Bush on Social Security

[toddjh]

It leaves many retirees in poverty.

Which is exactly why Social Security should be means-tested. It makes no sense to pay every senior a flat amount -- that's just an award for getting old! The whole point is supposedly that it's harder to make ends meet when you're beyond the normal working age, so it makes perfect sense to distribute benefits with that in mind, and limit it to people who actually are having difficulty.

Combining private retirement accounts with a modest, means-tested "senior welfare" program is the best of both worlds. The safety net is still there for those who need it, while those who can afford to provide for their own retirement benefit from potentially higher interest rates and more freedom to invest.

Jeremy

 

[BPSCG]

Don't let it happen to start with, of course. (While we're on the subject, what's the growth rate stocks will have to achieve - factoring in the higher administrative costs of privatization - to outperform the return of government bonds over the next four decades?)

"Higher adminstrative costs of privatization" is a myth - see my previous post.

In any case, the proper comparison isn't what does privatization have to do "to outperform the return of government bonds over the next four decades." The question is what does it have to do to outperform Social Security's rate of return, which has been dropping for years, is now about 2%, and will go lower - much lower - if (as you propose) we increase the tax and cap the benefits.

Stanation in wage growth in the bottom two-thirds of the income distribution since the eighties has a lot to do with the current anticipated shortfall.

I'm not even sure what you mean by that, so I'd appreciate an explanation and proof.

Seems unfair that with payroll taxes having been raised back in the eighties to cover future shortfalls end up being treated as general revenues, enabling tax cuts for the wealthy few, doesn't it?

This argument is a non-starter. Excess Social Security tax collected has always been treated as general revenues. It has always been loaned to the government to use for war and for welfare. What do you think they've been doing with the extra the last 60 years?

Might have been smarter to take the excess and invest it in the stock market for the last sixty years. Put $10,000 in equal dollar amounts in the 30 Dow Jones components and put another $10,000 in Treasury bonds. Let percolate for twenty years. Where do you think you'll do better? If you're not sure, pick any twenty year Dow period you want and look at the graph at the end of that period.

 

[BPSCG]

Which is exactly why Social Security should be means-tested. It makes no sense to pay every senior a flat amount -- that's just an award for getting old!

First off, Social Security is not a "flat amount." The amount you get depends on how much you've paid into the system over the years. Essentially, the better you supported your parents, the better your children will have to support you.

Combining private retirement accounts with a modest, means-tested "senior welfare" program is the best of both worlds.

There already is such a thing. It's called Supplemental Security Income (abbreviated SSI). It's a federal welfare program for people who are over 65 or disabled, with limited other means.

When you say "modest means test", I don't think you understand the ramifications of what you're suggesting. It means your grandma periodically has to go to the Social Security office (yes, SSA administers SSI, even though the two programs are not at all the same thing) and go through the same kind of questioning she would have to go through if she were applying for welfare. She needs to bring bank statements, proof of other income, proof of her living arrangements (does she live alone or is there someone living with her? - is she responsible for all the rent or part of it, and if part of it, does she pay her proportionate share?), and submit to a grilling by a bureaucrat who suspects she's trying to rip off the government.

Trust me - I used to do that for a living.

The safety net is still there for those who need it, while those who can afford to provide for their own retirement benefit from potentially higher interest rates and more freedom to invest.

I'm confused. Are you suggesting that rich people should pay Social Security tax but not get Social Security benefits?

 

[toddjh]

First off, Social Security is not a "flat amount." The amount you get depends on how much you've paid into the system over the years. Essentially, the better you supported your parents, the better your children will have to support you.

Yes. Sorry if I was unclear. I meant "flat" in the sense that people who've paid the same amount in get the same amount back, regardless of their financial status at the time.

Edited to add: this setup is also suboptimal because it's progressive. Those that pay more into the system get more back, even though the fact that they had more pre-tax income to begin with likely means they have less need for supplemental income in their old age. The income cap on the Social Security tax makes this even worse, since it means that lower-income people will have to pick up more of the slack, increasing the likelihood that those who need the money now will be the ones bearing the heavier tax burden.

There already is such a thing. It's called Supplemental Security Income (abbreviated SSI). It's a federal welfare program for people who are over 65 or disabled, with limited other means.

What I want to know is, why are seniors who are able to take care of themselves financially getting any of my tax dollars? What's the justification for taking money away from working people who may need it, and giving it to other people who demonstrably don't?

When you say "modest means test", I don't think you understand the ramifications of what you're suggesting. It means your grandma periodically has to go to the Social Security office (yes, SSA administers SSI, even though the two programs are not at all the same thing) and go through the same kind of questioning she would have to go through if she were applying for welfare. She needs to bring bank statements, proof of other income, proof of her living arrangements (does she live alone or is there someone living with her? - is she responsible for all the rent or part of it, and if part of it, does she pay her proportionate share?), and submit to a grilling by a bureaucrat who suspects she's trying to rip off the government.

As opposed to not doing any testing at all, and essentially letting the wealthy "rip off the government," by design?

Do you disagree with me on the theory, or just on practical grounds? I'm not convinced the setup for retirees would have to be as grandiose as it is for welfare. For starters, all the employment-related hoops that welfare programs have to jump through could be swept aside. It's expected that young people should seek out employment to support themselves, but not so much with seniors, who are generally expected to retire. Could you explain to me why a simple tax return would be insufficient to establish the income of a senior? We trust it enough to determine how much people should give to the government; why not also trust it to determine how much they should get back?

I'm confused. Are you suggesting that rich people should pay Social Security tax but not get Social Security benefits?

Yes. The same way their taxes help pay for welfare programs even though they don't benefit from them personally. It's hardly a radical concept; it's just not one that's traditionally been applied to Social Security in this country.

Jeremy

 

[BPSCG]

Yes. Sorry if I was unclear. I meant "flat" in the sense that people who've paid the same amount in get the same amount back, regardless of their financial status at the time.

And you object to that.

What I want to know is, why are seniors who are able to take care of themselves financially getting any of my tax dollars?

When I worked at SSA, the slogan "Contract Between Generations" was used to sell the program during its 50th anniversary celebrations back in 1986. People were told that each generation had an obligation to the generation before it, that the better you took care of your parents' generation, the better your children's generation would take care of you.

Think about it for a second. If every child took care of his parents when they became too old to work, you wouldn't need Social Security. And if everyone provided for their own secure retirement by saving and investing, you wouldn't need Social Security.

But a lot of people don't provide for their own retirements, and a lot of people are unable or unwilling to provide for their parents' wellbeing when they become too old to work. What Social Security is is a method of forcing taxpayers collectively to take care of their parents. There's something very Judeo-Christian about this, when you think about it.

What you're proposing is this: The government tells us, "We're changing the terms of the 'Contract Between Generations.' From now on, everyone will continue to be forced to take care of their parents' entire generation - you'll still pay the taxes. But when you become too old to work, your children will only take care of you if you are unable to take care of yourself, no matter how dutifully you took care of your parents' generation."

At that point, why shouldn't people say, "The hell with this system. I'm going to take care of my parents and my parents only, teach my own children by example so that when I become too old to work, they'll help me out if I need it, and make sure I don't have to count on the government (i.e., the other taxpayers) to take care of me." If enough people felt that way, they might conceivably vote Social Security out of existence.

Do you disagree with me on the theory, or just on practical grounds?

Both. Welfare, for better or force worse, has a certain social stigman attached to it. Social Security does not. Turning Social Security into welfare - and that's exactly what you are proposing - means turning millions of people into welfare recipients, with all its attendant social stigman and indignities.

Could you explain to me why a simple tax return would be insufficient to establish the income of a senior?

For starts, lots of income doesn't appear on a tax return.

Secondly, the tax return shows only your income for the year. If your income fluctuates from month to month, should your Social Security payment also fluctuate? It does in the SSI program. In the SSI program, your payment is based on, among other things, your quarterly income. Hit the Lotto for $5,000 in January and that wipes out your SSI for the January-March quarter, but you'd be eligible again in April.

Finally, if someone has $100,000 in tax-free municipal bonds, that generates 4% tax-free interest per year, does he qualify for Social Security inder your means test? He doesn't qualify for SSI, because there's a limit to how much money you can have in the bank. Your tax return would not only not show that you have the bonds, but since the income is tax-free, it wouldn't show the interest earned on the bonds.

These are just some of the difficulties of applying a means test to Social Security.

 

[TragicMonkey]

When I worked at SSA, the slogan "Contract Between Generations" was used to sell the program during its 50th anniversary celebrations back in 1986. People were told that each generation had an obligation to the generation before it, that the better you took care of your parents' generation, the better your children's generation would take care of you.

Think about it for a second. If every child took care of his parents when they became too old to work, you wouldn't need Social Security. And if everyone provided for their own secure retirement by saving and investing, you wouldn't need Social Security.

But a lot of people don't provide for their own retirements, and a lot of people are unable or unwilling to provide for their parents' wellbeing when they become too old to work. What Social Security is is a method of forcing taxpayers collectively to take care of their parents. There's something very Judeo-Christian about this, when you think about it.

The concept of Social Security, or similar programs, lets us out of the necessity of having children because we need someone to support us, and makes sure that people aren't unduly penalized if they happen to outlive their kids.

I'm sure the country is better off without people thinking they need to have at least six children each, so that they may have a comfortable retirement. I'm no mathematician, but that would seem to make it a mite crowded in here...



eta: I'm not sure what's "Judeo-Christian" about it; it's not like Jews and Christians are the only religions or cultures who care for their elders. Unless Confucianism is all hidden code for "**** the ancestors!"

 

[toddjh]

And you object to that.

Well, yes. Like I said, in its current form it's pretty much just a reward for not dying. Doesn't make any sense to me.

When I worked at SSA, the slogan "Contract Between Generations" was used to sell the program during its 50th anniversary celebrations back in 1986. People were told that each generation had an obligation to the generation before it, that the better you took care of your parents' generation, the better your children's generation would take care of you.

Think about it for a second. If every child took care of his parents when they became too old to work, you wouldn't need Social Security. And if everyone provided for their own secure retirement by saving and investing, you wouldn't need Social Security.

But a lot of people don't provide for their own retirements, and a lot of people are unable or unwilling to provide for their parents' wellbeing when they become too old to work. What Social Security is is a method of forcing taxpayers collectively to take care of their parents. There's something very Judeo-Christian about this, when you think about it.

But a means-tested version of Social Security would still be "forcing taxpayers to collectively to take care of their parents." It would just use a more reasonable definition of "take care of" that doesn't involve giving money to people who don't need it.

What you're proposing is this: The government tells us, "We're changing the terms of the 'Contract Between Generations.' From now on, everyone will continue to be forced to take care of their parents' entire generation - you'll still pay the taxes. But when you become too old to work, your children will only take care of you if you are unable to take care of yourself, no matter how dutifully you took care of your parents' generation."

You're ignoring the positive aspects: lower taxes (which everybody loves), and more (and better) choices to provide for your own future. Together, those combine to form a situation where fewer people need Social Security. So taxes go down even more, and...

At that point, why shouldn't people say, "The hell with this system. I'm going to take care of my parents and my parents only, teach my own children by example so that when I become too old to work, they'll help me out if I need it, and make sure I don't have to count on the government (i.e., the other taxpayers) to take care of me."

But that's not what I'm suggesting at all. I'm saying the government should take care of you -- but only if you need to be taken care of. My suggestion would result in more people wanting to take care of themselves and their families independently, maybe, but I fail to see why that's a bad thing. Isn't self-sufficience generally regarded as a positive trait?

If enough people felt that way, they might conceivably vote Social Security out of existence.

I strongly doubt that. Seniors are a powerful voting block, and they wouldn't stand for their support system being yanked out from under them. Which is why any changes will have to be subtle and incremental, and always include a safety net.

Both. Welfare, for better or force worse, has a certain social stigman attached to it. Social Security does not. Turning Social Security into welfare - and that's exactly what you are proposing - means turning millions of people into welfare recipients, with all its attendant social stigman and indignities.

Would the social stigma still be there if it were (a) progressive, so it wasn't an "all-or-nothing" deal, and (b) relied upon by twenty million or so seniors, at one level or another? What if everybody but the wealthiest seniors received, say, a base of $100/month or something, and then it gradually ramped up for those with lower incomes? I don't think it would be the same situation at all.

And I think it's unfair to focus on the possible psychological difficulties of the system without also addressing the huge financial difficulties of the current system. Having trouble paying bills because of high taxes carries a social stigma of its own.

For starts, lots of income doesn't appear on a tax return.

Secondly, the tax return shows only your income for the year. If your income fluctuates from month to month, should your Social Security payment also fluctuate? It does in the SSI program. In the SSI program, your payment is based on, among other things, your quarterly income. Hit the Lotto for $5,000 in January and that wipes out your SSI for the January-March quarter, but you'd be eligible again in April.

It wouldn't have to be a very in-depth system. I can live with a model if it's practical and does the job (and pretty much any type of test does a better job than no test), even if it's simplistic and not always optimal in every situation.

Finally, if someone has $100,000 in tax-free municipal bonds, that generates 4% tax-free interest per year, does he qualify for Social Security inder your means test? He doesn't qualify for SSI, because there's a limit to how much money you can have in the bank. Your tax return would not only not show that you have the bonds, but since the income is tax-free, it wouldn't show the interest earned on the bonds.

Well, okay. I'm willing to concede that there could be some additional paperwork required to cover things like that, but I don't think the whole interrogation-under-hot-lights scenario is the way it would have to be, either. Means-tested Social Security would be much different from our current welfare system in fundamental ways.

Jeremy

 

[Frank Newgent]

"Higher adminstrative costs of privatization" is a myth - see my previous post.

In any case, the proper comparison isn't what does privatization have to do "to outperform the return of government bonds over the next four decades." The question is what does it have to do to outperform Social Security's rate of return, which has been dropping for years, is now about 2%, and will go lower - much lower - if (as you propose) we increase the tax and cap the benefits.

As for your last point, wouldn't it be the other way around? If the cap on Social Security wages is raised a smaller percentage of current payroll revenue would be devoted to paying for current Social Security benefits and, so, even more would be added to the surplus, right?

Anyhow, went back to your previous post. Looked up the Thrift Savings Plan. Found this:

The administrative costs of the TSP are held in check by several factors: investment choices are restricted; the system is quite large, and investments are bundled and made centrally; and all covered workers operate under the same payroll system, which simplifies recordkeeping.

http://www.cbo.gov/showdoc.cfm?index=5277&sequence=3&from=0

Doesn't sound like a privatized Social Security system to me.

Can you show the set of dividend yields and stock price increases that add up to the stock returns you assume for a successful privatized Social Security system? (Bush's Social Security Commission has assumed stocks will give an average return of 6.5 percentage points above the rate of inflation over the next 75 years.)

I'm not even sure what you mean by that, so I'd appreciate an explanation and proof.

Didn't notice the typo before. Should have been "stagnation". Just referring to how (if) wages of high-wage earners are growing faster than low-wage earners, then the percentage of total earnings subject to Social Security taxes has to fall (given the ceiling on Social Security-taxed wages). And, so, if wages had been growning more proportionately over all earning levels, more money would have been paid into the Social Security reserves and the shortfall would be further away.

This argument is a non-starter. Excess Social Security tax collected has always been treated as general revenues. It has always been loaned to the government to use for war and for welfare. What do you think they've been doing with the extra the last 60 years?

I'll try that again. Seems unfair that with payroll taxes having been raised back in the eighties to cover future shortfalls, well, that these funds ended up just helping to offset the economic impact of budget deficits following tax cuts. But maybe I shouldn't use the word "offsetting" because spending this money borrowed from Social Security didn't offset deficits, it created more deficits. As you pointed out earlier, by 2016, the accumulated debt that the U.S. government owes the Social Security trust funds will be $3.2 trillion.

Now this is seen as a problem for we are all paying the interest. But it was incomes only up to the ceiling on Social Security-taxed wages that paid for it. Folks that never hit that ceiling in their income ($87,900 this year I think) received really very little benefit from the tax cuts that helped to fuel the "offset" deficits .

I don't think that's too hard to understand, is it?

Might have been smarter to take the excess and invest it in the stock market for the last sixty years. Put $10,000 in equal dollar amounts in the 30 Dow Jones components and put another $10,000 in Treasury bonds. Let percolate for twenty years. Where do you think you'll do better? If you're not sure, pick any twenty year Dow period you want and look at the graph at the end of that period.

Social Security is a social insurance program. Social Security was not designed to be an invested fund. When Social Security was set up in 1935 conservatives of the day demanded a "pay-as-you-go" system because they didn't trust the government to manage reserves.

Like I'm suspicious of the dishonest way the Bush administration has framed the language surrounding any reform of Social Security..

 

[Brown]

From Yahoo and Reuters (in the "Oddly Enough" section of the news, usually reserved for weird stories, humorous stories, bloopers and surprises):

In Washington, there are plenty of ways to say "no comment," but President George W. Bush offered his own formulation, after he refused to "negotiate with myself in public."

Bush used the phrase to deflect a question on the future of Social Security (news - web sites) at a televised news conference.
...
In essence, this Bushism means the president will discuss options on such issues as Social Security with members of Congress who write the law, but not with the media.

Actually, I'm not sure that this is a Bushism. Although the reporter has pegged the meaning of the words correctly, there is more to it than what was reported.

In general, negotiating with oneself (or variations such as "bargaining with oneself" or "bidding against oneself") is a phrase that others have used. Bush did not invent it. Basically it means that one has said all that one is going to say at the present time (i.e., "No comment"), and that something else must happen before one will say any more. Sometimes the phrase is employed to mean that the "next move" belongs to someone else.

It is generally a good idea to avoid "negotiating with oneself," because it is not a very productive exercise. Engaging in the practice basically opens a person up to criticism with no progress to resolution. Every successive idea that is offered gets criticized with "That's a bad idea," without any counter-proposals coming from the critic. A much more productive technique is to have competing sides offering proposals and counter-proposals, to get the give-and-take that leads to consensus and compromise.

So it seems to me that Bush is on pretty solid ground here. This doesn't seem to be a slip of the tongue or an inappropriate construction of a phrase.

 

[Silicon]

I don't know why all you all are aguing about this anyway.

Bush & Co. WILL do whatever they're going to do. They aren't interested in "a national conversation" or debate of any kind. Their conversation is just a 3 ring circus where they only invite those to speak who already agree with the plan they have.

They're interested in ushering in their plan to throw billions of Federal Dollars into the Stock Exchange. They're going to do that, crisis or no. Mild crisis or extreme crisis. Sure, there are thousands of other solutions to the problem. I'm a fan of granting tax incentives for people who are willing to "opt in" to a deferred late retirement. It's a great centrist position solution, so of course nobody's talking about that. Like I said, there are probably thousands of solutions, but our "national conversation" will only cover privitization.


The government is going to borrow billions or trillions of dollars, hand it over to Wall Street and make a bookkeeper's mark in your Social Security statement that YOU got that money and not Wall St.

Make no mistake, you got the debt, Wall St. got the capital. If business needs the money, THEY should borrow it, not the American taxpayer.

This will be the biggest corporate welfare scheme America has ever seen. I'm amazed at the gaul of this administration, and the gullibility of the American people.

 

[CBL4]

Originally Posted by TragicMonkey
Don't they already do #1[Slowly raise the retirement]?

It was raised to a max of 67 for people born after 1960. I have not done the math but I bet if we raised it to 68, there would be no problem. After all it is not a problem until 2045.

CBL

 

[CBL4]

Do you realize what kind of massive tax hike you're recommending here? ... Implement those measures and watch the economy go into a 1970's style nosedive.

How do the amounts compare to the tax breaks that these sources have gotten in the last 4 years?

Also, whenever there is a tax increase, conservatives always claim the sky will fall. They did it just before Clinton raised taxes and the economy boomed.

But on re-thinking it, I believe the social security problem is probably non-existant. Raise the retirement age to 68 or 69 and I am sure the problem will be solved.

CBL

 

[Frank Newgent]

[size=1/2]Don't get discouraged BPSCG. Make something else up. No one'll notice. [/size]

 

[Samus]

Lurker: Essentially, depending on whether you believe the estimates by the Congressional Budget Office or the Social Security Admin, the program is just fine until the year 2045 or 2055.

I don't think this comment got an adequate rebuttal.

Indeed, the Social Security Trust Fund has, in theory, enough money in it to pay benefits until about 2040-something (give or take a few years when you're estimating out that far).

However, the Trust Fund currently exists in the form of government-issued bonds. One cannot draw from the Fund because Congress has borrowed and spent every dime of that surplus since 1983.

At this point, the Fund is more a liability than it is an asset. Why? Because in order to pay benefits to retirees, Congress will need to make good on those bonds (plus interest).

I have no doubt that the government will indeed do this, but in order to do it, they will either need to raise taxes, cut spending elsewhere, or borrow more money from another source.

Social Security is absolutely not solvent until 2045. Beginning in about 2018 when benefits paid are projected to exceed SS payroll taxes received, the government will need to somehow honor the trillions of dollars in debt it owes to the Fund before it can be distributed.

Which means higher payroll taxes, huge spending cuts elsewhere, or more borrowing, pushing the government into more debt. Not exactly my idea of solvency.

 

[Lurker]

I don't think this comment got an adequate rebuttal.

Indeed, the Social Security Trust Fund has, in theory, enough money in it to pay benefits until about 2040-something (give or take a few years when you're estimating out that far).

However, the Trust Fund currently exists in the form of government-issued bonds. One cannot draw from the Fund because Congress has borrowed and spent every dime of that surplus since 1983.

Agreed. But what makes you think the govt will treat social security bonds any differently than it treats other govt bonds? I mean, why do you single out SS bonds from other bonds?

By your logic, which I do not disagree with, pretty much every program in the US is running a deficit as we sell bonds to pay for them, right? So therefore, shouldn't we be wringing our hands in desperation about our national debt?

I guess I am just confused why one govt bond deserves special attention versus the mountain of other govt bonds.

Lurker

 

[Samus]

Lurker: So therefore, shouldn't we be wringing our hands in desperation about our national debt?

We absolutely should! I wish more people felt that way. The debt this country carries is difficult to even conceptualize. Can you imagine what $7.5 trillion would look like? I can't.

Lurker: I guess I am just confused why one govt bond deserves special attention versus the mountain of other govt bonds.

Because this is a thread about social security.

Seriously, it's because of the magnitude of the borrowing required to redeem those bonds. Over the past 20 years, Congress has borrowed trillions against that Fund, which will naturally require trillions more in borrowing to redeem those bonds just to pay out that money to retirees. Of course, when you already owe $7.5 trillion, what's another few trillion?

Anyway, my point was that we should not get comfortable saying things like "oh, the Trust Fund is there, and can be redeemed over the next 40 years" because that would, in fact, only put us more in debt. The Fund should be treated like what it is: an unfunded liability. Some type of plan needs to be instituted to pay for boomer's SS without just resigning to more debt.

Although, the SSA remains more optimistic than I do:

As stated in the answer to "What happens to the taxes that go into the trust funds?", most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in 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 35 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.

 

[Frank Newgent]

Samus I think you missed something. Did you know that Social Security's government bond holdings are counted in the national debt, just like yours or my mutual fund's bond holdings are? Whereas commitments to pay retirement benefits are not counted in the national debt, because they are "funded".

If you think that the Social Security surplus is only an accounting manuever which replaces one kind of debt we owe ourselves with another kind of debt, well, you're flat-out wrong.

 

[Frank Newgent]

Seriously, it's because of the magnitude of the borrowing required to redeem those bonds.

Shhh. Funding privatization will let loose a torrent of US bonds. You want someone to find out we don't want to have to redeem them?

 

[Samus]

Frank Newgent: Did you know that Social Security's government bond holdings are counted in the national debt

Correct. They are considered part of the intragovernmental holdings, if I recall correctly.

Frank Newgent: Whereas commitments to pay retirement benefits are not counted in the national debt, because they are "funded".

Right-o. The surplus is what exists after benefits are paid. For the people currently receiving benefits, those benefits are funded.

Frank Newgent: If you think that the Social Security surplus is only an accounting manuever which replaces one kind of debt we owe ourselves with another kind of debt, well, you're flat-out wrong.

No, the year-to-year surplus is a genuine surplus and not an accounting entity. However, the surpluses that do come in are borrowed by Congress for regular spending, and replaced with bonds.

Even though the bonds are counted in the debt, we still have a debt problem by spending the surpluses. Congress will spend the money twice; once after a bond is issued, and again when a bond is redeemed. The money to redeem those bonds will come from one of three sources: higher taxes, cuts in spending, or more borrowing.

I guess what I am trying to say, in lots of words, is that the Fund is not liquid, and in order to pay benefits, it must first receive payment from the federal government on bonds it has issued.

Normally, when a bond is issued, it is done so under the premise that they will be repaid over a set period of time. The fear of some (myself included) is that bonds representing a large amount of money will need to be redeemed before maturity in order to pay benefits. This will not happen tomorrow, but rather in 15-20 years.

 

[Frank Newgent]

...the year-to-year surplus is a genuine surplus and not an accounting entity. However, the surpluses that do come in are borrowed by Congress for regular spending, and replaced with bonds.

Making them real invested assets, like a mutual fund government bond, right? But funded solely by incomes below the cap on Social Security wages.

Even though the bonds are counted in the debt, we still have a debt problem by spending the surpluses.

Didn't this used to be called Social Security surpluses "offsetting" the deficit? And to follow through with the point of my second sentence above: making "offset" deficits fueled by tax cuts favoring the wealthy thinkable.

Congress will spend the money twice; once after a bond is issued, and again when a bond is redeemed.

Maybe we agree after all. Spending borrowed money doesn't offset deficits, it creates them.

If Congress wishes to spend more than it receives in revenue - which is the real problem here - it has to issue bonds to cover the difference. And isn't Social Security is the only government program that is required to live within its means? Whatever happened to taking responsibility for one's behavior?

The money to redeem those bonds will come from one of three sources: higher taxes, cuts in spending, or more borrowing.

Weren't tax cuts going to "make the pie higher"?

And if you're this worried about more borrowing, well, what's your plan on funding any transition costs to a privatized system?

I guess what I am trying to say, in lots of words, is that the Fund is not liquid, and in order to pay benefits, it must first receive payment from the federal government on bonds it has issued.

We're back to this. Are invested surpluses real assets?

Hmmm... how about aircraft carriers? The money the US Government repays bond obligations with is general revenue. The only money it has to buy aircraft carriers with is general revenue. And those damned things are expensive.



Is it safe to assume you're here to defend a privatized system? If that is, indeed, the case I have a question.

If people just can't count on US government bonds, well, then who the hell is going to buy the ones we'll be issuing to cover the one or two trillion of transition costs?

Normally, when a bond is issued, it is done so under the premise that they will be repaid over a set period of time. The fear of some (myself included) is that bonds representing a large amount of money will need to be redeemed before maturity in order to pay benefits.

Hmm, am not an expert here. But let me guess. We'd just borrow more. Or declare bankruptcy.

Now for something completely different.

...Congress should move to buttress the system. A plan introduced by Rep. David Obey (D-Wis.) would do just that. It would increase from 85% to 90% the portion of earnings subject to the payroll tax, adjust benefits for inflation more accurately than current methods do and dedicate to Social Security revenue from a tax on estates in excess of $3.5 million. This would close all of the projected deficit over the next 75 years, as estimated by the Congressional Budget Office.