Social Security

[chipwhich]

Yep. Please don't try to tell this to Larry, because if you do, he'll point out that a treasury note is an ASSET, to the person who holds it. Apparently others on this board would like very much to pretend that that isn't the case.

Right the asset and the debt are held by the same person. The federal government Shell game. I would love to issue my own treasury note and send that in to my mortgage company to pay my mortgage. Then I spend my mortgage payment on other things. Hey mortgage company enjoy my asset. I promise I can pay it back later with interest. Lets do this each month Kay? Just check my credit score. This is a great deal!

[Larry]

Larry:

Again: The 2017 number became 2016 and that number became 2010 (with the caveat that it would go back to normal as soon as we got out of this).

That 2035 number is what now? a year after President Obama's next term?

(I'm not an economist, but if we "borrow" the money of the SS fund to keep the General fund even)

We are now going to run a deficit in both that will not be as easy to hide and will seem twice as deep?

Can we put IOU's based on Tbills in the General Fund?

Again: The actual balance if the SS trust fund went up in 2010, by a bit over $100B.

---------- Post added March-29th-2011 at 09:13 AM ----------

Right the asset and the debt are held by the same person.

US treasury bills do not exist if . . . ?

The reason why the t-bills that SS holds, and the t-bills which China hold, aren't the same, is . . . ?

[JMS]

I'd be thrilled if your posts were full of "statements of fact."

Let me thrill you then.

• Social Security is one of, if not the, most successful government program ever. It has touched more lives and made dramatic impacts on those lives than any other government program.
  
• Social Security when it was established in 1935 was to address 80% of all Americans age 65 and over who lived below the poverty line, which it did in dramatic fashion.
  
• Today 50% of all Americans over the age of 65 have income above the poverty line because of social security payments.
  
• Today about 10% of America's seniors ( 65 and over) live bellow the poverty line which is proportional to the rest of the population.
  
• Social Security is not bankrupt today, nor is it in financial trouble
  
• 2011 was the first year in the 80 year history of social security when it didn't make a profit
  
• Social Security could run for another 30-40 years without the drawing on general revenue funds on those profits that it wracked up in the last 80 years.
  
• The federal government has spent trillions of surplus social security money, and pays interest and principle of that money back every year and has for decades. So that won't change.
  
• The big change in coming years for social security will be that the federal governemnt won't be able to loan itself money from this general fund if the surplus doesn't exist. But ending sociol security isn't a solution to this problem because that too will mean ending any surplus.
  
• The entire social security's projected deficit over the next 70 years could be paid for in 10 years by ending the Bush tax cuts which moved the top interest rate from 38% to 36%.
  
• When people talk about social security being in crisis, they are misinformed.
  
• When policy makers talk about social security being in crisis it has to do with them wanting to spend those dollars on something other than keeping 50% of elderly above the poverty line and not about social security being either too expensive or out of money.
  
• Social security is and always has been a fierce partisan issue and partisan politics frame the discussion points on this program today just as they have every decade since 1935.
  
• Social securty isn't and never was envisioned as a savings account. Social Security is a trust one generation makes with the next. The money I pay in goes to pay for my parrents generation, as their money paid for their parrents all the way back to 1935.
  

Are you seriously arguing that any discussion of Social Security must, by definition be nothing more than a partisan ****fest?

That certainly explains your posts....

If I were arguing that I would have said that. What I said very plainly was that social secuirty is and always has been a fierce partisan issue.

Trying to discuss the issues without addressing the partisan motivations on either side is to avoid the meat of the argument.

[chipwhich]

US treasury bills do not exist if . . . ?

The reason why the t-bills that SS holds, and the t-bills which China hold, aren't the same, is . . . ?

If the government doesn't print them?

The difference is SS trust funds hold one, and China holds the other. The ones printed for the SS trust funds are as a result of BORROWING the TAX paid by the people to fund SS and SPEND the BORROWED TAX for BUDGETARY purposes. The ones issued to China are as a result of BORROWING MONEY from China for BUDGETARY purposes.

[JMS]

You're right, JMS. When I specifically said that the SSA was sitting on trillions in non-marketable Treasury securities rather than cash, and then specifically wrote out the process by which the SSA will go about redeeming those securities for cash raised by the Treasury through sales of ever more debt, and then specifically stated that the big problem with this picture is the rapid acceleration of our debt crisis, which could only be the big problem if the Treasury was indeed forking over all necessary cash to the SSA, what I really meant is that the SSA would never see one red cent of what it's owed.:

Social Security repayment doesn't change our debt crisis at all. Not unless you don't think the US Treasury bills in the Social Security trust shouldn't be honored. We owe money to the social security fund if we pay some of that money by incurring other debt that's not incurring new debt it's a debt neutral move. It's like changing your banker or changing how you are financing your debt not adding to your debt.

Also your premise is wrong that this would be a big change for us. We pay back our debt today to social security and have for decades. We pay interest and principle on social security debt every month, quarter, year. Those payments don't change because social security isn't makeing a profit any longer... Social security's lack of a surplus is not the game changing event you scope out. The only thing that will change is the US Treasury wouldn't be able to incur new loans from social security fund.. But the US treasury doesn't really have a hard time in moving it's T-Bills today, nor have we ever counted solely on social security fund for financing the deficiet. What's interest 2% on T-bills, it was 1% for nearly a decade.... At the height of the financial crisis if you added in the finance charge T-Bills were in such high demand folks were actually loosing money to buy them. Negative interest.

I think you are also wrong on your thought that the only way to pay off the social security debt would be through replacing it with other debt. The federal government has more tools in their toolbox than just incurring more debt if it came right down to it.

---------- Post added March-29th-2011 at 10:17 AM ----------

Though for those that say its in okay shape: Both the SS and GAO both say this recession is a killer.

Jan. 26 2011 (Bloomberg) -- The U.S. Social Security program will run a deficit this year and will continue spending more on benefits than it receives in revenue for the foreseeable future, according to the Congressional Budget Office.

The nonpartisan agency said today the program will run a $45 billion deficit this year and see a total shortfall of $547 billion over the subsequent 10 years. The calculations exclude interest payments earned on the program’s trust fund.

See why are they excluding interest payments on Social Securities trust fund? It is my understanding that the social security fund isn't even in deficit and won't be for decades if you do in fact count the interest the fund receives on the moneys it's loaned out.

Money that has been paid back continuously by the federal government over the last few decades the government has been borrowing against the trust.

So basically the bloomberg article is saying if we don't count all our revenue sources, social security doesn't make enough money... The obvious next question is why is that even relevant. Why wouldn't you want to count all your revenue sources in informing folks about your financial health?

[JMS]

duplicate post

[Thiebear]

Why is the GAO saying it you mean? (the Past means nothing as up to 2010 we've been in surplus and could loan from Peter to Paul).

Tell us why since you pointed it out so that we can understand.

[Larry]

The difference is SS trust funds hold one, and China holds the other.

Well, that explains it. T-bills are an obligation which the government must repay, except if the holder is SS.

The ones printed for the SS trust funds are as a result of BORROWING the TAX paid by the people to fund SS and SPEND the BORROWED TAX for BUDGETARY purposes. The ones issued to China are as a result of BORROWING MONEY from China for BUDGETARY purposes.

That looks like a really complicated way of saying the same thing as your first sentence.

The first ones consist of money which the government borrowed, promised to pay back, and then spent.

And the second consist of money which the government borrowed, promised to pay back, and then spent.

The difference is . . . ?

[JMS]

Why is the GAO saying it you mean? (the Past means nothing as up to 2010 we've been in surplus and could loan from Peter to Paul).

Tell us why since you pointed it out so that we can understand.

I guess this is directed at me...

GAO said it, but Bloomberg framed the statement.

The U.S. Social Security program will run a deficit this year and will continue spending more on benefits than it receives in revenue for the foreseeable future, according to the Congressional Budget Office

That is a factually inaccurate statement from the bloomberg article. Interest payments received on money the social security trust has loaned out is clearly revenue.

Typically in business different financial views are used for different purposes to inform different audiences. The problem occurs when people try to use these tailored incomplete pictures to come to conclusions about larger issues.

The picture painted by the GAO might be in a report geared towards explaining a new phase in the social security program. It is a new thing that the revenue from payroll taxes no longer is enough to pay for the benefits much less put the program into surplus...

But using the incomplete financial picture to demonstrate the program is in crisis is not reasonable or rational. We would need a complete picture of the programs finances to make that determination.

The fact that social security draws interest payments on trillions of dollars it has out on loan is a pretty substantial asset to be taken into account in any survey of the programs health. It's not like these interest payments haven't been ongoing for decades or that the debtor doesn't pay back their debts. Because if any of those things were true; social security health would really be the least of our worries.

[Thiebear]

Again: The actual balance if the SS trust fund went up in 2010, by a bit over $100B.

---------- Post added March-29th-2011 at 09:13 AM ----------

US treasury bills do not exist if . . . ?

The reason why the t-bills that SS holds, and the t-bills which China hold, aren't the same, is . . . ?

Why is it i quote the GAO and SS documents and you just ponder via Larry King ...

As you are so adamant, could you find something from the SS admin or GAO that back up these dot.dot.dots?

When i read from the SSA that revenue will be down for 10 years based on the worst recession since 1920: I believe them.

[JMS]

When i read from the SSA that revenue will be down for 10 years based on the worst recession since 1920: I believe them.

And what do you believe when they tell you that social security fund is in deficit, not including revenue from interest it receives on it's trust fund?

Really what can you believe from that statement other than to ask yourself for the complete financial picture? Which is what Larry is trying to provide you with. When he tells you that the trust fund increased in 2011 by many billions of dollars.... He's telling you that when you add in all of the Social Security administration revenue streams, they aren't in deficit yet.

---------- Post added March-29th-2011 at 11:07 AM ----------

I thought this was interesting..

http://www.ssa.gov/history/InternetMyths.html

Myth 4: President Roosevelt promised that the money the participants paid would be put into the independent "Trust Fund," rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement program, and no other Government program

The idea here is basically correct. However, this statement is usually joined to a second statement to the effect that this principle was violated by subsequent Administrations. However, there has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government.

The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."

Most likely this myth comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.

---------- Post added March-29th-2011 at 11:09 AM ----------

Here is another good explaination.... From the NY Times..

http://economix.blogs.nytimes.com/2010/11/26/the-social-security-deficit/

The Social Security Deficit

By DAVID LEONHARDT

Several readers have taken issue with our deficit puzzle’s description of Social Security’s finances, arguing that the program does not have serious problems. This post explains the details behind our description.

The government pays Social Security benefits with the revenue collected from the payroll tax. For many years, the annual revenue coming in to the government has exceeded the amount it pays out. This extra money has been placed in a trust fund that earns interest.

There are at least two ways to think about the long-term deficit facing the Social Security system.

The first describes the point when the government will begin paying more in benefits than it collects in taxes each year. This will begin happening consistently in 2015, according to Social Security’s chief actuary. As Mark Hinkle, a spokesman for the Social Security Administration, explained in an e-mail:

The projected point at which tax revenues (that is, not counting interest income) will fall below program costs comes in 2010. Tax revenues will again exceed program costs in 2012 through 2014 before permanently falling below program costs in 2015 — one year sooner than the estimate in last year’s report.

This calculation, however, does not give Social Security any credit for the surpluses it has built over the years. When you take those surpluses — that is, the trust fund — into account, Social Security is in better shape. It can cover its shortfall until 2025 with the interest it has earned over the years on the trust fund. Starting in 2025, the program has to begin dipping into the principal of the fund. It is projected to exhaust the entire trust fund in 2037.

Again, Mr. Hinkle:

The projected point at which the combined Trust Funds will be exhausted comes in 2037 — the same as the estimate in last year’s report. At that time, there will be sufficient tax revenue coming in to pay about 78 percent of benefits.

[Thiebear]

I dont know what i mean as i don't know what i'm talking about: I grabbed this from Dec 2010: It got worse in March 2011apparently but i couldnt find anything updated.

Trustees Report on Social Security's Trust Fund

Updated 12/28/2010 09:47 AM | ID# 210

What is the Trustees Report on Social Security's trust funds?

Every year the government-appointed Board of Trustees releases a report on the financial outlook for the Social Security and Medicare Trust Funds. The 2010 Trustees Report was released on August 5, 2010.

In the 2010 Annual Report to Congress, the Trustees announced:

•The projected point at which the combined Trust Funds will be exhausted comes in 2037-the same as the estimate in last year's report. At that time, there will be sufficient tax revenue coming in to pay about 78 percent of benefits.

•The projected point at which tax revenues will fall below program costs comes in 2010. Tax revenues will again exceed program costs in 2012 through 2014 before permanently falling below program costs in 2015-one year sooner than the estimate in last year's report.

•The projected actuarial deficit over the 75-year long-range period is 1.92 percent of taxable payroll-0.08 percentage point smaller than in last year's report.

•Over the 75-year period, the Trust Funds would require additional revenue equivalent to $5.4 trillion in present value dollars to pay all scheduled benefits.

What does this mean when we hit the decade of no interest rates?

[JMS]

What does this mean when we hit the decade of no interest rates?

Doesn't mean anything. We've been in a decade of no interest rates as far as the federal government is concerned. Greenspan cut interest rates on US Treasuries to 1% nearly a decade ago. 1% is still pretty significant though when you have trillions of principle. 1% interest on a trillion dollars is 10 billion.

[Thiebear]

Doesn't mean anything. We've been in a decade of no interest rates as far as the federal government is concerned. Greenspan cut interest rates on US Treasuries to 1% nearly a decade ago. 1% is still pretty significant though when you have trillions of principle. 1% interest on a trillion dollars is 10 billion.

The article says we enjoyed excess funds due to higher interest rates. (7yr returns)?

If the interest rates plummeted i would assume so would the returns? Or why mention the higher rates?

[JMS]

The article says we enjoyed excess funds due to higher interest rates. (7yr returns)?

If the interest rates plummeted i would assume so would the returns? Or why mention the higher rates?

You didn't publish the link for the article you sighted in post #87 so I can't comment on it....

But I would argue that interest rates to up and down and have been traditionally down for about a decade with regard to federal borrowing. I would argue that taken on average over 2-3 decades interest rates probable level out and become constant at 2-3%. Fluctuations in the market thus wouldn't impact a projection spanning decades.

But seriously how good are projections going out 30-40 years? Does one really think FDR had a good handle on the economic challenges faced by Nixon... Or Nixon would have had the incite to predict Clinton or Bush.....

China could go belly up very easily and change the entire projection for the better. Or Korea could unify and in 2030 we could be facing an even greater budgetary problem due to foolish trade deals.

Projections going out decades are kind of like educated guesses anyway.

[Thiebear]

So we are living off of this?

Effective interest rates

Although new investments for each trust fund carry the same interest rate, amounts of income and outgo differ between funds, resulting in a different investment portfolio for each trust fund. An effective interest rate provides a measure of the rate of return on an investment portfolio. We calculate an effective interest rate by dividing interest earned on investments during a calendar year by the average level of investments during the year.

1966 through 2010 http://www.ssa.gov/oact/progdata/intRates.html

the highest interest rate is 15.250 percent (Oct 1981) and the lowest rate is 2.125 percent (Jan 2009, Sep 2010, Oct 2010, Nov 2010).

We seem to by tying the lowest month after month in 2010... Not that far off in 2011.

[JMS]

So we are living off of this?

Effective interest rates

Although new investments for each trust fund carry the same interest rate, amounts of income and outgo differ between funds, resulting in a different investment portfolio for each trust fund. An effective interest rate provides a measure of the rate of return on an investment portfolio. We calculate an effective interest rate by dividing interest earned on investments during a calendar year by the average level of investments during the year.

I would say there is only one trust fund but multiple investments which all have their own profit margin based upon interest. I would also say that the effective interest rate doesn't alone provide the measure of rate of return on an investment portfolio. Compounded interest is typically huge when dealing with public trust funds spanning decades. So I would argue the age of the capital along with the effective interest rate would be determinative.

Your site shows we are getting around 5% interest in 2010.. That's pretty darned good seeing as how T-Bills are only like 2%.

[Larry]

Why is it i quote the GAO and SS documents and you just ponder via Larry King ...

And quote SS documents.

The SS trust fund got bigger in 2010. That's a fact. (I posted the link on page 1.)

(In fact, SS actually took in more money than it paid out. Although that wasn't forecast. It was projected to pay out a small amount more.)

When i read from the SSA that revenue will be down for 10 years based on the worst recession since 1920: I believe them.

Oh, I'm certain that revenue will be down, and expenditures up, compared to previous forecasts.

I don't know if the current forecasts say that taxation will cover expenditures or not.

But the point I'm making is that the GAO predicted (incorrectly, as it turns out), that SS would pay out more than it took in if you ignore the fact that SS is earning interest. If you factor interest in, it wasn't even close.

[Nerm]

I think that making people ineligible for SS if they are making 4k per month (or other similar plans regarding wealth/income) is a bad idea for a lot of reasons. First, you don’t want to discourage savings. As an example, lets say two identical twins go into the same job and make the same money over the course of their life. One twin likes to drive new cars, and the other likes to save money in his retirement account. All other spending is the same, but one spends $250 more per month on cars and the other sends $250 more per month into their retirement account. Assuming these differences were stable over 40+ years, it is highly likely that the saver would be making more than 4k per month on their savings. How fair is it to eliminate him from getting SS, while the other twin gets the money?

If you were going to decide to limit SS to only the most needy, I think it would be a better idea to base the decision on lifetime earnings, rather than net worth or current income. I think it is a very bad idea to punish savings and reward spending everything you earn right away.

[DRSmith]

Or you could give a refundable credit for the money saved in a retirement account equal to the rate that the person is being taxed at which means they will not need SS

[chipwhich]

The SS trust fund got bigger in 2010. That's a fact. (I posted the link on page 1.)

Larry, you are so clueless as to what the SS Trust fund is, it's hard for me to take any of your posting seriously...and I KNOW you are a smart guy.

Lets say in 2012 the SS receipts (money taken in from the people) is LESS then the outlays to those receiving SS. Well good ol uncle sam goes down to the SS Trust Fund and says "Hi, I am here to collect by overages". What does the trust fund hand him? They don't have cash. You realize this. They have a stack of IOU's. THERE IS NO MONEY. So Uncle Sam (the trust fund promissory) has to pay Uncle Sam (the debtor of SS to retirees). Problem is the SS Trust fund only has a stack of treasury bills that the SS debtor to SS retirees has promised to pay. Guess what, NOBODY has money. So the SHORTFALL $$$$$ will be BORROWED by Uncle Sam the Debtor from some other country or willing loaner, to pay the IOU of the SS Trust Fund. So our National Debt INCREASES.

Really save yourself further GOP crappy posts, and spend a day trying to understand what you are talking about when it comes to SS.

---------- Post added April-3rd-2011 at 09:32 AM ----------

I think that making people ineligible for SS if they are making 4k per month (or other similar plans regarding wealth/income) is a bad idea for a lot of reasons. First, you don’t want to discourage savings. As an example, lets say two identical twins go into the same job and make the same money over the course of their life. One twin likes to drive new cars, and the other likes to save money in his retirement account. All other spending is the same, but one spends $250 more per month on cars and the other sends $250 more per month into their retirement account. Assuming these differences were stable over 40+ years, it is highly likely that the saver would be making more than 4k per month on their savings. How fair is it to eliminate him from getting SS, while the other twin gets the money?

If you were going to decide to limit SS to only the most needy, I think it would be a better idea to base the decision on lifetime earnings, rather than net worth or current income. I think it is a very bad idea to punish savings and reward spending everything you earn right away.

Amen brother!

[Larry]

Larry, you are so clueless as to what the SS Trust fund is, it's hard for me to take any of your posting seriously...and I KNOW you are a smart guy.

Lets say in 2012 the SS receipts (money taken in from the people) is LESS then the outlays to those receiving SS. Well good ol uncle sam goes down to the SS Trust Fund and says "Hi, I am here to collect by overages". What does the trust fund hand him? They don't have cash. You realize this. They have a stack of IOU's. THERE IS NO MONEY. So Uncle Sam (the trust fund promissory) has to pay Uncle Sam (the debtor of SS to retirees). Problem is the SS Trust fund only has a stack of treasury bills that the SS debtor to SS retirees has promised to pay. Guess what, NOBODY has money. So the SHORTFALL $$$$$ will be BORROWED by Uncle Sam the Debtor from some other country or willing loaner, to pay the IOU of the SS Trust Fund. So our National Debt INCREASES.

Really save yourself further GOP crappy posts, and spend a day trying to understand what you are talking about when it comes to SS.

And if you're going to keep shoveling the lie that US Treasury bills don't exist, then you can at least drop the freaking personal insults from your drool.

I understand that you'd really, really, like to pretend that US treasury bills don't exist. (But, just the ones that SS holds. The rest of them are different.) But no matter how many insults you throw into the claim, it still won't be true.

[Hubbs]

And if you're going to keep shoveling the lie that US Treasury bills don't exist, then you can at least drop the freaking personal insults from your drool.

I understand that you'd really, really, like to pretend that US treasury bills don't exist. (But, just the ones that SS holds. The rest of them are different.) But no matter how many insults you throw into the claim, it still won't be true.

Erm... that's not at all what he said. In fact, he said the exact opposite.

[chipwhich]

And if you're going to keep shoveling the lie that US Treasury bills don't exist, then you can at least drop the freaking personal insults from your drool.

I understand that you'd really, really, like to pretend that US treasury bills don't exist. (But, just the ones that SS holds. The rest of them are different.) But no matter how many insults you throw into the claim, it still won't be true.

The treasury bills EXIST. The money to back them DOESN'T. Where is the MONEY Larry? When the deficit arises, a treasury bill has to be cashed in. Who provides that cash? The US government. Cash THEY DON'T HAVE. Are you really that dense?

[Larry]

Erm... that's not at all what he said. In fact, he said the exact opposite.

My first post in this thread: (excerpt)

They'll claim that the trust fund doesn't exist. There's lots of variations of this. All sorts of scary claims. "It doesn't exist". "It's full of IOU's to ourselves". And there is a smidgen of truth, here. Yes, t-bills do, in fact, exist. And they do, in fact, have value. But, even if you don't deny reality, having SS shift from loaning money to the feds, to demanding that the money they loaned be paid back, will have an effect.

For example, the feds don't have the money to give back. If SS goes to the teller window and says "I want to cash in this t-bill now", then "the bank" is just going to have to borrow the money from China or somebody, so they can give SS her money.

So, if SS "cashes in some bonds", it's still going to cause the (official) deficit to go up. (The feds are going to have to sell t-bills on the open market, and account for them, so that they can pay back the t-bills that they haven't been accounting for.)

. . .

Many people have said that SS went bankrupt in 09. Offhand, I'm not finding 09 data, but in 10, SS took in $570B (I assume that this site is listing amounts in billions, but I don't see where they say so.), and paid out $564B. But, the trust fund earned $108B in interest. The amount of the trust fund went up over $100B.

Now tell me how we get from there, to:

Larry, you are so clueless as to what the SS Trust fund is, it's hard for me to take any of your posting seriously...and I KNOW you are a smart guy.

. . . They don't have cash. You realize this. They have a stack of IOU's. THERE IS NO MONEY. . . . Guess what, NOBODY has money.

So, are all t-bills "a stack of IOUs" for which "NOBODY has the money"? Or just the t-bills that SS has? Does the National Bank of China have a vault full of "IOUs" for which "THERE IS NO MONEY"?

---------- Post added April-3rd-2011 at 01:04 PM ----------

The treasury bills EXIST. The money to back them DOESN'T. Where is the MONEY Larry? When the deficit arises, a treasury bill has to be cashed in. Who provides that cash? The US government. Cash THEY DON'T HAVE. Are you really that dense?

And that's true of all t-bills, right?