I am not even going to pretend to understand economics, but I am not aware of anyone more broke in the ordinary sense than the US Federal Government. The balance sheet is horrible and even accounting for future income still looks horrible.
There is no SS fund safely stashed away some where. If there were, and the SS admin was prudent (and had a choice), they’d put it in real estate. And gold. And potash. And China. And…well, you get the idea. The reason they don’t is not prudence; it’s practical. The Feds need all the cash that comes in in order to spend it right now.
It would be too much of a hijack to debate whether this is because of stupid wars or stupid entitlements–or both–but in any case we are way past dead broke.
The government, as a whole, is the only reasonable way to look at the balance sheet. It’s the government as a whole which establishes all Federal taxes. So to pretend the SS is prudent and the rest of the Feds are cavalier is…nonsense.
And in any case, it’s not “the government.” It’s me. Us. Everyone who votes. Everyone who likes to play now and pay later. Or have the kids pay.
I said in my first post that the gov’t was under no legal obligation to repay the debt. I then reiterated it in every subsequent post. If THAT’S your point, then, I’m not sure why we’re having this discussion.
You could say the same about SS in general, though. The gov’t could just decide it wanted to be done with the whole thing, take the fund and tell people that paid into it they’re SOL. But they won’t, and they won’t renege on the Tbills bought by the fund either, the political and economic repercussions would be huge. So while they’re technically under no legal requirement to repay the fund, that’s academic. The fund will be repaid (and is currently being repaid), and so the investment in Tbills is as good as an investment as if they’d bought something else from a seperate entity with a similar degree of security and rate of return.
The other factor is that loaning money to yourself is not a real investment. If I loan you $10,000 at 10% interest then I’m going to get a thousand dollars of additional income from this loan - it’s a genuine investment. But if I loan myself that $10,000 at 10% interest where is that additional money coming from? I owe the $11,000 to myself and to “repay” my loan I’m going to have to find some other source of income to get that additional thousand dollars. Plus I’m going to have to get the ten thousand dollars if I spent that after “borrowing” it.
To get back to the personal level suppose I make $50,000 a year and I’ve managed to save up $100,000 over the years. Then one day I decide to “invest” my money by loaning myself the $100,000 at 10% interest. Then I go out and buy myself a $100,000 yacht. I came out ahead all around, didn’t I? Once my loan gets paid back I’ll have $110,000 which is more than I started with plus I now have a yacht.
I ignored the cap to keep things simple (the cap only kicks in when your income exceeds $106,800). But the employer portion doesn’t enter into it. The question was about how much money the retiree put into the system.
The Social Security Trust Fund (actually the OASI and DI Trust Funds) does not invest in T-bills, so any discussion of their merits is pointless for this discussion anyway. However, suggesting that U.S. bonds are worthless (even the special bonds that the Fund buys) is ridiculous. It would require an Act of Congress to repudiate the bonds that the Trust holds. Somehow, I doubt that Congress would be willing to do that, even if they figured out some way to do it without undermining the confidence of U.S. bonds in general (which would threaten the economic survival of the U.S. in a profound way).
An IOU from entity A to entity B is a completely different and totally unrelated thing. An IOU from A to A is worthless. The trustworthiness of A is a complete canard! That has absolutely positively nothing to do with it being an IOU from A to A.
Do not get caught up in the canards.
An IOU from A to A is worthless. It doesn’t matter who or what A is.
The actual money (from the increase in FICA) was spent. Not invested. Spent. It’s gone. To replace it requires more taxes.
It’s only a clever gubmint trick to assign half the cost to an employer–that’s still a cost to the employee. Ask any employer. A business has a total amount of money to budget. Take out a tax here and it reduces a benefit or a wage there. Sure, there’s no simple equation that would guarantee the employer-side tax would accrue to the employee. But basically there’s just one pot from which to distribute all costs, and if the government extracts from that pot, a business has that amount less full to pay higher salaries…
As an employee I certainly consider what my employer puts into SS on account of having me for an employee should be considered to be contributed by me. It’s a matter of perspective, I guess.
It’s to “The USA TODAY Lifetime Social Security and Medicare Benefits Calculator”
One of the core messages: Try to be born a few decades ago to make sure you get your money’s worth. This may also speak to some of the comments above about just how secure the future is for SS…
But, to continue the analogy, we are only looking at the financial health of the college savings fund which was borrowed from and repaid with interest. We are now only looking at social security, not the overall health of the government.
So, if we repay into the funds with interest, then the fund is coming out ahead, no matter who makes the payment.
And, yes, the government could default on the trust fund, but it could do that with anything. It could pass a law saying that all US Currency is worthless. That is an extreme longshot.
Yup. But the poor health of the General Fund isn’t really the fault or problem of the SS Trust. Had the money not been borrowed from SS, presumably it would’ve been borrowed from the public, and the level of debt would’ve been the same, and the necessity of raising the income tax or cutting discretionary spending (or, our favored solution, borrowing more), to cover that debt would be the equal to what it is now, we’d just be giving it to public debt holders and foreign gov’t instead of another part of our own gov’t.
The total bottom line of the Federal gov’t is certainly a problem, but that is due almost entirely to the General Fund and Medicare/Medicaid. With the Trust, the SS has enough to pay its future obligations for the next two decades plus.
At that level of abstraction I can claim that Bill Gates is paying my income tax. So let’s keep it simple and stick with the money that’s coming out of my paycheck.
From the folks who designed the calculator I referenced above:
“Our approach calculates the annuity value (also known as the “actuarial present value”) of all Social Security contributions made by a worker plus his or her employer over a lifetime, given certain assumptions about wage level, family type, probability of death, and year of birth. The employer’s portion of the payroll tax is included here, since they are made on a worker’s behalf.”
I think most people who consider the cost of SS should consider the worker to have paid both sides, for the reasons I mentioned above. I don’t understand your comment about Bill. If you only consider the money coming out of your paycheck, you have fallen nicely for the ruse the government set up (“Don’t worry; we’ll split the cost”), so apparently you can fool some of the people all of the time…the employer’s total budget is a zero sum game, as I pointed out. Hey; here’s an idea: Let’s have the employer pay for all your healthcare with no deductible. That way it won’t cost any money!
As opposed to falling for the big business line that corporate taxes are somehow my money? So if we lower corporate taxes it’ll be just like getting my taxes lowered? Even if technically my taxes are increased to make up the difference? Doesn’t make much sense, but as you wrote, some fools believe things like this.
Ask any employer. A business has a total amount of money to budget. Take out a tax here and it reduces a benefit or a wage there. Sure, there’s no simple equation that would guarantee the employer-side tax would accrue to the employee. But basically there’s just one pot from which to distribute all costs, and if the government extracts from that pot, a business has that amount less full to pay higher salaries…