Do you believe the SS trust fund exists? (Jesus, school, economic)

[WestCobb]

Originally Posted by wjtwet

So you finally answer . So you understand that our current payroll taxes go to paying current benefits and do not go into a fund for our use when retire. SS contract is that if you pay current taxes when you retire to draw you will get certain benefits. But when retire the benefits we get are not from a fund we paid into . SS is only a contract that says when we retire current workers will pay our benefits.

What is it called when a fund manger uses current investors money to pay original investors dividends i think there is name for that

There is a few problems with what you're saying though. For 73 years, SS has ran a surplus. Since 1983, that surplus has been invested in US treasury bonds, hence the 2.5 trillion today. Once that fund is depleted, I will be in my 60s. (I'm 35 today.) By that time, most of the boomers will be dead, and there will again be more workers paying in than beneficiaries -- there's more Yers than Xers -- and SS will again run a surplus.

SS is not a scheme or fraud. It's a program that has paid 100 percent of benefits to 100 percent of eligible beneficaries for 75 years. If Ponzi's original scheme had this kind of track record, he'd be remembered as the world's greatest investment manager.

[jetgraphics]

The "joke" about "secure" investments in government bonds is that since 2006, Congress has borrowed MORE than it paid in interest.
In the private sector, that's what Bernie Madoff was sent to jail for doing.
If I were a new investor, I'd wonder about the "security" of getting back the principal, if ever the line of suckers - ahem - new investors ended.

[WestCobb]

Originally Posted by jetgraphics

The "joke" about "secure" investments in government bonds is that since 2006, Congress has borrowed MORE than it paid in interest.
In the private sector, that's what Bernie Madoff was sent to jail for doing.
If I were a new investor, I'd wonder about the "security" of getting back the principal, if ever the line of suckers - ahem - new investors ended.

Jet, what you're saying is that the US government is a bad risk. You don't think it will be able to pay what it owes, so you think the SS trust fund is worthless.

Do you think other issued US treasury bonds are worthless?

[jetgraphics]

Originally Posted by WestCobb

SS is not a scheme or fraud. It's a program that has paid 100 percent of benefits to 100 percent of eligible beneficaries for 75 years. If Ponzi's original scheme had this kind of track record, he'd be remembered as the world's greatest investment manager.

The SCHEME was simple - in 1930s actuarial tables, the average life expectancy of a working man was 56 years. With a "retirement age" of 65, the authors were BANKING on the majority of contributors being DEAD before they could get ONE DIME of benefits. But it backfired when life expectancy rose. (The bane of all tontines.)

If you discount the fact that 1933 dollar bills are worth FAR MORE in buying power than 2011 dollar bills, it does look pretty good.

But if you've spent a lifetime paying in ever devaluing dollar bills, and finally get your "pay off", oops... you're busted.

I can recall, back in the 1970s, a co-worker gushing over how he SAVED up for retirement - he had a nest egg of TWENTY THOUSAND DOLLAR BILLS in his bank account. Yeah, he's set for life - about 18 months worth - at current inflated price levels.

And let us not forget that the original tax rate has escalated to more than 15%.

Frankly, if you believe SocSec is mandatory, then it is involuntary servitude. But the law is not compulsory, so in truth, it's VOLUNTARY servitude, spending your working life to pay the benefits for another, with no guarantee that you will actually benefit from it.

Don't believe me - write a polite questionnaire to your Congressman, and ask for a copy of any law that compels ALL AMERICANS in the United States of America (not just the United States) to enroll before they can work in their own country.
Ask for a copy of any law that punishes ANY American who does not participate.
Ask for a copy of any law that punishes a private sector non-government employer who hires unnumbered Americans.

Or call their office and ask... but don't be surprised if you hear "Hotel California" playing in the background.

[WestCobb]

The purpose of this thread, jet, was to focus solely on the trust fund aspect of SS. SS is such a broad topic, and we already have several threads on it, I thought it would provide some clarity if we broke it down into chunks.

The main question is: do you think the trust fund exists? If no, then do you also think that a man who holds $2.5 trillion in other US treasury bonds is broke? Personally, I think that man would be the richest man in the world, by a HUGE margin.

[Mircea]

Originally Posted by WestCobb

By your own definition, mn, there's a trust fund. It's held in US treasury bonds...

Wrong, they are special-interest securities.

Originally Posted by WestCobb

... which you can characterize as IOUs if you wish. (An IOU from the US government is globally considered the safest investment in the world.)

Not relevant. Foreign investors cannot by law purchase the special-interest securities. If you knew what you were talking about, then you would know that appears on the balance sheet as part of the non-public portion of the National Debt.

Originally Posted by WestCobb

If everyone stopped paying payroll taxes tommorow, SS would exhaust the 2.5 trillion dollar fund before benefits stopped.

When? Within 4.3 years at present.

Originally Posted by WestCobb

That's not true, wet. I answered your question, and you kept acting as if I didn't, which lead me to question whether you understood the answer.

You didn't answer the question. You just keep repeating the same idiotic nonsense about "full faith and credit of the US government."

Originally Posted by WestCobb

This is the last time I am going to explain this, wet. The "Dems" said that Social Security benefits would not be paid if the debt ceiling wasn't raised because in order to pay full benefits SS has to cash in a portion of its US treasury bonds.

That's a lie.

The Social Security Trust Fund is part of the non-public portion of the US debt. Converting the special-interest securities to treasury bills, bonds or notes would not increase the National Debt. The only thing that would happen is that the non-public debt would decrease by $2.5 TRILLION and the public debt would increase by $2.5 TRILLION but the National Debt would remain the same.

Why don't you demonstrate that you have a clue and explain to everyone how exactly the US government will, um, you know, "cash in a portion of its US treasury bonds" (to use your own incorrect words)?

That might actually impress people here.

Originally Posted by WestCobb

In order to honor these bonds, which the US government is legally obligated to do, it must borrow.

Wrong answer.

That is lie. I actually have told you the answer twice straight from the mouth of the US Treasury Department, which you referred to as "Republican zombie rhetoric."

Originally Posted by WestCobb

Without raising the debt ceiling, the US government would not be able to borrow, which would mean it would not be able to honor its legal obligation to SS.

That's another lie.

This is what Obama's Treasury Department says:

When the OASI and DI Trust Funds require redemption of these securities to make expenditures. the Government finances those expenditures out of accumulated cash balances, by raising taxes or oilier receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. This is the same way that the Government finances all other expenditures.

The US can borrow from the public, but as I explained, that's only an accounting game where non-public debt is moved from one column of the ledger to the another column: public debt. It does not result in an increase in the National Debt.


In addition to borrowing, the government can, um, "cash in a portion of its US treasury bonds" (snicker) by using accumulated cash balances (a budget surplus), raising taxes or oilier receipts, repaying less debt, or by curtailing other expenditures.

Originally Posted by wjtwet

Which would mean there is no fund only debt.

That is absolutely correct.

The government spent the money, then wrote a promissory note to itself promising to pay back the money at a future date with interest.

The only way the government can convert the "special-interest securities" back into cash is by having a budget surplus, raising taxes, defaulting on its debt, cutting the budget or by converting non-public debt to public debt.

That's it. Those are the only ways.

And who pays for that? You do. You're being taxed twice, once when you paid into Social Security, and gain to convert the "special-interest securities" back into cash.

If there is a budget surplus, that means the government collected more money in personal income tax, capital gains and estate taxes, and other revenues that it collected.

Whose money is that? That's your money.

If the government takes $50 Billion from the Department of Education and $20 Billion from the Department of Agriculture to cover Social Security for a month (ie curtailing other expenditures), whose money is that?

That's your tax money.

So what exactly is the "full faith and credit of the US government?"

That's you the taxpayer, unless the government has a goose that lays golden eggs somewhere.

Originally Posted by wjtwet

I understand for some reason you think a pool of IOus is somehow a trust fund. However most people would define a trust fund as actually having working assets in it .

Yes, that's true, but the OP has no training in economics or finances and doesn't understand that.

If the US had purchased $2.5 TRILLION in securities from the United Kingdom or Switzerland or even Certificates of Deposit from a US based bank, they could simply redeem them for cash.

But that isn't the case. The only way the government can convert the "special-interest securities" back into cash is by having a budget surplus, raising taxes, defaulting on its debt, cutting the budget or by converting non-public debt to public debt.

That means you the tax payer pony up the money, not the US government.

Originally Posted by WestCobb

There is a few problems with what you're saying though. For 73 years, SS has ran a surplus. Since 1983, that surplus has been invested in US treasury bonds, hence the 2.5 trillion today. Once that fund is depleted, I will be in my 60s. (I'm 35 today.)

SSA estimates the fund will be depleted by 2037. That's 26 years from now.

Your math skills are atrocious to say the least.

Originally Posted by WestCobb

By that time, most of the boomers will be dead, and there will again be more workers paying in than beneficiaries -- there's more Yers than Xers -- and SS will again run a surplus.

That isn't true.

Wages are stagnant or declining. It is absurd to suggest that Generation Y will make the same wages as the Baby Boomers, the Tweeners or Generation X, because there isn't a single shred of evidence to support that.

You fail to realize that the assumptions made by Social Security in its actuarial report are baseless and unsupportable.

Social Security believes that it's tax receipts will increase by 7+% per year. There is not historical support for that.

Social Security also believes that the US GDP will increase at a rate of 6.4% per year through 2085. There is no historical basis or support for that, and in fact it is unprecedented. Clinton couldn't even do that.

Originally Posted by WestCobb

SS is not a scheme or fraud.

It's a Ponzi Scheme.

Originally Posted by WestCobb

It's a program that has paid 100 percent of benefits to 100 percent of eligible beneficaries for 75 years.

Past performance is not an indicator of future success. If that were true, then HH Gregg would still be around, and so would Blockbuster, and Borders and many others.

Originally Posted by WestCobb

If Ponzi's original scheme had this kind of track record, he'd be remembered as the world's greatest investment manager.

Ponzi Schemes fail because of diminishing entrants or diminishing entry fees, which is the fate of Social Security. Just because it lasts longer doesn't mean it's successful.

[hawkeye2009]

Originally Posted by WestCobb

Do you believe the over $2.5 trillion dollars in US treasury bonds held in the Social Security trust fund are worthless? If so, do you believe that all US treasury bonds are worthless?

(If that's the case, please send any and every US treasury bond you have to me. I will even give you some money for these worthless "IOUs." How does half of the face value sound to you? Pretty fair, right? After all, an asset that is only backed by the full faith of the US government, which is generally recognized as the safest investment in the world, is just trash, right?)

The "trust fund" is not a pile of gold or money in which one can draw on for future SS liabilites. It is a special form of T-bill (not the t-bills that you and I can purchase). In that fashion, it is simply debt that we the taxpayer must pay on redemption. As this "payment" comes from us, this is essentially an unfunded liability which must be paid and therefore does not really exist.

To say that the SS "trust fund" is an asset would be like saying the national debt is an "asset". Both are liabilities which are unfunded. While both have the full faith of the US government behind them, we would essentially be "taxed twice" for "payment" toward an asset which should be completely paid off. Quite the accounting plan and is certainly a scam, anyway you look at it.

[WestCobb]

Originally Posted by Mircea

SSA estimates the fund will be depleted by 2037. That's 26 years from now.

Your math skills are atrocious to say the least.

35 + 26 = 61. For all of your posturing to superior economic knowledge, you can't even do second grade addition?

You keep repeating the exact same data, most of which I concede (when its seperated out from Republic zombie rhetoric). However, you never answer the basic question -- so are you suggesting that we allow the US government to write off the $2.5 trillion it's obligated to pay SS?

[WestCobb]

Originally Posted by hawkeye2009

The "trust fund" is not a pile of gold or money in which one can draw on for future SS liabilites. It is a special form of T-bill (not the t-bills that you and I can purchase). In that fashion, it is simply debt that we the taxpayer must pay on redemption. As this "payment" comes from us, this is essentially an unfunded liability which must be paid and therefore does not really exist.

To say that the SS "trust fund" is an asset would be like saying the national debt is an "asset". Both are liabilities which are unfunded. While both have the full faith of the US government behind them, we would essentially be "taxed twice" for "payment" toward an asset which should be completely paid off. Quite the accounting plan and is certainly a scam, anyway you look at it.

It's pretty much the same kind of T-bill you and I can purchase. It has a lower rate of return, but it can be redeemed at any time. It's backed by the same principles. The government repays the T-bills you and I can purchase the same way it repays the T-bills held by Social Security.

Do you think T-bills in general are worthless? Or only SS's T-bills?

[WestCobb]

No takers on this question? A bunch of people are trying to convince me that the SS T-bills are worthless, but no one appears ready to state that other T-bills are worthless. They're backed the same way. Why does one have value and the other doesn't?