For historical perspective, here’s a bit of Ronald Reagan’s famous speech from 1964, “A Time for Choosing.”
This belief you have that there is a fund, Hentor, is a common one. However, it is not a belief actually held by the government, and hasn’t been their policy for decades, as you can see.
It would be trivial to fix the “trust” issue as described by the government - have Congress make the Social Security administration one of those quasi-governmental corporation thingies and turn over to it the appropriate amount of treasury notes. Problem solved. Now the bad faith on the part of a governing party becomes obvious as they must formerly repudiate part (but only part!!) of the nation’s debts, rather than pretending that the debts do not exist.
Scylla In your first post you are also largely describing a “bank” (except with a small proportion of cash on hand in lieu of a dedicated revenue stream)
Just an observation that Ronald Reagan was not a part of the U.S. government in 1964. In some ways, that is a pity, but it’s the fact.
Allow me to observe that while I am well aware that Social Security is a tax, not insurance, the SSA has for decades promoted itself as a body which provides the equivalent of old age pensions through its benefits, that it requires 40 quarters of “contributions” for eligibility, etc., and that it has advised the public to plan carefully for when they should begin drawing benefits. And that part of the argument for the current level of SS taxation has been to build a reserve for the payment of future SS pensions.
As usual in Bush Newspeak, though, plausible deniability is used to avoid any responsibility for one’s actions. Most of us learned better than that by sixth grade, and learned to stand by our words and actions and their consequences.
Too bad you people didn’t.
I’m pretty sure Scylla’s posts above proved that there is no money anywhere. Time to start running up those credit card bills!
Us people, Poly? Bullshit. You’ve been voting for the government that’s been raiding the Social Security trust fund to fund general government expenses for, what, thirty years longer than I have? Because every President and every Congress elected has done that.
The fact is that the Social Security ‘trust fund’ was never set up as a way for money to be saved. It was always set up for the money coming in to go out to current retirees, with the assumption that there would always be a larger generation in the future to pay for the benefits takers. And up until recently, that was an acceptable assumption to make.
But given longer lifespans, an political inability to raise the eligibility rules to keep in time with such, and a few generations that are smaller than their predecessors, and it’s all going to collapse. There is no ‘trust’. There never was. There was the assumption that things in the future would go exactly as they had in the past. And that turned out to be a damned faulty assumption.
That’s rhetoric, though, Polycarp. In fact Congress has always allocated to itself the power to make changes to the program at any time, including changing the amount and nature of payments made to beneficiaries. Already the retirement age is going up, and the taxes have gone up numerous times.
This right was affirmed in 1960 by the Supreme Court in the case of Flemming v. Nestor:
What this all boils down to is the fact that Congress can change the program. It can reduce payments, raise eligibility ages, increase or restructure taxes. It may even stop payments to deported Communists. And while it is true that nearly everyone will get their payments as provided by law, the fact is that there is no guaranteed right to that money. We, as citizens, don’t have signed contracts with the government on this one.
Now, the fact of the matter is that the system is going to be restructured in some way. It would be helpful if we all rejected these little fictions we’ve built in our heads about bonds, funds, and entitlements. Doing so would simplify the debate greatly, IMHO.
No.
SS was, as you note, set up as a pay as you go system originally. However the “Trust Fund” was set up in the eighties as a method of dealing with the baby boomer demographic retirement crisis. SS taxes were raised to levels well above those needed for current pay outs to build up a surplus that would be used to tide over the shortfall when the boomer bulge retired. As a way of getting everyone to agree with this it was decided to invest/loan the money to the rest of the government - allowing relatively painless (from a spending point of view) tax cuts under Reagan.
The SS system does not require necessarily more workers, merely economic growth increasing wages faster than the cost of living (SS taxes and initial benefits upon retirement being indexed to wages, and thereafter to cost of living)
Yet when Gore proposed making the trust fund actually be one, under the rubric “lockbox”, the partisans had a load of fun deriding it.
Sure, because what Gore wanted to do was use the budget surplus to buy yet more government bonds.
It didn’t make sense at all.
As opposed to what you’re advocating – an abnegation of the idea that government is responsible to keep its word?
Well, clearly I cannot count on the United States of America to be a nation which honors its commitments any longer.
I will have to support myself – and in my physical condition, that will clearly be to do so by my pen.
And I have a clear first topic here.
While the gov’t may have no legal obligation to pay back the trust, I can’t imagine it is at all politically feasable not to. Every working American has bought into the trust, and the uproar would be intense if we learned that we weren’t going to see that money back.
Also, for the record, many of the bonds that were bought back in 1983 onwards have already matured, been redeemed and the money/interest rolled over back into the trust. So far, all mature bonds in the trust have been successfully redeemed, and I think that’s what will continue to happen.
Also, I imagine that at this point, a sizable amount of the total US national debt is held by the SS trust fund. If we defaulted on all that debt, even to ourselves, wouldn’t that make other treasury bonds and the like far less desirable to the private sector and other gov’ts?
In behalf of the clueless :
What does “IOU” mean?
Sorry, Polycarp, but I don’t think this is just a political party thing. I think it’s also an age thing. And when the math says that at some point the system will no longer be able to fully meet its obligations and I’m going to be looking at some ugly, ugly choices further down the line if nothing is done now, you bet I’m gonna agree with those who advocate change now. As far as I’m concerned, writing yourself an IOU does not count as saving money. If a private individual tried to claim that he had thousands in assets because of a pile of IOUs they wrote to themselves, he’d be laughed at.
There was a short story in F&SF in July 2000, “Dave Dickel’s Historic Interview With the Inventor of the Hart Cart” by Nancy Etchemendy, that had as part of its background that Social Security collapsed. At least, I think that was the implied backstory. I don’t have a copy of it available at the moment. It was also somewhat implied that the younger generation allowed the older ones to take the consequences. And quite frankly, I believe that people my age would be more likely to allow Social Security to default if it came to that. After all, you guys have had decades now to figure out a solution. You guys knew this was coming at least as early as the 80s. I don’t know anyone that truly believes they will get anything from Social Security 40 years from now. Anyone my age who has actually thought about it realizes that they need to start putting money away now. I, for one, find it almost inconceivable that people now are banking on Social Security to provide for their retirement. Why weren’t they invested long ago? Even if stocks were difficult to get before the Internet, what’s wrong with savings bonds, T-bonds, CDs, IRAs, and plain old savings accounts? Why this blind trust in Social Security? Similarly, I bet there’s a clear majority of support in my age demographic for the idea of private accounts along the lines President Bush is proposing. I truly wonder if not long from now it’ll come down to a generational war where the children of the Baby Boomers (and younger) have to either decide to cut Social Security out from under their parents and grandparents or to take on a huge tax burden.
Hmmm, maybe I’ll start that GD thread I’ve been thinking about when it comes to age and Social Security reform (as well as thinking on retirement and the like.)
Almost exactly what it sounds like. “I owe unto.” Of course, it’s easy to assume (and means almost exactly the same thing) that it means “I owe you.” Think of something along the lines of a promissory note (not that THOSE ever get used anymore) but generally more informal and possibly not legally binding.
Judge Judy made a guy honor an IOU once. Not that that means anything, but still…
Asterion,
Here is an article that talks about some polls WRT how people of different age groups feel about privatization.
Oh, for pity’s sake.
Polycarp, what’s wrong with you?
Sure, there’s a trust fund. Social security taxes have been used to buy t-bills. And of course, the interest and repayment on those t-bills will be available to pay social security in the future.
But don’t you understand exactly how that works? Why can’t you understand that those t-bills will have to be repaid by the taxpayers in the future? That money won’t come out of the ether, it will come out of the paychecks of future taxpayers.
It doesn’t matter whether we call one part of a taxpayer’s tax bill “social security taxes” or “income taxes”. They still have to pay. Why can’t you understand that? Of course it would make more sense to cut social security taxes today, and increase income taxes today, instead of this “borrowing” accounting trick. But it doesn’t really matter, since we’d have to increase social security taxes later to pay for the demographic inevitability of increased social security payments. The total tax burden we have to pay today remains essentially the same regardless of what we call the taxes, and the total tax burden we will have to pay in the future remains essentially the same regardless of what we call the taxes.
I honestly cannot understand why you are so upset about this. I mean, I’m trying hard to understand it, and I can’t. Please do me the favor of not pretending I’m rubbing my hands with glee at the thought of old folks thrown out on the street.
Taxpayers will have to fund social security payments tomorrow, just like they do today. However, the demographic reality is that we will all have to pay higher taxes to fund current levels of social security payments. If the economy grows robustly, this isn’t a problem. If the economy grows slowly, then pretty soon a very very large portion of everyone’s paycheck is going to fund social security payments. It doesn’t matter if we cut taxes now or increase taxes now, we still have to pay more later, just because more and more of you old geezers are going to be retiring and fewer and fewer of us young’uns are going to be paying taxes.
Why does that give you conniptions?
Oh yeah? Who made you Judge Judy and executioner?
But the trust fund is just one of many places that the general fund has borrowed out of over the last few decades, and paying back all that money isn’t really a SS problem as it is a general fund problem. We will have to raise future taxes to pay back a lot of treasury bonds left over from years of deficit spending, we shouldn’t “blame” that on SS.
Matters to a lot of us as lower income folk have to pay SS on all thier income while high income folks only have to pay on part of thiers, income taxes on the other hand hit the high income folks more then the lower income folks. So since we raided SS in the 80’s so that income taxes could be lower, it makes sense that the general fund should have to repay that by raising income taxes. It may not make a difference to the total balance sheet of the federal gov’t, but to the individual tax payer theirs a large difference between income and pay-roll tax.
In a way, the rich borrowed money from the poor, its only fair that be paid back now.