SwimExpert
Gold Member
- Nov 26, 2013
- 16,247
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- #1
There is much discussion on this on this board. Almost any time SS and it's solvency (or lack thereof) is discussed, everyone talks about how SS has been "raided" and used to pay for other things. The problem here is that most of you, Democrat and Republican alike, who say this don't have a clue what you're talking about. So here, I'll explain it to you. I'd like to say that we could put the issue to rest once and for all, but I doubt that will be the case.
Before I begin, a prediction: Many of you will rush to respond without bothering to read, and in the process you'll jump to conclusions and make an ass out of yourself. Some will rail off on wild tangents. Many dissenters will be folks who claim to be conservatives, but are really just fake ass Cinos who like to complain and whine, and will be completely oblivious to the highly damaging implications I'll be presenting against the entire SS system. But you'll feel good because touching yourself always feels good. Many dissenters will be liberals, who will "like" this post, will note the Cinos dissenting for all the wrong reasons, and based upon that, will launch into your Hooray for Government dance, as if idiots being wrong instantly means that government is the solution to all our problems. Finally, if most people are adequately drawn to my blue highlighting of this paragraph so as to read it, and subsequently see their planned reaction described herein, few responses will be made because you'll realize that you've already been identified and you're now embarrassed at how much of an ass of yourself you were about to make.
Okay, now that that's cleared up, let's talk about the Social Security Trust, and what happens to the money.....
Overall, the Social Security Trust is fairly simple. Money goes in with the express purpose of being used to fund Social Security. It can't be used to pay to fuel up Air Force One for Obama's latest golfing venture. Simple. That being said, money static is money lost. That is to say, if money just sits on the coffee table, it's not doing anything except sitting there. In our personal lives most people know that building up a nest egg of cash that is doing nothing typically means lost opportunities. We could invest that money and make more money. Even something as simple and safe as putting it into a Certificate of Deposit with your bank might return a little bit of cash, all while you sit back and play video games for the next 18 months. If you're not going to be using your nest egg anyway, it's like giving up free money to just let it sit there.
That's why many, many years ago Congress passed a law that requires excess funds in the Social Security Trust to be "invested." Instead of just sitting there and collecting dust, the excess is invested and collects interest, which is then rolled back into the Trust. This "investing" is done in the form of intra-governmental loans. Basically, the government borrows money from itself, on a short term basis, in pretty much the same fashion as other government borrowing occurs. A bond is given to the Trust, and a few months later the Trust is repaid with interest.
Now, you might be thinking that "Well, this really does amount to raiding the SS Trust to pay for other things." On it's surface, it might appear that way. But in reality, it's not that way. And there are two reasons for that:
1 - At it's core, it's little more more than moving around cash. If your car broke down on Wed and you were short on cash, causing you to transfer $500 from your savings into your checking until payday Friday, at which point you put back the $500 plus added your normal per-paycheck savings contribution, would you call that "raiding" your savings account to pay you mechanic? Of course not. All you did was move your own cash around so that your check won't bounce.
2 - The law requires that the Trust be invested in his way. It doesn't matter how much or how little the government is spending on other things. Congress could pass a balanced budget, and the same thing would happen. Heck, the Congress could pass a budget that only authorizes $1,500 in spending, and the same thing would still happen. The Trust would still be invested, and the government would still borrow from itself.
This is why you may have heard such seemingly absurd things as "The debt is $18 trillion, but the real dept is only $10 trillion." What the "real" debt refers to is the amount of debt that is not in the form of intra-governmental loans; intra-governmental loans are included in the official calculation of the debt, so a sizable part of the $18 trillion includes cash that the government has just shifted around between accounts. (***Note: I do not know the actual figures off the top of my head, the $10 trillion amount is merely an explanatory tool).
Now that we understand that investing the excess funds in the Social Security Trust by means of intra-governmental debt is a long standing legal requirement that happens without regard to how much the government spends, some people might be ready to rejoice in the alleged marvel that is the Social Security system. Some might feel relieved that in fact the SS Trust is not being "raided" and might even see this as evidence that SS can remain solvent for many decades to come. But don't be so fast to celebrate. Because everything I've just said actually underscores the fact that Social Security is a drain on the American economy, and on the taxpayer.
As I explained, when excess funds from the SS Trust are loaned out to other parts of the government they are paid back with interest. This brings more money into the Trust. That money didn't come from your SS payroll taxes. It comes directly from your income tax. You are investing more money into the SS Trust than just your SS taxes!! The SS Trust is like a black hole. It sucks in money from every direction, and all it spits out are the decayed remnants of what's left over.
The amount of money a person receives in terms of SS retirement benefits will almost always be less than what you've paid into it as SS taxes. And now that we understand that we invest more than just our SS taxes into the SS Trust, the disparity of return is understood to be even greater. Allowing individuals to retain their SS taxes would allow them to instead invest those funds into retirement plans that would yield better returns, resulting in having more funds available for their own retirement. Additionally, the interest that the SS Trust sucks in from the taxpayers would result in a net savings of government expenses, allowing for lower deficits.
Before I begin, a prediction: Many of you will rush to respond without bothering to read, and in the process you'll jump to conclusions and make an ass out of yourself. Some will rail off on wild tangents. Many dissenters will be folks who claim to be conservatives, but are really just fake ass Cinos who like to complain and whine, and will be completely oblivious to the highly damaging implications I'll be presenting against the entire SS system. But you'll feel good because touching yourself always feels good. Many dissenters will be liberals, who will "like" this post, will note the Cinos dissenting for all the wrong reasons, and based upon that, will launch into your Hooray for Government dance, as if idiots being wrong instantly means that government is the solution to all our problems. Finally, if most people are adequately drawn to my blue highlighting of this paragraph so as to read it, and subsequently see their planned reaction described herein, few responses will be made because you'll realize that you've already been identified and you're now embarrassed at how much of an ass of yourself you were about to make.
Okay, now that that's cleared up, let's talk about the Social Security Trust, and what happens to the money.....
Overall, the Social Security Trust is fairly simple. Money goes in with the express purpose of being used to fund Social Security. It can't be used to pay to fuel up Air Force One for Obama's latest golfing venture. Simple. That being said, money static is money lost. That is to say, if money just sits on the coffee table, it's not doing anything except sitting there. In our personal lives most people know that building up a nest egg of cash that is doing nothing typically means lost opportunities. We could invest that money and make more money. Even something as simple and safe as putting it into a Certificate of Deposit with your bank might return a little bit of cash, all while you sit back and play video games for the next 18 months. If you're not going to be using your nest egg anyway, it's like giving up free money to just let it sit there.
That's why many, many years ago Congress passed a law that requires excess funds in the Social Security Trust to be "invested." Instead of just sitting there and collecting dust, the excess is invested and collects interest, which is then rolled back into the Trust. This "investing" is done in the form of intra-governmental loans. Basically, the government borrows money from itself, on a short term basis, in pretty much the same fashion as other government borrowing occurs. A bond is given to the Trust, and a few months later the Trust is repaid with interest.
Now, you might be thinking that "Well, this really does amount to raiding the SS Trust to pay for other things." On it's surface, it might appear that way. But in reality, it's not that way. And there are two reasons for that:
1 - At it's core, it's little more more than moving around cash. If your car broke down on Wed and you were short on cash, causing you to transfer $500 from your savings into your checking until payday Friday, at which point you put back the $500 plus added your normal per-paycheck savings contribution, would you call that "raiding" your savings account to pay you mechanic? Of course not. All you did was move your own cash around so that your check won't bounce.
2 - The law requires that the Trust be invested in his way. It doesn't matter how much or how little the government is spending on other things. Congress could pass a balanced budget, and the same thing would happen. Heck, the Congress could pass a budget that only authorizes $1,500 in spending, and the same thing would still happen. The Trust would still be invested, and the government would still borrow from itself.
This is why you may have heard such seemingly absurd things as "The debt is $18 trillion, but the real dept is only $10 trillion." What the "real" debt refers to is the amount of debt that is not in the form of intra-governmental loans; intra-governmental loans are included in the official calculation of the debt, so a sizable part of the $18 trillion includes cash that the government has just shifted around between accounts. (***Note: I do not know the actual figures off the top of my head, the $10 trillion amount is merely an explanatory tool).
Now that we understand that investing the excess funds in the Social Security Trust by means of intra-governmental debt is a long standing legal requirement that happens without regard to how much the government spends, some people might be ready to rejoice in the alleged marvel that is the Social Security system. Some might feel relieved that in fact the SS Trust is not being "raided" and might even see this as evidence that SS can remain solvent for many decades to come. But don't be so fast to celebrate. Because everything I've just said actually underscores the fact that Social Security is a drain on the American economy, and on the taxpayer.
As I explained, when excess funds from the SS Trust are loaned out to other parts of the government they are paid back with interest. This brings more money into the Trust. That money didn't come from your SS payroll taxes. It comes directly from your income tax. You are investing more money into the SS Trust than just your SS taxes!! The SS Trust is like a black hole. It sucks in money from every direction, and all it spits out are the decayed remnants of what's left over.
The amount of money a person receives in terms of SS retirement benefits will almost always be less than what you've paid into it as SS taxes. And now that we understand that we invest more than just our SS taxes into the SS Trust, the disparity of return is understood to be even greater. Allowing individuals to retain their SS taxes would allow them to instead invest those funds into retirement plans that would yield better returns, resulting in having more funds available for their own retirement. Additionally, the interest that the SS Trust sucks in from the taxpayers would result in a net savings of government expenses, allowing for lower deficits.