost forgot to whose post I was responding) just try very hard to consider if all payroll tax deductions had been stored in Gold at Fort Knox?

That aside, we spent the money so that the party in power, or the shared parties in power, could offer a budget which appeared resonable. We are all in this together, and unless we somehow begin to pull together we will (to mix metaphores) hang together.

Taxes must be raised and spending reduced. The R's refuse to consider raising taxes, yet one of the very rich this week spent $3.4 million dollars on one photograph. In the irony of all ironies the photo was of Billy the Kid. How many of the unemployed could be put to work with that $3.4 Million dollars?

 

[Toro]

That's a valid assessment, but he point I am making is, SS is a pension fund, and as such, a trust fund. As such, it should be self-sufficient. The payments into the trust fund should be generating enough revenue to cover the costs and the outflows.

But.. it ain't because SS receipts have been used for decades to finance deficit spending.

The economics are still the same. If you were to sell bonds out of the trust to meet payments outside the normal course of liquidation to meet pension obligations, the government would merely be borrowing from the pension plan (which is what they are essentially doing with federal government employees pension funds to keep moving the debt ceiling). So the government can borrow from either the trust or from the general public.

BTW simply because something isn't liquid does not mean it isn't an asset. There are all sorts of assets that have no liquidity.

Well, of course. That was my point. But as you well, know, this is unsustainable. I can see the need to do this in the short term from time to time. But, it has become a way of life.

I worked in a prior life as Bankruptcy Consultant for both the the courts and attorneys... you know how many millionaires sitting on millions of assets... go bankrupt because they can't pay their bills? More ofetn than not, all those great assets, end up being worthless.

The way SS is configured is no different than a pension plan that is invested 100% in government bonds. Investing 100% in govies is dumb IMHO. No other pension plan in the country I am aware of invests entirely in Treasuries. But all pension plans invest in government bonds to some extent.

What matters isn't that the government debt is rising. As a CPA, you know that you have to look at both sides of the balance sheet. What matters is the net balance of the government. If the debt is rising but total net liabilities are falling, the financial position is strengthening.

Make no mistake, we have a real problem if the trajectory remains the same. We MUST fix our fiscal balance. But the problems really aren't in SS. They are in Medicare and Medicaid, and the government budgetary balance. SS would be in balance forever with a few fixes. Medicare is where we are really fucked if healthcare spending keeps growing as it has.

 

[Toro]

And had I filled my client's poension funds with IOU's, where would I be today?

Government bonds are IOUs. They are promises to pay at a future date. The only difference is that SS liabilities are nonmarketable.

The answer I was looking for was... "you'd be in jail".

That's not the point, is it? The government does not use accrual accounting for the budget either, which would get any CFO in the country in jail if they kept their books like the government.

The SS trusts just cut out the middle man. Rather than go through the trouble of issuing bonds and sticking them in the trusts, the government just debits the trusts and credits the Treasury.

 

[Flopper]

Oh brother. So, the fate of the American budget lies at the feet of 1% of the taxpayers?

That's just brilliant.. really.

This scam has gone on for over a decade now and it's a huge reason why the debt has skyrocketed. The top 1% isn't paying their fair share because they aren't paying 35% in income tax. It's more like 15% to 20% while your average middle class person is paying 25% or so.

Make the top 1% pay the damn rates that they are supposed to pay and it will certainly help. Then you can cut programs but cutting stuff and not addressing the tax issue will only mean middle class pain and the top 1% will not be affected at all by it.

And what rate is it that they, as you say, "are supposed to pay". And define fair? I'm a six-figure guy... what should I pay, according to you? And what rate should you pay?

And while you're in the mood to answer questions... who appointed you God anyway?

You need to understand that the Social Security Trust Fund can only be used to pay benefits and make investments. The trust fund is fully invested in US treasuries, which are loans to the government. Sometimes the government has to borrow money to pay interest and payback principal to the trust fund. The trust is not insolvent. It will become insolvent only if the government cannot payback the loans to the Trust Fund or the payments to beneficiaries exhaust the fund, which should happen in about 15 or 20 years.

 

[Flopper]

There are a lot of thins that could be done to cut the budget deficit and overall debt and still keep many social programs intact. But allowing our already horribly fiscally irrespnsible government to borrow yet more money it will have a hard time paying back without government drastically changing how it does business is not a workable long term solution.

Using the debt limit requirement in the Constitution to control spending makes no sense. It is Congress that has approved government financial obligations. Now Congress is deciding whether they will honor their obligations.

The place to control spending is through the budget. If the budget process does not work, the process needs to change.

You seem to be suggesting that the best way to make the process 'work' is simply let congress borrow whatever they want.

Yes the process needs to change. A balanced budget amendment would be good. But the fact is that is basically what denyiny an increase in the debt cieling would be. It would be a self imposed budget balancing measure that says "okay folks you can't keep piling ever more money. When you reach the debt cieling, you're done."

Or, and I believe some congressman has already authored this bill, a measure that says government may not have a budget that exceeds 20% of GDP.

Not really. A balanced budget amendment would stop congress from making financial obligations that it does not have the revenue to cover. Exercising the debt limit provision, forces the government to default on obligations that Congress has previously agreed. Not meeting your obligations is not the way to control spending. In the end, the results would be lawsuits, layoffs requiring up to one pay severance, default on loans which would raise the amount the government pays in interest. Exercising the debt limit, would increase spending. No doubt the country would go into another recession which make matters even worse.

 

[Dont Taz Me Bro]

It's already in the red, so it's taking in less than it's now paying out.

Rash of retirements pushes Social Security to brink - USATODAY.com

From the article:

"accumulating a $2.5 trillion trust fund."

You can thank me later.

That wasn't the whole passage, but you already knew that.

Since 1984, Social Security has raked in more in payroll taxes than it has paid in benefits, accumulating a $2.5 trillion trust fund. But because the government uses the trust fund to pay for other programs, tax increases, spending cuts or new borrowing will be required to make up the difference between taxes collected and benefits owed.

Experts say the trend points to a more basic problem for Social Security: looming retirements by Baby Boomers will create annual losses beginning in 2016 or 2017.

You can thank me now.

 

[Dont Taz Me Bro]

This scam has gone on for over a decade now and it's a huge reason why the debt has skyrocketed. The top 1% isn't paying their fair share because they aren't paying 35% in income tax. It's more like 15% to 20% while your average middle class person is paying 25% or so.

The top 1% of income earners pay 38% of federal income taxes. Sounds more than fair to me. How much did you pay in taxes last year? I'd like to make sure you're paying your fair share since you're such an authority on how others should be paying your bills for you.

 

[Too Tall]

And what rate is it that they, as you say, "are supposed to pay". And define fair? I'm a six-figure guy... what should I pay, according to you? And what rate should you pay?

And while you're in the mood to answer questions... who appointed you God anyway?

I told you the top earners should pay 35%. They don't because of capital gains and other exemptions. I have no problem with the rates, I have a problem with the avenues the top earners can take to avoid it.

Fair? Again, it would be fair if everyone paid the rate that they're supposed to.

What should you pay? 28% or 33% depending on how much income you make. I should pay 25%. That's what the current income tax policy says and I have no issue you with it.

God? lol...no I just want you to realize that the system is catered to people in the top tax bracket.

I am not a CPA but the 15% tax rate applies to those that derive their income from selling something for more than they paid for it. Stocks for example. Are you suggesting that the capital gains tax rate should be raised?

What affect would this have on those of us who have a 401K plan for retirement? I would think the cost to mutual fund managers that trade shares on a daily basis would incur an additional expense, thereby reducing my 401K by that amount. I am not in the top 1%, so every little bit helps, or in this case, hurts.

And as far as the tax code is concerned, it is what it is. Taking away deductions or closing loopholes would not have any effect until April 15, 2012 and as I understand it, the problem happens on Aug 2, 2011.

Perhaps the Senate should have thought of this last year when they neglected to submit a budget and again this year when they couldn't be bothered to do it again.

 

[Flopper]

Who says they will chose to cut SS or Medicare or the paychecks to the military??

The party in power will chose what to cut.

Of course if you claim your going to have to cut SS, Medicare or paychecks to the military and are doing so because you can't reach an agreement with the GOP then of course its the GOP's fault. Right??

Of course it is.

House Republicans have refused to raise the debt limit without concessions from Senate Democrats. Whether voters hold the Republicans or Democrats responsible for any resulting financial crisis depends on whether there is a crisis and how serious it is. If the crisis is serious enough to cause a major sell off in stocks and bonds and triggers another recession you can bet voters will hold Republicans responsible for a failed risky plan to bring about deficit reduction.

The other side is if the Dems made the concessions, no default.

I guess its in how you look at it.

Politically speaking, the Dems have little reason to compromise, despite what Obama says. House Republicans are between a rock and hard place. If they stand fast, we will have a financial crisis, which could well turn into another recession. The Democrats would then have a strong case to put before the voters, a failed plan of the Republicans to lower the deficit that resulted in a second recession. If, on the other hand they give in to the Democrats and get only meager spending cuts, that’s not going to play well with their supporters.

 

[Toro]

The Democrats and Republicans both have a lot to lose, as does this country.

People who are saying we should never raise taxes or never cut spending are part of the problem. Both parties should agree to cut spending and raise taxes because ultimately that WILL happen. If we do it now, we will be better off than if it is forced upon us later.

 

[Steelplate]

WASHINGTON — Social Security payments to millions of retirees and people with disabilities could be threatened if President Obama and Congress can't agree to increase the government's debt limit by Aug. 2, a new analysis shows.

Although the Treasury Department likely could avoid delaying Social Security checks, the analysis by the Bipartisan Policy Center points up the depth of the cuts that would be needed if the $14.3 trillion debt ceiling isn't raised.

It shows that in August, the government could not afford to meet 44% of its obligations. Since the $134 billion deficit for that month couldn't be covered with more borrowing, programs would have to be cut.

If Social Security, Medicare, Medicaid, unemployment benefits, payments to defense contractors and interest payments on Treasury bonds were exempt, that would be all the government could afford for the month. No money for troops or veterans. No tax refunds. No food stamps or welfare. No federal salaries or benefits.

Want to protect the social safety net? That would be possible — but only if Treasury stopped paying defense contractors, jeopardizing national security. Plus virtually every federal agency and employee.

"We should be honest with ourselves what this would be like, and the answer is it would be chaotic," said Jay Powell, a former top Treasury official in President George H.W. Bush's administration. "There is no way to avoid really serious pain."

The Bipartisan Policy Center studied Treasury Department receipts and spending for August 2009 and 2010 and found that the government likely would not have enough revenue to make the full $23 billion payment to Social Security recipients due Aug. 3. That's the first Wednesday of the month, when a majority of Social Security and Supplemental Security Income checks go out.

Things wouldn't improve much as the days pass. The first major interest payment to creditors would be due Aug. 15 — $29 billion, more than the $22 billion due to arrive in revenue.

On that day, Treasury would have to roll over nearly $500 billion in maturing debt — necessitating an auction which, by that time, might have fewer takers than usual. If demand declines, interest rates would rise.

As the center foresees it, the picture would get worse: layoffs and lawsuits. Global market reaction and media glare. A possible downgrade in the U.S. credit rating, perhaps followed by the loss of market access.
The effect on the country, said former Republican senator Pete Domenici of New Mexico, would be "irretrievable."

Debt-limit delay would jeopardize Social Security payments - USATODAY.com

My gooness, they should have saved ! That way there useless SSI benefits not coming in would not hurt so bad.

We aren't talking about SSI alone. First off, you scumbag... you know who gets SSI.... not just the guy with the "fake" back Problem that you so often demonize. We are talking about incredibly handicapped people who will Never be able to work.

I know... it's more important that our Billionaire population get their tax breaks than to give a person with Profound Mental Retardation the few hundred/month they get.

Secondly... we aren't just talking about the handicapped... we are talking about millions of people who have PAID INTO THE SYSTEM.

You fuckers are the most ruthless, heartless bastards I have ever seen... and IF YOU ARE THE FUTURE of this country... I want the Fuck out. I hope to God that no tragedy ever befalls you that you would need the benefits that you so readily dismiss.

The truth is... you are all fucking talk. IF push came to shove you would be BEGGING for those benefits.... and you know it.

 

[Steelplate]

The Democrats and Republicans both have a lot to lose, as does this country.

People who are saying we should never raise taxes or never cut spending are part of the problem. Both parties should agree to cut spending and raise taxes because ultimately that WILL happen. If we do it now, we will be better off than if it is forced upon us later.

No one is saying that on the Democratic Side, are they? Show me one source where Dems say that we shouldn't cut.

To think this particular problem is bipartisan is ridiculous. It's the GOP and their SHIITE Brethren(the Tea Party) that is pulling the Stonewalling thing.

They don't want a fair approach... they want it their way.... which has been pretty much the case since '08. They have blocked and filibustered just about any significant piece of legislation this whole time.

I love it... the GOP holds the country hostage and Dems either get the blame entirely... or get this 50/50 bullshit.