Social Security Discussion

[Toro]

I think you know about it but are missing it, the federal government has a legal obligation to "invest" excess SSA revenue into the SSA "trust fund" (under current federal law), it's right there in the PDF you linked. They're just not accounting for that legal obligation when they report a "surplus".

I believe that they are. When you posted the total debt of the US, that comes from the Treasury, which includes both the publicly traded debt and the debt of the trusts. That would be on the "balance sheet" of the Treasury. That's a stock statement, meaning it's a snapshot in time. The budget is a flow statement, meaning it measures the flow of cash in and out of the accounts over a period of time. Companies are no different. When they report earnings, or release income and cash flow statements, on those statements, they don't report the changes in assets and liabilities. They report those changes on the balance sheet. So you wouldn't expect the changes in liabilities to be reported in the budget.

I'm not sure how to put the fact that an excess of debt isn't the same thing as a surplus of cash any more simply than I already have but I'll give it one last shot; the national debt (intra-governmental holdings + public debt) as reported by the treasury increased every year under Clinton which clearly demonstrates a case of the former rather than a case of the latter. In my book reporting that to the public as a "surplus" is an attempt to deceive the public into believing that it's a case of the latter.

... and therein lies the point of contention my friend, that the federal government has redefined the meaning of surplus to include a scenario which involves an increase of outstanding debt, I (along with others more knowledgeable about accounting than I) don't agree with that definition, You apparently do, so we'll have to agree to disagree.

Fair enough. Most people define it as this

Definition of 'Surplus'
The amount of an asset or resource that exceeds the portion that is utilized. A surplus is used to describe many excess assets including income, profits, capital and goods. A surplus often occurs in a budget, when expenses are less than the income taken in, or in inventory when fewer supplies are used than were retained.

Surplus Definition | Investopedia

In our current budget, when more money comes in than is paid out, people define that as a surplus.

No it's not what I'm arguing in my brackets, what I'm pointing out there is the possibility that the federal government utilizes an actual surplus of cash to shore up it's unfunded future liabilities (which aren't limited to SS, since they also include Medicare and the other various federal pension funds), unfortunately federal law makes the "maneuverability" of this rather limited since in most cases it prohibits the federal government from purchasing marketable securities from external entities, I'm just assuming (hoping) there's some wiggle room in there somewhere that would allow for this.

First, to reiterate, I'm not defending the current system. I think it's a poor one. If I were starting from scratch, I would do it much differently. It is very confusing. And the government does nothing to make it any less confusing.

Your point about the government spending and not saving is an example of this confusion. But in the current scheme, the government is saving. This is the logic of how it works.

I gave the example of the budget in this post.

Operating budget
Revenues $2000
Spending $2100
Deficit $-100

Trusts
Revenues $1000
Payments $700
Surplus $300

Consolidated surplus $200

Liabilities before the fiscal year would have looked like this
Publicly traded debt $2000
Liabilities to the trusts $1000
Total liabilities $3000

After the fiscal year, it would have looked like this
Publicly traded debt $1800
Liabilities to the trusts $1300
Total liabilities $3100​

Social security is to be invested in the safest assets. The safest assets are considered to be government debt. Thus, the safest portfolio (so it goes) is a portfolio of government debt. Investments in government debt are usually investments in government bonds. A bond is a promise to pay the lender back. When the government issues government bonds, the transaction would look like this

Investor has $100 --> He buys a government bond worth $100 plus interest, say 2% --> Government takes the $100 and spends the money --> At expiration, government pays back the $100 plus 2% interest.​

Every single transaction regarding government bonds looks like this.

Let's say that rather than non-marketable liabilities, the trusts invest in government bonds. Each transaction in the trusts would look like this.

Worker pays $100 in FICA taxes which are transferred to the trusts --> The trust buys a government bond worth $100 plus interest, say 2% --> Government takes the $100 and spends the money --> At expiration, government pays the trust back the $100 plus 2% interest. --> The worker is credited with a future claim on the trusts that will be paid when he retires. --> The trusts make payments to those eligible to receive social security payments.​

This, in fact, is the mechanics of how any annuity or defined contribution pension plan works.

The mechanics of the trusts work exactly the same, with one difference - they don't go into the bond market and actually buy the bonds. They record credits and debits as if they were buying the bonds, then debiting to the Treasury the liabilities the US government owes to the trusts.

This is how the mechanics of the trusts work

Worker pays $100 in FICA taxes which are transferred to the trusts --> The trusts credit the account at the prevailing interest rate, say 2% --> Government takes the $100 and spends the money --> The worker is credited with a future claim on the trusts that will be paid when he retires. --> The trusts make payments to those eligible to receive social security payments.​

Notice that in all cases, the government is spending the money. This is true regardless whether or not

- You buy a government bond
- A portfolio that manages your money buys a government bond, or
- You pay taxes to the SS trusts where you receive credits for your payments

So let's take a look at what the balance sheet of the trusts would look like if they invested the surplus in government bonds.

The current balance sheet at the beginning of the year would look like this.

Non-marketable government liabilities $1000
Total government debt owed to the trusts $1000​

Then, this year, the trusts run a $300 surplus. Under the current system, the balance sheet would look like this

Non-marketable government liabilities $1300
Total government debt owed to the trusts $1300​

But instead of continuing the old system, we use the $300 to invest in government bonds. The balance sheet of the trusts would look like this

Non-marketable government liabilities $1000
Treasury bonds $300
Total government debt owed to the trusts $1300​

In each case, whether the FICA taxes are swept directly into the Treasury or the FICA taxes are used to buy government bonds that are then swept into the Treasury, the government spends the money. A government bond is a promise to pay back the money the government spends. The SS trusts are promises to pay back the money the government has spent. As long as the government is crediting the trusts with the market interest rate that would been earned on a portfolio of government bonds, the government is "saving" the money that they are spending because that's exactly how a portfolio of government bonds work.

Whether the government issues a bond or makes a promise to pay social security when you retire, it is a promise to pay money in the future. The only difference in the trusts is that the middle-man is cut out. Rather than issuing bonds, the government credits the accounts as if they were buying government bonds. Again, I get that it's confusing, and it's not the system I would construct, but the mechanics of a government bond portfolio and the trusts are the same.

Anywho, great talking to you and interesting conversation, hope you have an excellent weekend!

You too.

 

[Kimura]

I think you know about it but are missing it, the federal government has a legal obligation to "invest" excess SSA revenue into the SSA "trust fund" (under current federal law), it's right there in the PDF you linked. They're just not accounting for that legal obligation when they report a "surplus".

I believe that they are. When you posted the total debt of the US, that comes from the Treasury, which includes both the publicly traded debt and the debt of the trusts. That would be on the "balance sheet" of the Treasury. That's a stock statement, meaning it's a snapshot in time. The budget is a flow statement, meaning it measures the flow of cash in and out of the accounts over a period of time. Companies are no different. When they report earnings, or release income and cash flow statements, on those statements, they don't report the changes in assets and liabilities. They report those changes on the balance sheet. So you wouldn't expect the changes in liabilities to be reported in the budget.

I'm not sure how to put the fact that an excess of debt isn't the same thing as a surplus of cash any more simply than I already have but I'll give it one last shot; the national debt (intra-governmental holdings + public debt) as reported by the treasury increased every year under Clinton which clearly demonstrates a case of the former rather than a case of the latter. In my book reporting that to the public as a "surplus" is an attempt to deceive the public into believing that it's a case of the latter.

... and therein lies the point of contention my friend, that the federal government has redefined the meaning of surplus to include a scenario which involves an increase of outstanding debt, I (along with others more knowledgeable about accounting than I) don't agree with that definition, You apparently do, so we'll have to agree to disagree.

Fair enough. Most people define it as this



Surplus Definition | Investopedia

In our current budget, when more money comes in than is paid out, people define that as a surplus.

No it's not what I'm arguing in my brackets, what I'm pointing out there is the possibility that the federal government utilizes an actual surplus of cash to shore up it's unfunded future liabilities (which aren't limited to SS, since they also include Medicare and the other various federal pension funds), unfortunately federal law makes the "maneuverability" of this rather limited since in most cases it prohibits the federal government from purchasing marketable securities from external entities, I'm just assuming (hoping) there's some wiggle room in there somewhere that would allow for this.

First, to reiterate, I'm not defending the current system. I think it's a poor one. If I were starting from scratch, I would do it much differently. It is very confusing. And the government does nothing to make it any less confusing.

Your point about the government spending and not saving is an example of this confusion. But in the current scheme, the government is saving. This is the logic of how it works.

I gave the example of the budget in this post.

Operating budget
Revenues $2000
Spending $2100
Deficit $-100

Trusts
Revenues $1000
Payments $700
Surplus $300

Consolidated surplus $200

Liabilities before the fiscal year would have looked like this
Publicly traded debt $2000
Liabilities to the trusts $1000
Total liabilities $3000

After the fiscal year, it would have looked like this
Publicly traded debt $1800
Liabilities to the trusts $1300
Total liabilities $3100​

Social security is to be invested in the safest assets. The safest assets are considered to be government debt. Thus, the safest portfolio (so it goes) is a portfolio of government debt. Investments in government debt are usually investments in government bonds. A bond is a promise to pay the lender back. When the government issues government bonds, the transaction would look like this

Investor has $100 --> He buys a government bond worth $100 plus interest, say 2% --> Government takes the $100 and spends the money --> At expiration, government pays back the $100 plus 2% interest.​

Every single transaction regarding government bonds looks like this.

Let's say that rather than non-marketable liabilities, the trusts invest in government bonds. Each transaction in the trusts would look like this.

Worker pays $100 in FICA taxes which are transferred to the trusts --> The trust buys a government bond worth $100 plus interest, say 2% --> Government takes the $100 and spends the money --> At expiration, government pays the trust back the $100 plus 2% interest. --> The worker is credited with a future claim on the trusts that will be paid when he retires. --> The trusts make payments to those eligible to receive social security payments.​

This, in fact, is the mechanics of how any annuity or defined contribution pension plan works.

The mechanics of the trusts work exactly the same, with one difference - they don't go into the bond market and actually buy the bonds. They record credits and debits as if they were buying the bonds, then debiting to the Treasury the liabilities the US government owes to the trusts.

This is how the mechanics of the trusts work

Worker pays $100 in FICA taxes which are transferred to the trusts --> The trusts credit the account at the prevailing interest rate, say 2% --> Government takes the $100 and spends the money --> The worker is credited with a future claim on the trusts that will be paid when he retires. --> The trusts make payments to those eligible to receive social security payments.​

Notice that in all cases, the government is spending the money. This is true regardless whether or not

- You buy a government bond
- A portfolio that manages your money buys a government bond, or
- You pay taxes to the SS trusts where you receive credits for your payments

So let's take a look at what the balance sheet of the trusts would look like if they invested the surplus in government bonds.

The current balance sheet at the beginning of the year would look like this.

Non-marketable government liabilities $1000
Total government debt owed to the trusts $1000​

Then, this year, the trusts run a $300 surplus. Under the current system, the balance sheet would look like this

Non-marketable government liabilities $1300
Total government debt owed to the trusts $1300​

But instead of continuing the old system, we use the $300 to invest in government bonds. The balance sheet of the trusts would look like this

Non-marketable government liabilities $1000
Treasury bonds $300
Total government debt owed to the trusts $1300​

In each case, whether the FICA taxes are swept directly into the Treasury or the FICA taxes are used to buy government bonds that are then swept into the Treasury, the government spends the money. A government bond is a promise to pay back the money the government spends. The SS trusts are promises to pay back the money the government has spent. As long as the government is crediting the trusts with the market interest rate that would been earned on a portfolio of government bonds, the government is "saving" the money that they are spending because that's exactly how a portfolio of government bonds work.

Whether the government issues a bond or makes a promise to pay social security when you retire, it is a promise to pay money in the future. The only difference in the trusts is that the middle-man is cut out. Rather than issuing bonds, the government credits the accounts as if they were buying government bonds. Again, I get that it's confusing, and it's not the system I would construct, but the mechanics of a government bond portfolio and the trusts are the same.

Anywho, great talking to you and interesting conversation, hope you have an excellent weekend!

You too.

Toro,

I love you brother. You're exceedingly meticulous. Exceedingly...

Obviously, the social security trust fund is....ridiculous. We need to fund it out of the general revenue. It's not like there is a nominal crisis and it's not like there is a real crisis.

 

[Joe Steel]

... The mechanics of the trusts work exactly the same, with one difference - they don't go into the bond market and actually buy the bonds. They record credits and debits as if they were buying the bonds, then debiting to the Treasury the liabilities the US government owes to the trusts. ...

Are you saying no special issue security exists, that no physical evidence of indebtedness of any kind exists in any form?

 

[Toro]

... The mechanics of the trusts work exactly the same, with one difference - they don't go into the bond market and actually buy the bonds. They record credits and debits as if they were buying the bonds, then debiting to the Treasury the liabilities the US government owes to the trusts. ...

Are you saying no special issue security exists, that no physical evidence of indebtedness of any kind exists in any form?

I believe that's the case, yes. The assets and liabilities are digital ones and zeros on a computer somewhere. There is no physical evidence they exist.

But that's also the case for many other securities. Many stocks and bonds no longer exist in tangible form. Many only exist in digital form. For example, when a company issues new stock, it is recorded as a CUSIP at a custodial bank. When the stock is traded, the CUSIPs are credited and debited to the account numbers of the those trading the stock. Physical paper rarely changes hands today.

 

[oldfart]

... The mechanics of the trusts work exactly the same, with one difference - they don't go into the bond market and actually buy the bonds. They record credits and debits as if they were buying the bonds, then debiting to the Treasury the liabilities the US government owes to the trusts. ...

Are you saying no special issue security exists, that no physical evidence of indebtedness of any kind exists in any form?

I believe that's the case, yes. The assets and liabilities are digital ones and zeros on a computer somewhere. There is no physical evidence they exist.

But that's also the case for many other securities. Many stocks and bonds no longer exist in tangible form. Many only exist in digital form. For example, when a company issues new stock, it is recorded as a CUSIP at a custodial bank. When the stock is traded, the CUSIPs are credited and debited to the account numbers of the those trading the stock. Physical paper rarely changes hands today.

For ceremonial occasions, they have been known to whip up a bond, kind of like the checks the lottery makes up to present to winners. About 20 years ago I recall a $100 billion special issue bond at a media event on TV. I give the Treasury guy kudos for keeping a straight face when he handed it to the SSA Commissioner.

 

[Joe Steel]

... The mechanics of the trusts work exactly the same, with one difference - they don't go into the bond market and actually buy the bonds. They record credits and debits as if they were buying the bonds, then debiting to the Treasury the liabilities the US government owes to the trusts. ...

Are you saying no special issue security exists, that no physical evidence of indebtedness of any kind exists in any form?

I believe that's the case, yes. The assets and liabilities are digital ones and zeros on a computer somewhere. There is no physical evidence they exist.

But that's also the case for many other securities. Many stocks and bonds no longer exist in tangible form. Many only exist in digital form. For example, when a company issues new stock, it is recorded as a CUSIP at a custodial bank. When the stock is traded, the CUSIPs are credited and debited to the account numbers of the those trading the stock. Physical paper rarely changes hands today.

I found this but I don't know how accurate it is.

For internal federal accounting purposes, when special U.S. government obligations are purchased by the Social Security trust fund, the Treasury is shifting surplus Social Security revenues from one government account (the Social Security trust fund) to another government account (the Treasury's "general fund" account). The special U.S. government obligations are physical documents held by the Social Security Administration, not the U.S. Treasury. The government securities held by the Social Security trust fund are redeemed on a regular basis. These special U.S. government obligations, however, are not resources for the government because they represent both an asset and a liability for the government.

The Social Security/Medicare Trust Fund Is a Pile of IOUs from the U.S. Government

The whole document is hostile but seems to indicate the securities actually exist.

To be honest, I don't know that it really makes a difference. A lot of us use electronic money almost exclusively. It's deposited into our accounts and we spend it by swiping our cards and then logging-in to transfer the money to the credit card company.

 

[william the wie]

Are you saying no special issue security exists, that no physical evidence of indebtedness of any kind exists in any form?

I believe that's the case, yes. The assets and liabilities are digital ones and zeros on a computer somewhere. There is no physical evidence they exist.

But that's also the case for many other securities. Many stocks and bonds no longer exist in tangible form. Many only exist in digital form. For example, when a company issues new stock, it is recorded as a CUSIP at a custodial bank. When the stock is traded, the CUSIPs are credited and debited to the account numbers of the those trading the stock. Physical paper rarely changes hands today.

For ceremonial occasions, they have been known to whip up a bond, kind of like the checks the lottery makes up to present to winners. About 20 years ago I recall a $100 billion special issue bond at a media event on TV. I give the Treasury guy kudos for keeping a straight face when he handed it to the SSA Commissioner.

Also accounting for assets or in this case countra-liabilities is not the same as accounting for actuarial projections which is where the problem is.

As is, I intend to watch the descent into incoherence

 

[Toro]

PolitiFact | Medicare and Social Security: What you paid compared with what you get

 

[Kimura]

SS doesn't have a "solvency" problem. This is a phony crisis manufactured by reactionaries. We don't need any type of solution to this "fiscal crisis". What's need is a political solution to get a funding guarantee into perpetuity by Congress. A funding guarantee that same way it guarantees funding for Medicare Parts B & D. The same can be said of the of the alleged Medicare crisis. This is also a manufactured crisis, since Congress can also guarantee funding into perpetuity for Medicare Parts A & C.

A part of me thinks we should eliminate the SS fund. We could just fund SS out of the general revenue.

By the way, there isn't any type of operational constraint on the government's ability to meet all SS payments. The numbers in the SS Trust Fund are largely irrelevant. The trust fund is nothing more than basic record-keeping, just like all accounts at the FED.

 

[jwoodie]

And here I thought this was going to be a substantive discussion...

If our government wasn't so dysfunctional (thanks to our brilliant electorate), we would have done the following:

1. Instead of raising income tax rates, lift the income cap on Social Security taxes.

2. Suspend all COLAs until the federal budget is balanced.

P.S. The debate about the mythical trust fund had been over for years. Time to move on...

 

[RKMBrown]

Obviously, the social security trust fund is....ridiculous.

You should have stopped there.

It needs to ended. I would recommend a cash buy out of the future liabilities via check to the 401k of each asset holder for the assets collected that have not yet been paid out to the asset holder.

 

[oldfart]

SS doesn't have a "solvency" problem. This is a phony crisis manufactured by reactionaries. We don't need any type of solution to this "fiscal crisis".
What's need is a political solution to get a funding guarantee into perpetuity by Congress. A funding guarantee that same way it guarantees funding for Medicare Parts B & D. The same can be said of the of the alleged Medicare crisis. This is also a manufactured crisis, since Congress can also guarantee funding into perpetuity for Medicare Parts A & C.

I would start out with a broader issue. There is no way financial markets can assure a given standard of living in the future in the aggregate, period. Suppose someone has a million dollars in gold buried under their porch and intends to sell it in five years to pay for their food, shelter, utilities, and medical care. How much will it buy then? If you pick a number you are a fool.

The financial medium is not determinative, the cost of future real assets and standard of living are a function of the future supply of such assets and services, which in turn is dependent on everything that happens between now and then. There are a few limited exceptions (the big one is housing, you can buy a house now and reasonably expect to be able to live in it five years from now; but it might not have utilities potable water or services like police protection and fire departments then).

This is not to say that we cannot provide for the future; but we can only provide for the future in most areas collectively. If you want medical care in ten years, we should be investing in medical research, training medical personnel who will be around then, and building medical facilities and equipment. If we don't, and invest in gold hoards instead, all we assure is that medical care in the future will be very expensive and/or unavailable. If we do not invest wisely as a society, but get rates of return on our hedge fund portfolios, we get inflation, not consumption in the future.

BTW this applies as much to private investment as it does to programs like Social Security or Medicare. The demographics for IRAs are the same as for Social Security; when Social Security runs at a net cash outflow, at the exact same time the financial industry will be dealing with the same age group redeeming more investments than new money is being invested. If there is a Ponzi scheme in this, it applies exactly as much to Wall Street as it does to government programs. What idiot falls for the idea that private financial markets are immune to the forces that the real economy faces?

We can only consume what we produce as a society, and since we now specialize in producing wealth-destroying financial instruments rather than goods or services anyone wants to consume, the future is not promising. Eventually the wealthy do the logical thing and move to a country where they can obtain real goods and services, either part time as in the case of medical tourism or permanently. Everyone else can enjoy being part of a third world nation. "I have seen the future and it is Mississippi."

A part of me thinks we should eliminate the SS fund. We could just fund SS out of the general revenue.

By the way, there isn't any type of operational constraint on the government's ability to meet all SS payments. The numbers in the SS Trust Fund are largely irrelevant. The trust fund is nothing more than basic record-keeping, just like all accounts at the FED.

On an intellectual level you are correct. On a perception level, we need the trust funds. Otherwise a group of crooks trying to scam America out of its savings will be able to convince gullible people to vote to gut or eliminate Social Security and Medicare and force them to purchase inferior financial products at much greater cost from private monopolies which benefit the folks proposing the scam. Sound familiar?

 

[oldfart]

Obviously, the social security trust fund is....ridiculous.

You should have stopped there.

It needs to ended. I would recommend a cash buy out of the future liabilities via check to the 401k of each asset holder for the assets collected that have not yet been paid out to the asset holder.

That would be intellectually dishonest. If you replace Social Security, replace it in kind. Add a single-pay disability income policy for the current disability benefit projected for each worker through age 65 and a single-pay life insurance policy for the amount of the survivor benefit. Add to that a single-pay annuity for the amount of the retirement benefit. Factor in an additional single-pay premium to cover cost of living adjustments.

It is dishonest to advocate replacing a public insurance system with one that shifts all the investment risk and actuarial risk onto the participant. But then I gave up on "conservatives" being "honest" in their economic proposals thirty years ago. It must be something in what they drink. They keep pretending, as Tevya noted, in selling someone a horse that is actually an ass.

 

[oldfart]

And here I thought this was going to be a substantive discussion...

One keeps hoping......

If our government wasn't so dysfunctional (thanks to our brilliant electorate), we would have done the following:

1. Instead of raising income tax rates, lift the income cap on Social Security taxes.

I don't see the rationale for linking the two, but I definitely favor increasing or eliminating the SSA income cap. I also have no problem transferring any actuarial surplus thus generated to the general fund to be used dollar for dollar to reduce income tax collections. We could start by eliminating the income taxation of Social Security benefits (which goes to the SSA trust funds anyway) and the income taxation of unemployment benefits, both of which were part of Reagan's 1986 tax package. Maybe we could fold the unemployment tax into the Social Security system and eliminate both state unemployment and FUTA taxes on employers. Might even be good for business.

2. Suspend all COLAs until the federal budget is balanced.

I see absolutely no reason (and neither does any responsible economist) to target a balanced federal budget. If we attain maximum employment and output consistent with non-accelerating price stability, who cares what the budget deficit is?

That said, I would agree to your proposal if it included all government contracts. Why should major corporations get price increases while we limit military and civilian employees of government and retirees?

P.S. The debate about the mythical trust fund had been over for years. Time to move on...

Amen.

 

[Kimura]

SS doesn't have a "solvency" problem. This is a phony crisis manufactured by reactionaries. We don't need any type of solution to this "fiscal crisis".
What's need is a political solution to get a funding guarantee into perpetuity by Congress. A funding guarantee that same way it guarantees funding for Medicare Parts B & D. The same can be said of the of the alleged Medicare crisis. This is also a manufactured crisis, since Congress can also guarantee funding into perpetuity for Medicare Parts A & C.

I would start out with a broader issue. There is no way financial markets can assure a given standard of living in the future in the aggregate, period. Suppose someone has a million dollars in gold buried under their porch and intends to sell it in five years to pay for their food, shelter, utilities, and medical care. How much will it buy then? If you pick a number you are a fool.

The financial medium is not determinative, the cost of future real assets and standard of living are a function of the future supply of such assets and services, which in turn is dependent on everything that happens between now and then. There are a few limited exceptions (the big one is housing, you can buy a house now and reasonably expect to be able to live in it five years from now; but it might not have utilities potable water or services like police protection and fire departments then).

This is not to say that we cannot provide for the future; but we can only provide for the future in most areas collectively. If you want medical care in ten years, we should be investing in medical research, training medical personnel who will be around then, and building medical facilities and equipment. If we don't, and invest in gold hoards instead, all we assure is that medical care in the future will be very expensive and/or unavailable. If we do not invest wisely as a society, but get rates of return on our hedge fund portfolios, we get inflation, not consumption in the future.

BTW this applies as much to private investment as it does to programs like Social Security or Medicare. The demographics for IRAs are the same as for Social Security; when Social Security runs at a net cash outflow, at the exact same time the financial industry will be dealing with the same age group redeeming more investments than new money is being invested. If there is a Ponzi scheme in this, it applies exactly as much to Wall Street as it does to government programs. What idiot falls for the idea that private financial markets are immune to the forces that the real economy faces?

We can only consume what we produce as a society, and since we now specialize in producing wealth-destroying financial instruments rather than goods or services anyone wants to consume, the future is not promising. Eventually the wealthy do the logical thing and move to a country where they can obtain real goods and services, either part time as in the case of medical tourism or permanently. Everyone else can enjoy being part of a third world nation. "I have seen the future and it is Mississippi."

A part of me thinks we should eliminate the SS fund. We could just fund SS out of the general revenue.

By the way, there isn't any type of operational constraint on the government's ability to meet all SS payments. The numbers in the SS Trust Fund are largely irrelevant. The trust fund is nothing more than basic record-keeping, just like all accounts at the FED.

On an intellectual level you are correct. On a perception level, we need the trust funds. Otherwise a group of crooks trying to scam America out of its savings will be able to convince gullible people to vote to gut or eliminate Social Security and Medicare and force them to purchase inferior financial products at much greater cost from private monopolies which benefit the folks proposing the scam. Sound familiar?

All valid points....we need to fix the problem with the financialization of our economy. Americans are starting to put 2+2 together slowly but surely. There's just so much propaganda regarding public debt, the nature of a fiat system, what financial assets entail, sectoral balances, real resources, provisioning of government, etc. The 1% have done a great job duping the masses with reactionaries in Congress and the media.

The bottom line is, at the end of the day, if government spending will result in the sufficient amount of real assets we'll require down the road. For people in internet land, real resources being medical care, clothing, food, shelter, etc. As long as we have real stuff, paying for it is relatively simple: the government issues checks. For the inflationistas on the board, as long as goods and services increase with the supply of money, there won't be any inflationary issues.

The only risk to SS and entitlements are inflation. It's never been described in these realistic terms by the media or our political class. It's like these people are detached from economic reality or something. They parrot things like SS is going 'broke' or 'bankrupt' which is a lie and borders on a mental disorder.

 

[BillyV]

A part of me thinks we should eliminate the SS fund. We could just fund SS out of the general revenue.

By the way, there isn't any type of operational constraint on the government's ability to meet all SS payments. The numbers in the SS Trust Fund are largely irrelevant. The trust fund is nothing more than basic record-keeping, just like all accounts at the FED.

On an intellectual level you are correct. On a perception level, we need the trust funds. Otherwise a group of crooks trying to scam America out of its savings will be able to convince gullible people to vote to gut or eliminate Social Security and Medicare and force them to purchase inferior financial products at much greater cost from private monopolies which benefit the folks proposing the scam. Sound familiar?

I don’t disagree with this; while it is tempting to think about the returns in the private market vs US Government obligations, many either unsophisticated or unlucky investors would lose their retirement fund (not necessarily from “scams”) and go on to be supported by taxpayers, anyway. However, on a little deeper level, the distinction between the trust funds and general funds differentiates Social Security and (to a lesser extent) Medicare from welfare and other true “entitlement” programs. You can retire knowing that, despite being forced, you have contributed what for most people is a significant amount of their wages over their working life to their own retirement and that the returns are then yours and are computed in a way that at least has a relationship to the amounts contributed, rather than collecting general income tax revenues and then supporting only the indigent retirees (however that may be defined), putting them in a class of freeloaders who didn’t save for the future. Having separate accounts, however imaginary, reinforces that view and prevents seniors from feeling like they’re living on the public dole (which they are not, despite the views of some extremists). For the same reason I would oppose raising the cap on Social Security; it turns that program into more of a welfare program than a pension arrangement. If more revenue is needed (and I don’t necessarily agree that it is), general income or other taxes should be used to raise it.

 

[RKMBrown]

Obviously, the social security trust fund is....ridiculous.

You should have stopped there.

It needs to ended. I would recommend a cash buy out of the future liabilities via check to the 401k of each asset holder for the assets collected that have not yet been paid out to the asset holder.

That would be intellectually dishonest. If you replace Social Security, replace it in kind. Add a single-pay disability income policy for the current disability benefit projected for each worker through age 65 and a single-pay life insurance policy for the amount of the survivor benefit. Add to that a single-pay annuity for the amount of the retirement benefit. Factor in an additional single-pay premium to cover cost of living adjustments.

It is dishonest to advocate replacing a public insurance system with one that shifts all the investment risk and actuarial risk onto the participant. But then I gave up on "conservatives" being "honest" in their economic proposals thirty years ago. It must be something in what they drink. They keep pretending, as Tevya noted, in selling someone a horse that is actually an ass.

Huh? It's dishonest to give people their money back if that's what they want? But it's honest to steal from peter to pay for paul's insurance?

 

[oldfart]

Huh? It's dishonest to give people their money back if that's what they want? But it's honest to steal from peter to pay for paul's insurance?

No. it's dishonest for a pseudo-free market shill (refering to advocates of the plan, not you as an individual) to advocate negating contracts to which the government is a a party simply because it is in the interest of a few to do so. If you advocate a voluntary program of privatization, of renegotiating the contract, I would oppose it as a bad idea, but would consider it to be honest. But the cost of replacing Social Security with actuarially sound private insurance is about 180% of the cost of retaining Social Security, reflecting the fact that as constituted private monopolies are not able to compete with public insurance, which is why it only happens if the public can be persuaded to vote against their own economic interests to support the interests of paid political hacks beholden to economic leaches who cannot exist without being bailed out every few years at the public trough. This endeavor of extracting resources from almost everyone in society for the benefit of the wealthy and powerful is only possible when assisted by intellectually dishonest parrots of the corporate line who hopefully well paid for their services as a judas goat.

Suppose we conduct a thought experiment. Eliminate the government and start over. Disband all public services including police and military and abolish the legal system. Do you reasonably believe that third and fourth generation wealth will rise to the top of the new society? Where are you Social Darwinians? The wealthy will take their liquid assets and flee, joining the Russian emigres and the French Old Regime. Is the new upper class based on ability to mobilize support for forceful expropriation any less moral than those they displace? Of course not. Our present political structure is losing legitimacy, and when it reaches the point of governing only by the threat of force, it has no basis to complain when force turns out to be in the hands of others. Many on the left and right historically, and today many on the right, play the revolutionary rhetoric game. If you win, you get to make the rules and rewrite history. If you lose, the victors decide your fate. Who wants to play that game? It is a fool's game. And I am and have been ever disgusted by those of any political stripe who wish to play it.

 

[RKMBrown]

Huh? It's dishonest to give people their money back if that's what they want? But it's honest to steal from peter to pay for paul's insurance?

No. it's dishonest for a pseudo-free market shill (refering to advocates of the plan, not you as an individual) to advocate negating contracts to which the government is a a party simply because it is in the interest of a few to do so. If you advocate a voluntary program of privatization, of renegotiating the contract, I would oppose it as a bad idea, but would consider it to be honest. But the cost of replacing Social Security with actuarially sound private insurance is about 180% of the cost of retaining Social Security, reflecting the fact that as constituted private monopolies are not able to compete with public insurance, which is why it only happens if the public can be persuaded to vote against their own economic interests to support the interests of paid political hacks beholden to economic leaches who cannot exist without being bailed out every few years at the public trough. This endeavor of extracting resources from almost everyone in society for the benefit of the wealthy and powerful is only possible when assisted by intellectually dishonest parrots of the corporate line who hopefully well paid for their services as a judas goat.

Suppose we conduct a thought experiment. Eliminate the government and start over. Disband all public services including police and military and abolish the legal system. Do you reasonably believe that third and fourth generation wealth will rise to the top of the new society? Where are you Social Darwinians? The wealthy will take their liquid assets and flee, joining the Russian emigres and the French Old Regime. Is the new upper class based on ability to mobilize support for forceful expropriation any less moral than those they displace? Of course not. Our present political structure is losing legitimacy, and when it reaches the point of governing only by the threat of force, it has no basis to complain when force turns out to be in the hands of others. Many on the left and right historically, and today many on the right, play the revolutionary rhetoric game. If you win, you get to make the rules and rewrite history. If you lose, the victors decide your fate. Who wants to play that game? It is a fool's game. And I am and have been ever disgusted by those of any political stripe who wish to play it.

Contract? What contract? Did you sign a contract? Where's my contract? I never signed any contract for SS, never saw one either.

My point, in part, was that there has been no agreement the money is simply taken by force.

As to your fools game, how far are you willing to take this? 100% of our children's salaries? 100% of all of assets upon our death? Prima Nocta of our wives by our governors? Where do you draw the line before you will protect family members from this attack by our elected leaders on our liberty to live life as we see fit? You deride others for drawing the line at 50% or so total tax, fine then where do you draw the line? You may be a willing slave to your employees, you may be willing to pass this legacy of slavery to future generations, I am not.

As to your accusation that I'm better off with SS than private... That's a load of bull honky. I put the same amount in my 401k as I'm forced to put into SS. I'll be receiving 5times more from my 401k in retirement than from SS and it's MINE to do with as I see fit. I can leave it to my children if I want for example. Where with SS it's flushed down the toilet. I would have to live to be 211 years old just to break even on the money that has been stolen from me for SS.

 

[Toro]

15 years ago, the Liberal government in Canada reformed the Canada Pension Plan - Canada's version of SS - and changed it to a standard defined contribution plan. It's done better than SS IIRC and I expect it to do better in the future, given that SS mimics a government bond fund earning very low returns. I think SS should be reformed similarly.