Social Security is Not a Ponzi Scheme, Mr. Perry

[Listening]

Someone still needs to explain to me how, if there is all this trust fund money still around and the system is so solid, that President Obama would make the kind of statement he did during the debt cieling crisis.

How is it possible that he could not be sure SS checks would be in the mail if the system is safe for the next 25 years.

Looking for some help !!!

 

[clevergirl]

The only money that SS is costing the government right now is some repayment of the surplus that the congress spent all the rest is paid by current contributions and technically the govt is only repaying debt owed to the SS administration aka the people of the USA.

Repayment of surplus...that sounds just so quaint. SS was not sold to the American people as a bank for the Feds. It USED TO BE a pay as you go program...and even then it was a pittance with regards to retirement.

Now what we have, is a system that must further tax the younger generation more, for a decrease in benefits, in order to make up what the government "borrowed" from it.

 

[flacaltenn]

NYCarbineer:

A Ponzi scheme is fraud. There is no fraud in Social Security. Social Security operates openly and in full compliance with the law.

In a Ponzi scheme, someone is stealing money for their own personal use. No one is stealing money from Social Security. All the money is accounted for.

Forget the Ponzi scheme thing.. There is NO THEFT or FRAUD IN SOC SEC? Then how come you skipped every one of my recent posts outlining all the ways BOTH theft and fraud are part of the program?

Of course diverting Payroll tax "premiums" into any dam thing Congress pleases isn't theft. Especially when some of the same people who paid those premiums the 1st time are now obligated to REPAY those premiums WITH INTEREST and FINANCING charges..

It's indefensible by any means. But go ahead and try...

It's not Social Security's fault that the government is 14 trillion in debt. Social Security is a LENDER, not a borrower.

Was that a defense of No Theft and No Fraud? And now we have Soc Sec as a "lender"?

Yeah -- we all consciously decided to buy Cruise Missiles with poor workers excess retirement insurance premiums and then we wanted to PAY AGAIN when the govt borrows principal + phoney interest + financing charges to make the actual payments..

 

[flacaltenn]

[Currently SS is paying out more than it takes in.

Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

Trustees Report Summary

Why would exclude interest income? That's the whole point of investing the money.

In 2010 SSA took in 677 billion and paid out 585 billion, thus increasing the trust fund by the difference.

Some Ponzi scheme lolol

Who is paying that phoney interest? I say phoney because it's on a IOU note not on negotiable, transferable paper. THe SSA trust fund owns NOTHING that is a marketable security.. The Treasury has to issue NEW debt to make those payments. New debt that the SAME TAX PAYERS who got the FICA excess stolen from them are on the hook to cover AGAIN..

That's not -- "an investment".. It's a theft followed by the delayed issuance of debt instruments to cover the theft. If you can't get your arms around that -- you probably also believe in the tooth fairy.. What part of this are you DENIERS having problems with?

 

[bripat9643]

The 2.5 trillion dollar balance is fully invested in US treasuries as required by law for over 70 years. Most of the money in the fund is from interest, not contributions.

The mechanics are pretty simple. The treasury issues benefit checks directly out of payments receive from payroll taxes. Excesses are reinvested. Any shortage is covered by selling bonds in the portfolio.

In 2009 and 2010, receipts were about 5% less that benefits. This was due to higher unemployment and the temporary reduction in payroll tax rate. By 2012-14, the CBO projects the shortage to be less than 1%. After that contributions are expected to surpass benefit payments for a few years then begin a rapid fall resulting in a zero balance by around 2038. At that time payment of benefits will come 100% from contributions and benefits will be about 25% less than they are now. This is if Congress does nothing which seems unlikely.

You can't pay yourself interest, and you can't loan money to yourself.

Why is it so hard for leftwing nitwits to understand that?

 

[saveliberty]

It is a lot easier to try when you can print your own money.

 

[bripat9643]

You are confusing form for substance. A pension fund that invests solely in government bonds is sending your money to the government and the government spends it which it then pays you back in the future by taxing others. That is exactly what SS does, except it doesn't go to all the trouble of issuing bonds.

So the government sends money to the government and then spends it? What does it pay you back with?

You have to be really stupid not to understand that there is no money in the trust fund. There are no investments. No interest is paid. The "Trust Fund" is a drawer full of worthless IOUs that one government department issued to another government department. They aren't marketable, which means they have no value to anyone.

And no, SS does not buy and sell bonds. It credits the accounts as if it were buying and selling bonds. That is confusing, I know, but the economics of the cash flows through SS and a government bond fund are the same.

 

[flacaltenn]

To sum it up, pension funds actually invest the principle, SS only invest whatever is left after it pays current retires. Since SS are currently paying out more than it takes in it is not investing anything.

What about the $2.5 trillion surplus?

The 2.5 trillion dollar balance is fully invested in US treasuries as required by law for over 70 years. Most of the money in the fund is from interest, not contributions.

The mechanics are pretty simple. The treasury issues benefit checks directly out of payments receive from payroll taxes. Excesses are reinvested. Any shortage is covered by selling bonds in the portfolio.

In 2009 and 2010, receipts were about 5% less that benefits. This was due to higher unemployment and the temporary reduction in payroll tax rate. By 2012-14, the CBO projects the shortage to be less than 1%. After that contributions are expected to surpass benefit payments for a few years then begin a rapid fall resulting in a zero balance by around 2038. At that time payment of benefits will come 100% from contributions and benefits will be about 25% less than they are now. This is if Congress does nothing which seems unlikely.

THERE ARE NO BONDS TO SELL 'in the portfolio'..

Special-issue securities, Social Security trust funds

The Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund comprise the Social Security trust funds. Both funds are managed by the Department of the Treasury through their Bureau of Public Debt. Since the beginning of the Social Security program, all securities held by the trust funds have been issued by the Federal Government. There are two general types of such securities:

•Special issues—available only to the trust funds
•Public issues—marketable Treasury bonds available to the public.
The trust funds now hold only special issues, but they have held public issues in the past.

The definition of "special issue" is NON-TRANSFERABLE, NON-MARKETABLE...

Any shortage is covered by selling bonds in the portfolio.

Stop the lying Flopper.. Stop repeating the fairy tale.. Your description above isn't true.

They DON'T sell bonds in the portfolio.. The Treasury is FORCED to issue NEW debt.

To Fix Social Security, First Ask Why It Is Deep in the Red

In other words, there is no "trust Fund" or "lockbox": Social Security is entirely dependent on the Treasury's sale of new bonds for its own solvency. If interest rates spike and/or global buyers become wary of Treasuries, costs for borrowing will skyrocket, crowding out all other Federal spending.

The Awful Truth About the Social Security Trust Fund is Beginning to Emerge | Dissident Voice


None of the Social Security surplus revenue has ever been saved and invested in Treasury bonds or anything else. All revenue, not needed to pay current benefits has been put into the general fund and used to pay for wars, tax cuts, and other government programs. Every dollar of the $2.5 trillion that is supposed to be in the trust fund has been “borrowed,” “embezzled,” or “stolen” by the government and spent for other purposes. The trust fund does not hold any real marketable government bonds or any other kind of real assets. It holds only IOUs in the form of ”special issues of the Treasury.” These are a gimmick, created by the government, to make the public think the trust fund holds “bonds” when it holds only IOUs. They are not marketable and could not be sold to anyone even for a penny on the dollar. They are nothing more than accounting devices.

Or from the Congressional Budget Office..

http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf

When a trust fund receives payroll taxes or other income
that is not needed immediately to pay benefits or cover
other expenses, the Treasury credits the fund and uses the
excess cash to reduce the amount of new federal borrowing
that is needed to finance the governmentwide deficit.
That is, if other tax and spending policies are unchanged,
the government borrows less from the public than it
would in the absence of those excess funds. The reverse is
the case when revenues for a trust fund program fall short
of expenses. The balances of trust funds at a given point
in time are not a measure of resources available to pay
future obligations for the respective programs; those
resources will need to come from federal revenues or
additional borrowing in the years those obligations are
due.

Sources from the SSA themselves and CBO or Santa Claus.. You decide..

 

[Lakhota]

Why do some people describe the "special issue" securities held by the trust funds as worthless IOUs? What is SSA's reaction to this criticism?

As stated above, money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Many options are being considered to restore long-range trust fund solvency. These options are being considered now, over 20 years in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds' securities will need to be redeemed on a large scale prior to maturity.

More: Trust Fund FAQs

 

[Lakhota]

fecaltenn is full of shit.

 

[bripat9643]

More: Trust Fund FAQs

Let me get this straight: You actually believe that horseshit?

The people who wrote the stuff on that web page should be arrested for fraud.

 

[Lakhota]

Let me get this straight: You actually believe that horseshit?

The people who wrote the stuff on that web page should be arrested for fraud.

Maybe you'll see it differently when you're out of diapers...

 

[Listening]

Why do some people describe the "special issue" securities held by the trust funds as worthless IOUs? What is SSA's reaction to this criticism?

As stated above, money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Many options are being considered to restore long-range trust fund solvency. These options are being considered now, over 20 years in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds' securities will need to be redeemed on a large scale prior to maturity.

More: Trust Fund FAQs

That really is quite a claim given the fact that President Obama stated that he wasn't sure they could cover the checks because there simply might not be enough money to do so during the debt cieling crisis.

You might want to vet these kinds of quotes in advance of posting them.

 

[Quantum Windbag]

But if a pension fund invests only in government bonds, how is that any different from SS?

Government bond fund cash flow
Tax money ---> Buys bonds ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government redeems your bonds from the taxes of others and gives you back your money plus interest

SS cash flow
Tax money ---> Your account is credited ---> Government spends all your tax money ---> Government taxes others ---> Government gives you back your money plus interest from the taxes of others

What is the difference in cash flows other than the issuance and redemption of bonds?

Because the pension fund actually invest the income, and pays out from the proceeds of government bonds. SS pays out of proceeds, and then invests in bonds. Why does a person who actually handles investments not understand the difference between front loading investments and front loading payments?

You are confusing form for substance. A pension fund that invests solely in government bonds is sending your money to the government and the government spends it which it then pays you back in the future by taxing others. That is exactly what SS does, except it doesn't go to all the trouble of issuing bonds.

And no, SS does not buy and sell bonds. It credits the accounts as if it were buying and selling bonds. That is confusing, I know, but the economics of the cash flows through SS and a government bond fund are the same.

As for front loading payments, that was relevant 40 years ago but it isn't today since everyone has been paying into it since. True, they - and we - have not paid enough into it for the benefits we will receive, but that is a funding and a liability issue, not a "Ponzi Scheme" issue.

I am not the one that is confused.

You asked me what the difference in cash flow was, and I described it. A pension fund is actually legally required to follow the laws about having enough assets on hand to cover their obligations, SS does not.

I have no idea why you are so hung up on the bond buying part of this. The point is that the pension fund does not transfer payments from current workers to current retirees, SS does. That is the significant part of the cash flow in this discussion, not the bonds. SS relieas on the transfer payments, not the bonds, to meet its obligations. Pension funds do the opposite.

And, as I have repeatedly pointed out here, I started this thread, and pointed out that SS is not a Ponzi scheme. The OP even pointed out why it is not a Ponzi scheme, and everyone else has been trying to convince me that I am wrong, and there is nothing to worry about.

 

[bripat9643]

Maybe you'll see it differently when you're out of diapers...

I've been out of diapers longer than you can imagine.

I won't see it differently because there won't be any money for me to collect. The Dims have spent it all.

 

[Toro]

I am not the one that is confused.

You asked me what the difference in cash flow was, and I described it. A pension fund is actually legally required to follow the laws about having enough assets on hand to cover their obligations, SS does not.

That's not true. Most places don't have laws which say that pension funds have to be fully funded. In fact, most aren't. Pension funds are bounded by laws in which they are supposed to operate. But they don't have laws that say "You have to have $X in assets to pay $Y in liabilities."

I have no idea why you are so hung up on the bond buying part of this. The point is that the pension fund does not transfer payments from current workers to current retirees, SS does. That is the significant part of the cash flow in this discussion, not the bonds. SS relieas on the transfer payments, not the bonds, to meet its obligations. Pension funds do the opposite.

I am hung up on the bond buying part because a pension plan comprised entirely of government bonds does transfer payments from one set of workers to another. In fact, all government debt - or all debt for that matter - transfers assets from one group of people to another.

I'll give you an example. Lots of people say that "The SS trusts are just filled with IOUs." Never mind that all bonds and debts are merely IOUs with different legal standings, that doesn't change the economics and cash flows of the funds. Let's say I borrow money from you. We can do it two ways. I can promise to pay you back (an IOU) or we can write a contract saying I will pay you back (a bond). Then I pay you back. Between the time when I've borrowed money from you and the time I've paid you back, in the first scenario, you have my promise, the second, you have a bond. That doesn't change the cash flows and economics of the transaction. The only difference is the legal standing of the asset and liability and perhaps the liquidity.

I get why this is confusing, but if you drill into the economics, the cash flows are all the same. The government could set up an individual mutual fund administered by a private company for every one on social security which can only invest in government bonds, and the economics and cash flows would be exactly as they are in the SS trusts.

 

[editec]

You are confusing form for substance. A pension fund that invests solely in government bonds is sending your money to the government and the government spends it which it then pays you back in the future by taxing others. That is exactly what SS does, except it doesn't go to all the trouble of issuing bonds.

So the government sends money to the government and then spends it? What does it pay you back with?

You have to be really stupid not to understand that there is no money in the trust fund. There are no investments. No interest is paid. The "Trust Fund" is a drawer full of worthless IOUs that one government department issued to another government department. They aren't marketable, which means they have no value to anyone.

And no, SS does not buy and sell bonds. It credits the accounts as if it were buying and selling bonds. That is confusing, I know, but the economics of the cash flows through SS and a government bond fund are the same.

IF SSI's accounts are worthless, so too are all FEDERAL GOVERMENT issed debt instruments.

Now, the question really is Which debts will be paid and which will not?

Will The USA pay its own people that it owes money to, or will it decide to ONLY pay everybody else it owes money to?

Seems to me that the American people ought to be first in line to get paid.



No guarantee that the masters will decide that, of course.

They do seem to hate the american people, after all, so these complaints about SSI do have some merit.

 

[JakeStarkey]

The money will be there if bripat wants it, but he can give it back if he wants.

 

[thereisnospoon]

I am not the one that is confused.

You asked me what the difference in cash flow was, and I described it. A pension fund is actually legally required to follow the laws about having enough assets on hand to cover their obligations, SS does not.

That's not true. Most places don't have laws which say that pension funds have to be fully funded. In fact, most aren't. Pension funds are bounded by laws in which they are supposed to operate. But they don't have laws that say "You have to have $X in assets to pay $Y in liabilities."

I have no idea why you are so hung up on the bond buying part of this. The point is that the pension fund does not transfer payments from current workers to current retirees, SS does. That is the significant part of the cash flow in this discussion, not the bonds. SS relieas on the transfer payments, not the bonds, to meet its obligations. Pension funds do the opposite.

I am hung up on the bond buying part because a pension plan comprised entirely of government bonds does transfer payments from one set of workers to another. In fact, all government debt - or all debt for that matter - transfers assets from one group of people to another.

I'll give you an example. Lots of people say that "The SS trusts are just filled with IOUs." Never mind that all bonds and debts are merely IOUs with different legal standings, that doesn't change the economics and cash flows of the funds. Let's say I borrow money from you. We can do it two ways. I can promise to pay you back (an IOU) or we can write a contract saying I will pay you back (a bond). Then I pay you back. Between the time when I've borrowed money from you and the time I've paid you back, in the first scenario, you have my promise, the second, you have a bond. That doesn't change the cash flows and economics of the transaction. The only difference is the legal standing of the asset and liability and perhaps the liquidity.

I get why this is confusing, but if you drill into the economics, the cash flows are all the same. The government could set up an individual mutual fund administered by a private company for every one on social security which can only invest in government bonds, and the economics and cash flows would be exactly as they are in the SS trusts.

Get this straight. There is NO Social Security Trust Fund.
There is no bind buying. The money taken from us in payroll deductions goes to the general fund. What's left are IOU's.
If SS money was backed by bonds or in a trust fund, how then could Obama tell the American people that they may not get their SS Checks in a particular month?
The bottom line is the Left for some reason wants to believe the federal government is acting in the best interests of the people. They want to believe that because they have invested so much in Obama, emotionally and with their undying loyalty.
Now, once a new administration is in place Jan 2013, we will see a remarkable swing in opinion from the Left. Realizing they are no longer most favored in DC, they will go on the attack, claiming that it is right wing tea party terrorists( Thx Joe Biden) that screwed up Social Security and it was THEY who stole all that money.
Please....
You Lefties are as fickle as a high maintenance blonde staring at a closet full of shoes.

 

[NYcarbineer]

What surplus?
Its in IOUS

You do understand that's how SS makes interest on the money, right?

Yes I do

Now pay close attention........................................

Government - Interest Expense on the Debt Outstanding

Refute it if you can!!!

The interest earned on the trust fund in 2010 was 108 billion.

2011 Trustees Report: Section IV.A, Short-range estimates