So either Social Security is either solvent or we have no debt. What am I missing?

[rpannier]

My understanding is that those (ahem) worthless pieces of paper we hear about that make up the Social Security trust are government bonds.
The same bonds that the Chinese (Brits, Koreans, Japanese, etc) have been buying to allow the former president to drive us into debt to pay for his destruction of the economy and parts of the Middle East.

So if they're worthless then we tricked the Chinese, Koreans, Brits, Japanese, etc and we owe them nothing.
If we owe the Chinese, Japanese, Koreans, Brits, etc money then they are valuable and not worthless pieces of paper

Am I correct or did I miss something?

[MannyGoldstein]

1. Backed the same as any other Treasury bonds

By the full faith and credit of the US Government

http://fdrdemocrats.org/the-common-sense-guide-to-social-security/4/

But the Republicans and Obama keep making up lies to set the stage for slashing it:

http://fdrdemocrats.org/the-common-sense-guide-to-social-security/7/
http://fdrdemocrats.org/the-common-sense-guide-to-social-security/8/

[rpannier]

3. Thank you. That's what I thought nt

[notesdev]

19. Yep

backed with worthless hot air and the words of professional liars.

Ever run the numbers on what it takes to make good on the promises that have been made?

[MannyGoldstein]

23. Yes, as a matter of fact I have run the numbers:

http://fdrdemocrats.org/the-common-sense-guide-to-social-security/

[notesdev]

25. No you haven't

that link has nothing to do with the question I asked.

[lumberjack_jeff]

27. They'll be repaid by reversing the purpose for which the loans were used.

Raise taxes.

And I don't care that people won't like that. Workers loaned them that money. Pay up.

[notesdev]

28. In other words, steal it

Take it from people who will never see a dime of their money - the future workers, the ones who never got to vote against the people who racked up all this debt on their behalf, because they were too young or not even born yet.

Don't expect anyone younger than 50 to want to hop on board with that plan.

[lumberjack_jeff]

30. taxes = theft. Where have I heard that before?

Did you get lost and accidentally land here?

I don't care that you don't like it.

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

The debt held by US workers is trivial compared to the total. "Borrowing" without expecting to repay IS theft. Taxes are not.

[notesdev]

32. What's the repayment plan again?

What you are describing can fairly be summarized as "the old, stealing the lifeblood of the young in a vain quest to delay the inevitable". There is no justice in your solution, only the raw exercise of power. There is no way the younger generations will stand for it long enough for you to claim any success by it.

Moreover, it is plainly unsustainable. Maybe at best, one generation gets the benefit of your plan. Then, full stop. Because this plan requires the leveraging of the economic surplus of multiple generations to serve the desires of a single generation.

[lumberjack_jeff]

34. Previous generations didn't pay surplus taxes to fund their SS benefits.

Prior to 1984, each generation paid for their retired parents directly - a social security trust fund wasn't a chronic condition.

The bank(s) (including the SSTF) are into us $13 trillion. We'd better start putting some serious thought on how we're going to raise the money to repay it. Reneging on those debts isn't an option.

I did my part. I voted for Carter, Mondale, Dukakis, Clinton, Gore and Kerry.

Fix health care and there's no problem for subsequent generations.

As for your literal question, it's easy.

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

Raise taxes and lower military spending.

[notesdev]

37. Demographics have changed

Previous generations were all larger than the generations before them. A formula that works in the context of indefinite exponential growth does not work the same in the context of a flattening age demographic.

Also, many children directly took care of their own aging parents back then. Now, they throw them in a nursing home at someone else's expense.

We're going to need to adopt cultural changes in order to accommodate our demographic changes. This means a later retirement age and an end to the "all measures, no matter how expensive" approach to issues, among other things, and may just end up in some form of household consolidation where multi-generation homes become common again.

[lumberjack_jeff]

38. I just showed you how easy it is to balance the budget.

I see no good reason to reneg on the debt to the SSTF simply because you don't want the rich to pay higher taxes.

I paid ss taxes all those years, far in excess of my parents generation's needs precisely to avoid your "household consolidation" ideal.

It doesn't matter to me what the people to whom I loan money spend it on. It matters to me that they repay it.

[notesdev]

42. I got bad news for you

SS tax payments are taxes, not loans. You have exactly zero legal right to anything back from it, as per the official ruling of the Supreme Court.

It doesn't matter to me what the people to whom I loan money spend it on. It matters to me that they repay it.

They spent your money on the political equivalent of a cocaine binge, buying votes left and right for a generation. Did at no point during those wild and crazy years did you come to understand that people with such little financial discipline in them were unlikely to be able to pay you back? That's the exact same rationale given for the AIG bailout, by the way.

[lumberjack_jeff]

44. Worthless IOU? Below is the comprehensive list of everyone to whom the US has defaulted their debt.

.

Umm... I guess the SSTF would be the first.

The government absolutely CAN afford to redeem those bonds representing about one-quarter of their total debt. They just don't want to, and are, with political cover from misinformed people such as yourself, trying their level best to change the system so that they never have to.

It doesn't matter that they spent it on a cocaine binge. I don't care. The obligation doesn't go away.

[notesdev]

45. Whose obligation?

Here's the problem with that approach... the people who took then spent the money are not the same people who you would like to compel to repay it. The people you are asking to repay, many of them had no say whatsoever in the process (being too young to have voted in the elections of the time). You can count on them abandoning, with prejudice, any plan you can come up with to make them responsible for debts created by others.

The young of this country certainly deserve a better fate than the debt slavery that you have planned for them. Don't expect them to sit quietly and take it, because they won't.

[MannyGoldstein]

35. Nonsense. Taxes on the wealthiest need to return to historically-normal levels

Right now, the wealthiest pay federal taxes at the same rate as do median wage earners. Taxes on the wealthiest have dropped by two-thirds, and doubles on the median wage earner:

http://fdrdemocrats.org/the-common-sense-guide-to-social-security/5/

This is crazy.

[notesdev]

39. That's a red herring

OK fine. Tax the crap out of the wealthiest. Even better, take every damn thing they have and execute them. Poof - what was theirs is ours.

Now do the numbers and find out just how long this bought us, at our present run rate. (see below * if you don't want to do the math yourself)

It's a fine point but it's not a solution to this problem. The real problem on that issue is that the distribution of income is obscene and there's been nothing but decreases in real standard of living for the vast majority... that's not a problem that can be fixed with federal spending, nor is it one that can solve the problem of federal spending on the necessary timeline (the 2-5 year window we have before the rest of the world realizes they're not getting paid).

The long term solution is this country simply needs to start working again. We need more producers and fewer consumers.

In the shorter term however, we simply can't borrow the amount envisioned to sustain the status quo. We need to change to a sustainable plan for the 21st century and abandon plans designed for the 20th.




*it's less than 6 months

[MannyGoldstein]

33. One of us has a reading comprehension issue nt

[ThomWV]

2. Nearly - they are not the same bonds

If they were Social Security would have no problems at all. So in a way your question points to a way to end the Social Security debate and concurrently solve its funding problems.

[lumberjack_jeff]

26. The difference about special issue bonds is that these are payable on demand.

The SS administration can cash them at any time for face value.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.
In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.

[Lint Head]

4. If it isn't solvent it's because Congress stole the money from SS that

every American has held out of his or her hard earned paycheck. The money should have never been touched or moved around, manipulated, to cover other pork causes.

[mmonk]

9. If that money went to producing bonds, essentially loans, what happened

to the cash from those sales?

[dkf]

5. The bonds held by the SS system are stamped non negotiable.

They have no secondary market and are worthless to anyone else but the Federal government.

If they could be traded then they would be the same as the bonds the Chinese and Japanese have.

But a debt that is only payable to and from the US Govt is basically a gimmick. It's like getting a loan from your 401k. If your regular earnings can't pay back the 401k loan then the loan is worthless.

[MannyGoldstein]

6. By law, SS can ONLY invest in bonds that are

backed by the full faith and credit of the United States.

Some have due dates, some are payable on demand, all must be paid.

[Po_d Mainiac]

8. And how will they be paid? n/t

[dkf]

11. They are paid by the regular budget.

So paying them off just squeezes the rest of spending.

All the stuff Democrats love will have to be reduced to pay off SS. Or they can change the payout formula so the general fund doesn't have to pay out so much. Those are the two choices really, stop funding womens health programs, heat for the poor, etc or cut back on social security payments. That should be a fun decision...not.

[Enthusiast]

12. All the stuff Democrats love?

Two choices? Really? Maybe in your world.

In my world the wealthiest Americans and corporations can start to pay their fair share of taxes. We can stop waging unjustified wars. We can stop outspending the entire world on military hardware. In my world there are other options. Of course, I don't live in a "Republican" world.

[dkf]

15. Revenues are going to increase when the Bush cuts expire.

Then revenues will be near their historical norms.

It's spending which is scheduled to go completely crazy, mostly due to Medicare. But spending now is also excessive and yes a lot of that is due to these ridiculous wars. But Obama seems addicted to them as are the Libya supporters here.

Guns or butter.

But if we can't control ourselves and stay out of wars then what?

[MannyGoldstein]

22. The wealthiest have hyperlow taxes because of borrowing from SS

So their taxes need to be restored to historically-consistent levels to pay it back.

It's that simple.

[Enthusiast]

40. Exactly.

They used our overpayment to FICA as their piggy bank to fund tax cuts and unnecessary wars. Hey, if a war is necessary because some faction or other is a true threat to national security that war should be waged, otherwise forget it. Afghanistan and Iraq hardy qualify, they're just larger versions of Grenada.

[econoclast]

7. It is really a question of the total borrowing requirements of the federal government

Ok. Here is the history. Since the inception of SS in the thirties the rules have ALWAYS been thus :

if SS has excess funds - a surplus - those funds are required by law to be invested in US treasury securities. 

Let's suppose that in some year the US govt budget deficit is 100 billion dollars. And SS collected 25 billion more in taxes than it paid out in benefits. The SSTF buys 25 billion in US treasuries. This means that the government only has to go to the market to sell 75 billion dollars in treaasury securities. The deficit is 100 billion, but they only had to raise 75 billion in the market. The rest comes from selling 25 billion to the SSTF. This is how it was designed. Really. You can go to the SS website and search for the official historian. They have one. There you can see for yourself that it has been like this sinse the 30's. 

Fine. But what happens if SS doesn't collect more in taxes than it pays in benefits? I think this is the first year that will happen. Then, the process works in reverse.

Suppose the government deficit is 100 billion dollars. But suppose SS has to pay out 20 billion in benefits in excess of what they collected on taxes. Where do they get the money? They redeem 20 billion of their treasuries. Ok. Where does the treasury get the money from if the government already has a deficit. They borrow it in the market. So, the budget deficit is 100 billion but they have to go to the market to raise 120 billion dollars. 100 to finance that year's budget deficit and 20 to pay off SS.

And how much we have to borrow in the market that is the real issue.

To turn the 2.4 trillion in assets in the SSTF into the cash needed to make future payments, those assets have to be redeemed. Which means that, since the government seems likely to continue running budget deficits, to get that cash the government will have to borrow an additional 2.4 trillion dollars in the market. That is an additional 2.4 trillion on top of what they need to borrow to cover the annual budget deficits.

[Po_d Mainiac]

10. Or Plan B

Inflate the crap outa the U$D. Problem solved.

Until you go to fuel up the vehicle, put groceries on the table, or require medical care. :grr:

[Enthusiast]

13. How about we make the rich pay taxes

on capital gains and other income?

[Po_d Mainiac]

21. That wood help, along with some clawbacks. n/t

[Enthusiast]

14. So we should stop waging wars of choice?

So we should tax the wealthy at a fair rate? Maybe one reason that there is a shortfall is because this is the lowest tax rate ever paid by the wealthy since early in the 20th century.

[janet118]

18. Thanks for that concise, understandable explanation. n/t

[lumberjack_jeff]

29. Prior to 1984, the SSTF had inflow years and outflow years.

The assets of the larger trust fund (OASI), from which retirement benefits are paid, were nearly depleted in 1982. No beneficiary was shortchanged because the Congress enacted temporary emergency legislation that permitted borrowing from other Federal trust funds and then later enacted legislation to strengthen OASI Trust Fund financing. The borrowed amounts were repaid with interest within 4 years.

The whole reason that there's a huge trust fund is because workers agreed to pay excess so we wouldn't be a burden on our kids. We did our part. It doesn't matter how inconvenient it is to repay those debts. The SSTF has a legally enforceable right to repayment.

You also completely neglect to mention that the federal government could raise taxes to repay that. Or is raising taxes only appropriate for workers?

[Generic Other]

16. You forgot the thieves who took the lockbox

while we all slept.

[spedtr90]

17. Bill by Repub would pay foreign debt before social security

Congressman Tom McClintock of California has introduced H.R. 421 – "To require that the Government prioritize all obligations on the debt held by the public in the event that the debt limit is reached." This bill would prioritize payments to China and our other creditors over our own citizens should Congress not raise the debt ceiling.

If they hold tight on the debt ceiling this would make SS go away through the back door.

http://www.dailykos.com/story/2011/1/31/940184/-GOP-intros-bills-to-Pay-China-First-before-Soc.-Sec.-recipients

[janet118]

24. Backed by the full faith and credit of the US Government . . . LOL n/t

[lumberjack_jeff]

31. It's unconstitutional.

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

[alc]

20. they aren't the same as other bonds

They aren't included in our debt. Lenders (Chine, Japan, etc) don't really care how much our government owes itself. They do care that we have external debt of $14 trillion. If we put SS bonds in the same category as normal bonds, that $14 trillion becomes $17 trillion and we will have a more difficult time borrowing.

If we do agree to pay them in full, that money has to come from somewhere (the funds aren't sitting in a bank gaining interest - they were spent). As long as we are running deficits, that means increasing the deficit and/or cutting other programs. So SS is part of the budget conversation.

[lumberjack_jeff]

36. Where do people come up with this stuff?

The SSTF is absolutely part of our debt, and they are absolutely the same in the only sense that matters; they are redeemable.

There is no "If" about agreeing to redeem them in full. We have already agreed.

Gibberish. Complete rightwing gibberish.

[econoclast]

41. Lumberjack Jeff. You are correct but that's not the point

Of course the bonds in the SSTF are redeemable full faith and credit etc and will be honored. But where does the money to DO THAT come from? Lower spending, raising taxes. Borrow more. How much of each? Which programs? Which taxes?

That is the hard part and it HAS to be seriously addressed. But having the political class saying "there is no problem" is courting disaster. We, as a country, need to begin the heavy lifting on this issue NOW before it is too late and decisions are forced on us by our creditors. It's fine if we don't agree with each other just now on what the solutions should be. We'll hash that out. But we need to begin that debate while we still have options.

Pooh poohing it as right wing gibberish is foolish in the extreme.

[Liberal_Stalwart71]

43. SS has nothing to do with the debt. It is funded by separate means.

SS is also solvent. There are changes that could be made, like increasing the cap, for instance.