# Is there "money" in the Social Security Trust Fund? **URL:** \ **Category:** Great Debates\ **Created:** [August 12, 2014, 7:34pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391 "2014-08-12T19:34:13Z")\ **Posts on this page:** 20\ **Page:** 14
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 29, 2014, 2:24am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/261 "2014-08-29T02:24:28Z")
> [@Shodan](#): > > Loaning money to someone else is different from borrowing money from yourself. > > If _you_ spend some of your own 401(k) then yes, _you_ have dipped into your 401(k). > > Regards, > Shodan They’re not loaning money to themselves. I think you need to try to construct your argument without this assumption because it is wrong. The government does not own the contents of the trust. Lets say that the SSTF could hold other securities and the SSTF held Canadian bonds instead of US bonds. The federal government cannot reach into the SSTF and sell those bonds to pay for another aircraft carrier or a war in Syria, can it? No? then it doesn’t own the contents of that trust and when they borrow money from that trust, they are not borrowing money from themselves. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [August 29, 2014, 2:31am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/262 "2014-08-29T02:31:07Z")
> [@Shodan](#): > > Yes it is. Help yourself to a clue from petty cash. > > If the SSTF isn’t part of the government, then it isn’t covered by the 14th Amendment and therefore has no value according to **Ravenman** ’s definition. If it is covered by the 14th Amendment then it is part of the government because that’s what the 14th Amendment says. > > Regards, > Shodan Keep the personal comments to a minimum, please. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 29, 2014, 2:31am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/263 "2014-08-29T02:31:41Z")
> [@Fuzzy\_Dunlop](#): > > So we’re legally obligated to pay it. What does that have to do with whether the trust fund caused any actual savings? Being obligated to pay for something shouldn’t be anyone’s idea of a valuable trust fund. The trust fund holds things of value. The government has an obligation. The negative value those bonds represent to the government (and the tax liability to the taxpayers) is balanced by the positive value of those bonds in the SSTF. Its almost like you are TRYING to look at things sideways. > [@](#): > > Now when the surplus is gone completely and the trust fund begins tapping into its trust fund the only way we can pay it is by taxing ourselves more, albeit via some means other than the payroll tax. And how does that make the bonds worthless? ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 29, 2014, 2:38am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/264 "2014-08-29T02:38:47Z")
> [@Fuzzy\_Dunlop](#): > > What if instead you had a self-directed 401(k) and you invested the money in a commercial note with a private company you personally owned? Nevermind the fact that you can’t actually do that. > > As CEO, you directed the money be spent to repave the parking lot, repair the roof, and redo a product display. The company is obligated to pay back the note with interest, which it’s fine with doing because it trusts its ability to be a productive profitable business, and having a dry store and nice parking lot should help. > > Now taking your CEO hat off, as the owner of the business and owner of the 401(k), do you still have any “money” in your note? Or did you spend it all and are now counting on your ability to make enough money in the future to pay it off? > > The person in that hypothetical probably (hopefully) sincerely believes he’s going to be a successful business man and pay his 401(k) back, but if he thinks he didn’t actually spend the money he’s deluded. You are eliminating the obligor on those bonds without explaining why that is appropriate. All these analogies are flawed and unnecessary. Government debt that is not owned by the government has value so long as the government has good credit. The debt held by the SSTF is not owned by the government. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 29, 2014, 2:43am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/265 "2014-08-29T02:43:30Z")
> [@Fuzzy\_Dunlop](#): > > People are prone to saying, “If we didn’t borrow the money from the trust fund, we would have just borrowed exactly the same amount from China or someone else.” That’s not true. It’s possible and it’s very likely what would’ve happened but it’s not necessarily true. > > We could have used those excess dollars to borrow less. There isn’t a simple answer for how exactly to do that. Instead of treating that excess money each year as extra income we get to spend, treat it as a way to avoid borrowing money we would’ve had to from other sources. Being financially responsible doesn’t have a flashy simple answer. Spend less? Raise taxes in 1980 instead of putting it off until 2040? All good options. > > That paper I linked to suggests it could be as simple as accounting for it differently, which I think is unrealistically simplistic. In reality, we’re not very good at being financially responsible and making difficult decisions. But the fact that it would’ve been difficult and complicated doesn’t mean it wasn’t possible. > > On the other hand, what’s not complicated is the reality that we did not increase our national savings. A thread about how we could go back several decades and use our excess FICA revenue more prudently would be interesting, but that’s not the topic of this thread. According to that paper I linked to and many others, every dollar saved in the trust fund resulted in nearly an extra dollar in the federal deficit. So the short answer to “is there money in the trust fund” is, nope, not in any meaningful sense. If our deficit in any given year was limited to the amount by which the SSTF was increased, then perhaps for those years, we wouldn’t have borrowed all that money but for the SSTF but in most years we borrow a lot more than the SSTF surplus which leads me to believe that absent the SSTF, our budget would have been about the same size. Of course that’s a bit off topic. The central question is whether the SSTF holds anything of value and of course the answer is yes. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 29, 2014, 2:46am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/266 "2014-08-29T02:46:47Z")
> [@Shodan](#): > > Unless they buy the T-bills from themselves, no it isn’t. > > Regards, > Shodan You really should read up on trusts, trustees and shit like that. > **[Trust (law)](https://en.wikipedia.org/wiki/Trust_law)** > > Sections > Contest > Property disposition You’re jumping through all sorts of hoops to blur the distinction between the SS benficiaries and the SSTF and the government and the taxpayers. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 29, 2014, 4:36am UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/267 "2014-08-29T04:36:05Z")
> [@Fuzzy\_Dunlop](#): > > We could have 1) spent less money or 2) raised more tax revenue or 3) some combination of the two that resulted in a net savings. > > I told you the first time you asked it was a simple economic concept. You can ask the same question a thousand times and it’s still going to be just as simple. Actually this is more of a psychological concept - that somehow counting the debt as higher would reduce spending and tax cuts. Since tax cuts have been a major part of the Republican agenda, this doesn’t sound too plausible. Today the positive cash flow is gone. Have Republicans stopped supporting tax cuts? (And if you like, have Democrats stopped supporting spending increases?) > [@](#): > > It’s also not relevant because we already _didn’t_ save any money. All those excess revenue were spent as they were collected and there’s no “money” in the trust fund, just a $3 trillion IOU payable by present and future tax payers. Just like any bond. The interest rate shows that the market is pretty confident that the government and the taxpayers will indeed pay back the loans. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 12:46pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/268 "2014-08-29T12:46:05Z")
> [@Damuri\_Ajashi](#): > > The trust fund holds things of value. The government has an obligation. The negative value those bonds represent to the government **(and the tax liability to the taxpayers)** is balanced by the positive value of those bonds in the SSTF. Its almost like you are TRYING to look at things sideways. > > And how does that make the bonds worthless? I bolded the part that’s really important. What it all adds up to is a tax liability to us taxpayers. If there were no trust fund, it would still add up to a tax liability for tax payer. That’s what makes them worthless. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 12:51pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/269 "2014-08-29T12:51:39Z")
> [@Damuri\_Ajashi](#): > > If our deficit in any given year was limited to the amount by which the SSTF was increased, then perhaps for those years, we wouldn’t have borrowed all that money but for the SSTF but in most years we borrow a lot more than the SSTF surplus which leads me to believe that absent the SSTF, our budget would have been about the same size. > > Of course that’s a bit off topic. The central question is whether the SSTF holds anything of value and of course the answer is yes. It’s completely on topic. If the excess funds didn’t result in any actual savings then nothing was actually saved. The money was collected and spent and the only option left is for the tax payers to carry all the burden of future benefit payments. And it’s fine to speculate what effect the SSTF had on borrowing, but people have actually looked at it analytically. I linked to one research paper that studied the effect of trust funds on deficit spending - they found that every trust fund dollar resulted in nearly a dollar of extra federal deficit spending. That’s not off topic - it’s the key reason the trust fund failed to build any actual wealth to pay for future benefit payments. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 1:01pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/270 "2014-08-29T13:01:07Z")
> [@Voyager](#): > > Actually this is more of a psychological concept - that somehow counting the debt as higher would reduce spending and tax cuts. Since tax cuts have been a major part of the Republican agenda, this doesn’t sound too plausible. Today the positive cash flow is gone. Have Republicans stopped supporting tax cuts? (And if you like, have Democrats stopped supporting spending increases?) I agree it’s naive to think anything in particular would have resulted in significant genuine savings. I’m not arguing it would have. What I’m saying is it’s possible to look at the effect of the trust funds and analyze whether they resulted in any actual net savings or if they just added to deficit spending. In actuality there was little if any net savings so we can’t say there’s “money” in the trust fund. > [@Voyager](#): > > Just like any bond. The interest rate shows that the market is pretty confident that the government and the taxpayers will indeed pay back the loans. When you’re talking about $3 trillion dollars and a promise to pay benefits to virtually every American, the government has little to do with paying it back. It’s the taxpayers who will be paying for the benefit payments. Just like we would if there were no bonds. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [August 29, 2014, 1:37pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/271 "2014-08-29T13:37:07Z")
> [@Voyager](#): > > Both the issuers of the bonds I bought and the issuers of the bonds they bought are branches of government. Which branches obviously doesn’t matter. > So, how is it different? Because you are not a branch of government. AFAIK. Regards, Shodan ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [August 29, 2014, 1:51pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/272 "2014-08-29T13:51:23Z")
> [@Damuri\_Ajashi](#): > > WTH are you talking about? I am explaining to you for the umpteenth time that you are wrong. If the SSTF isn’t part of the government, then it isn’t covered by the 14th Amendment and therefore has no value according to **Ravenman** ’s definition. If it is covered by the 14th Amendment then it is part of the government because the 14th Amendment applies to debt incurred by the government. > [@](#): > > Why do you think that the SSTF is issuing debt? The obligations of the SSTF are carried on the government books as debt. I think I explained that to you before. So, in your view, Social Security is set up by the government, run by the government, its obligations are part of the government debt, and its obligations are guaranteed by the US Constitution that establishes and controls the government - but it isn’t part of the government. Uh-_huh._ Regards, Shodan ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 29, 2014, 2:06pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/273 "2014-08-29T14:06:57Z")
I’m not sure if you’re intentionally trying to be obtuse with **Damuri** ’s point, but it’s clear that the Social Security system is a government function, but the finances of the trust fund (as well as a handful of other trust funds) are separated from the general government’s finances. It’s somewhat like a franchise of a fast food chain. If you buy a McDonald’s franchise, yes, you are part of McDonald’s in a major respect. But it is false to say that the McDonald’s Corporation has day-to-day control of your operations, and so in that respect your business is independent of McDonald’s. If the franchise buys meat patties from McDonald’s corporate, that’s a real transaction – it doesn’t mean it isn’t a real purchase simply because one part of McDonald’s received money from a different part of McDonald’s. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 2:26pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/274 "2014-08-29T14:26:37Z")
> [@Ravenman](#): > > I’m not sure if you’re intentionally trying to be obtuse with **Damuri** ’s point, but it’s clear that the Social Security system is a government function, but the finances of the trust fund (as well as a handful of other trust funds) are separated from the general government’s finances. > > It’s somewhat like a franchise of a fast food chain. If you buy a McDonald’s franchise, yes, you are part of McDonald’s in a major respect. But it is false to say that the McDonald’s Corporation has day-to-day control of your operations, and so in that respect your business is independent of McDonald’s. If the franchise buys meat patties from McDonald’s corporate, that’s a real transaction – it doesn’t mean it isn’t a real purchase simply because one part of McDonald’s received money from a different part of McDonald’s. That’s not a good analogy. McDonalds franchises are owned by people distinct and different from McDonalds corporation. That’s not true of social security and the rest of the government - they are both owned by the citizens of the us. A better analogy would be a large company with an independently operated subsidiary. Day to day, the subsidiary is managed by its own managers, but those managers report to the parent company. If the subsidiary needs to purchase goods or services from its parent, it does pay for them. It’s called transfer pricing and it’s an important part of accounting and economics. That doesn’t make it a “real” transaction though. All the finances are ultimately the responsibility of the parent. All the debt flows back to parent and its shareholders, to the extent those shareholders own equity in the parent. In fact, if you try to hide debt in subsidiaries you wind up in an Enron type situation - the subsidiaries at worst obfuscate the real health of the company, and at best you can clearly see they’re the debts of the parent. But they never are distinct from the parent. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 29, 2014, 2:49pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/275 "2014-08-29T14:49:52Z")
Are the contracts between subsidiaries and their parents legally valid? And what’s with the implying that the Social Security Trust Fund is hiding debt, what with your references to Enron? There is no hidden debt. Google “national debt” and the figures are right there. Everyone knows the value of the trust fund, everyone knows the debt to the public, everyone knows intragovernmental debt. There is no Enron comparison here – that’s just your imagination and political hangups speaking. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 3:21pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/276 "2014-08-29T15:21:13Z")
> [@Ravenman](#): > > Are the contracts between subsidiaries and their parents legally valid? Not really. I don’t know exactly what you think legally valid means. A subsidiary isn’t going to sue its parent to enforce a contract. In reality a company would be wary of how investors perceive its action, but certainly nothing could keep it from nullifying some contract between the parent and a wholly owned subsidiary. Lots of private companies create subsidiaries for various reasons and they can do anything that doesn’t run afoul of the IRS or state laws. > [@Ravenman](#): > > And what’s with the implying that the Social Security Trust Fund is hiding debt, what with your references to Enron? There is no hidden debt. Google “national debt” and the figures are right there. Everyone knows the value of the trust fund, everyone knows the debt to the public, everyone knows intragovernmental debt. There is no Enron comparison here – that’s just your imagination and political hangups speaking. The obfuscation comes from the topic of this thread. The idea that there’s some wealth that has been saved up in the trust fund when there is none - it’s just a $3 trillion obligation owed to the American people by the American people. And you don’t know anything about my politics. You don’t have to be bad at economics and not understand public finance to be a liberal. I’ve never said I think we shouldn’t fully fund social security. The point is that we simply haven’t saved $3 trillion in our trust fund. There’s nothing political about that. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 29, 2014, 3:29pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/277 "2014-08-29T15:29:00Z")
> [@Fuzzy\_Dunlop](#): > > Not really. I don’t know exactly what you think legally valid means. A subsidiary isn’t going to sue its parent to enforce a contract. I love the double standards here – a contract isn’t really a contract between a subsidiary because a subsidiary probably wouldn’t sue to enforce the contract; but others argue that the trust fund doesn’t exist because Congress could decide in the future to change the law. In my world, reality isn’t defined by what some party may or may not choose to do in the future. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 3:43pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/278 "2014-08-29T15:43:35Z")
> [@Ravenman](#): > > I love the double standards here – a contract isn’t really a contract between a subsidiary because a subsidiary probably wouldn’t sue to enforce the contract; but others argue that the trust fund doesn’t exist because Congress could decide in the future to change the law. > > In my world, reality isn’t defined by what some party may or may not choose to do in the future. It’s not a double standard. It’s the same exact issue. That’s what makes it a good analogy. In both cases there’s ultimately only one party involved. Admittedly in the case of Social Security the one party is “all American citizens”, but in both cases that one party can elect to handle the situation however they want. Anyway that’s not why there isn’t any “money” in the Trust Fund. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [August 29, 2014, 3:54pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/279 "2014-08-29T15:54:44Z")
Thinking about your points a little more, I think you underestimate the importance of subsidiaries. While your comments focus on the balance sheet of the parent, one of the main reasons for subsidiaries to exist at all is to shield the parent from liability - establishing a separate legal entity with a different identity and independent operations is helpful in that regard. If a subsidiary were only to be a mere shell with no substantive difference between the company and its parent (which is basically what you claim the trust fund to be), then their is no distinction between the two, and liability can be shared between the organizations. Obviously, corporations tend not to want that, and I think the government has aimed similarly in establishing the trust fund (not for liability purposes of course, but for other reasons). In short, I think you go way too far in erasing valid distinctions between parent and subsidiary, simply because you’re excessively focused on the idea of balance sheets being the only factor in your argument. ---
**Author:** ![Fuzzy\_Dunlop](https://avatars.discourse-cdn.com/v4/letter/f/848f3c/32.png) [@Fuzzy\_Dunlop](https://boards.straightdope.com/u/Fuzzy_Dunlop)\ **Post date:** [August 29, 2014, 4:15pm UTC](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391/280 "2014-08-29T16:15:55Z")
> [@Ravenman](#): > > In short, I think you go way too far in erasing valid distinctions between parent and subsidiary, simply because you’re excessively focused on the idea of balance sheets being the only factor in your argument. The question of the thread is “Is there “money” in the Social Security Trust Fund?” That is a question that has a lot to do with balance sheets. So I’m focused on it, but it’s not excessively focused; nor is it the only factor in my argument. Also, no analogy is perfect. Businesses exist to conduct business with things besides itself and its owners. They sell things to other businesses and people, they buy things from other businesses and people. That’s not true of social security. Its raison d’être is to pay benefits to the American people. It’s funded by the American people. We can either pay the benefits that’ve been promised or not pay them. If we do pay them we’ll need to pay them with taxation. Trying to pretend there is some valid distinction in this simple equation is the obfuscation I keep talking about. [Previous page](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391.md?page=13) [Next page](https://boards.straightdope.com/t/is-there-money-in-the-social-security-trust-fund/695391.md?page=15)