For the bajillionth time: there is no cash in the SSTF because Federal law prohibits any cash balances in the SSTF. The SSTF consists of bonds that are constitutionally guaranteed. Therefore, the trust fund has a value of roughly $2.8 trillion despite not holding a single penny in cash.
How much cash is in your investment portfolio?
Also, in your estimation, how much will repaying the Social Security Trust Fund raise the national debt?
Zero, for the reasons I explained above. Work through the steps. The SSTF can be eliminated (in a constitutionally satisfactory way), with no change to the Treasury’s balance sheet.
But that is money it is entitled to through its ownership of securities. The federal revenue and the SSTF are different troughs.
So?
Economist live in a highly stylized world where everyone is rational and reasonable.
Its not nitpicking. You are basically saying that a creditor has acess to the revnue of its debtors so you can somehow ignore the distinction between the two.
The government owes that money to itself about as much as GM bonds held by the GM administered pension fund is money GM owes to itself.
There is a difference between saying that the government CAN do soemthing and assuming that it has already done that thing.
The government could collectively repeal the Constitutional provision against defaulting on the debt. the government could do a lot of things but as things stand now, that money is not fungible with the federal revenue and represents real value held by the SSTF.
Even assuming that we are using government revenue on frivolous shit, the bank would still owe me the money and they would still have to pay it to me even if I didn’t have $11 to give it.
I went to the dentist over lunch, and after I got back and (briefly) stopped procrastinating with a bit of work, it’s like I keep missing posts in this thread. It’s like posts appear out of nowhere. So if I’ve missed an important comment or you’ve already engaged some of this stuff, my apologies.
I can point out that 10 plus 1 equals 11 when there are other people claiming it equals 10.
And from my perspective, that is exactly what has been happening.
Whoooooaaaaa. That’s not what I was talking about.
When you first entered this thread, you made a simple factual error. (I assume you admit it’s an error, since you didn’t respond to treis’s correction.) You also participated in other conversations.
But what pulled me personally into the thread was a very specific claim. There were other posters writing about the “burden” of the debt in the Social Security Trust Fund. That is what prompted my scribblings. The burden of all that debt. And I pointed out, correctly, that the debt was not a burden. I used an analogy to demonstrate that.
An awesome analogy.
I was saying essentially the same thing that treis was saying, the same matter you had mistaken in your first post. (Only my analogy was way awesomer.) Keep in mind that this was an analogy to refute the financial idea that the debt in the fund was a burden to the government. You can go and reread the first page. Those were the posts that pulled me into the thread.
When I was first drafting Post 22, I was writing something like, “And then the Treasury borrows money to pay the interest into the SSTF, and then that interest is paid in benefits, but then all that money is in excess of what the SSTF needs, so part of the money is returned to Treasury in exchange for new bonds.” And in the middle of drafting all that nonsense, I was like, what the fuck am I doing? None of that matters! Just skip all those steps and get to the end of the discussion. And so I was all like, eh, Treasury gives new bonds to the SSTF. I’m not sure you will believe me on that, but I can promise that’s exactly how my draft of that post went. I took out a paragraph and a half because it just wasn’t necessary to explain the idea. It all nets out equal, you see? What was important was the financial idea.
And this is when you stepped in.
You brought up that court case thing. I demonstrated that the financial outcome was the same regardless of which side won. You brought up the fact that interest is paid in benefits, not new bonds. I demonstrated that was financially irrelevant. And this is where, from my perspective, you got things very wrong. Because these first arguments of yours? That’s not purely legalistic. They’re also based in a financial mistake, as I saw it. At that point in the thread, you give every indication of a financial argument. This is the post that tripped me:
The last bit of emphasis I added. You are making an argument here about why the bonds exist. And by any reasonable reading that I can come up with, that argument is wrong.
It is a cold, hard fact that you are in error.
At least, that’s how I see it. It’s now looking to me like you’re retreating from that. It looks like you’re retreating to the strict letter of the law instead of a financial argument. But if I read you right originally, the fact remains: the bonds don’t exist for any financial reason related to the interest payments going in one bucket instead of another. I’m aware that the law says THIS MONEY GOES HERE, but that’s not why the bonds exist. They exist as an accounting placeholder, and nothing more. This placeholder can (potentially) have real legal consequences, yes. Your latest post to me is to point out that shit gets weird when the SSTF dries out. And I’m not arguing that shit gets weird. I started by arguing that the debt in the SSTF is not a burden (and it’s not), and then I started arguing that your reason about why the bonds exist was wrong. The SSTF bonds do not exist for the financial reason you were asserting.
I even qualified my posts. I acknowledged more than one time that there are legal intricacies that could change things. Here’s an excerpt from before we were talking: “Obviously those legalities can be politically important. For instance, the debt ceiling would have to be raised to accommodate quadrillions of intragovernmental debt. But that’s just bureaucratic foofaraw. It doesn’t make any difference whatsoever on the government’s ability to pay itself interest.” Notice that the subject is the government’s debt burden. I point out that that is a political problem (i.e. a legal problem), not a financial problem. And in my long post to you, I said this “Obviously some of them will involve more wasteful bureaucratic foofaraw than others, and there might be legal issues on the side like the debt ceiling, but ultimately the net effect for any observer outside the government will be a perfectly identical result.” To get that identical result obviously requires political acknowledgement of the financial equivalency. I believe this relates to the same issue you had mistaken in your first post in the thread.
The financial equivalence of the different systems – which is why the financial debt burden of the STFF does not exist – requires some political (legal) acknowledgement. I admit that right there in my posts. Did I point that out in every single post I wrote? Did I qualify every assertion? No. No, I did not. But when you say something a couple times, you no longer feel the need to say it again.
To repeat your latest reply to me.
That’s fine.
But I was admitting the legal intricacies even before you insulted my (awesome) analogy. Obviously I’m not going to argue with your analysis of the law. If we freeze the statutes as they currently exist, shit will get weird if the SSTF empties out.
But that still doesn’t mean anything about the burden of the debt. My analogy? It was introduced into this thread to discuss the burden of the debt in the SSTF. Which is to say, it was perfectly appropriate in the context it was introduced. (And also awesome.) It remains true that the SSTF as it’s currently instituted, and the alternative system in which no fund was created at all, are entirely equivalent financially. If no fund had existed at all, the Social Security as the public perceives it would be exactly identical. (To qualify those assertions for a third time: they would remain entirely equivalent until the strange case, possibly in two decades time, when the fund empties, or if another bizarre legal thingy like the debt ceiling happened.) If there are problems when the fund empties, they will be political/legal problems. It will have nothing to do with any financial reason for “why the bonds exist”. It will be a legal technicality. Which is important, yes. It will have practical effects, yes. But it’s not a financial reason.
(And every time I say “practical” in this thread, you can probably amend that to “non-political”. Almost everything about the political system strikes me as inherently impractical, even given the very real practical effects. That’s an emotional, instinctive reaction. Nothing rational about it.)
And now I’m genuinely curious. What do you think would happen if the fund emptied out and Congress did nothing? I haven’t the slightest idea how that would work.
Yes, do you understand that the securities in the SSTF are not owned by the government?
The fact that the government has to tax you to repay its debt to the SSTF so taht the SSTF can pay its social security obligations does not make the debt held by the SSTF worthless.
I don’t think that is what theya re asking at all. I think theya re asking whether there is any value in the SSTF not whether the value is held in US government securities.
You are simply engaging in rhetoric when you try to porttray the securities in the SSTF as being valueless because they must be repaid from the general revenue.
Yes we all get that. But folks like shodan are latching onto the notion that the elimination of the SSTF wouldn’t cause a ripple on the federal balance sheet to means that there is nothing in the SSTF.
Do you think there is any value held in the SSTF? Regardless of whether or not it is offset by some obligation somewhere else, do the bonds held by the SSTF have any value? Are they a real calim on real assets?
Currency is a liability of the Federal government. Bonds are a liability of the Federal government. If there was a warehouse somewhere filled with million dollar bills, it would make no difference (other than cash pays no interest - but even that would make no real difference).
If you want to say that bonds have no value because they’re just pieces of paper printed by the government, you have to say the same thing of currency. Currency is just pieces of paper printed by the government.
The mistake people make when they talk about government finances is that they treat them as of they worked like business or personal finances. They don’t. When you or I need money, we have to get it from someone else. The government doesn’t have to do that. It can - and does - create money. And that is a good thing. A growing economy needs a growing supply of money.
I’m going to nitpick myself. I’ve been using the SS Trustees mid-line estimate when I’ve been discussing this, so I should have said SS Trustees instead of the CBO.
However, both the CBO and the SS Trustees are fare more qualified then you or I to make these estimates. If you disagree, then pony up some figures. Otherwise, I have to think that you are just making stuff up.
Life expectancy at retirement age hasn’t increased all that much, and we already have increases in the retirement eligibility age on-going and scheduled, and future life expectancy increases are already considered in the SS Trustee and CBO reports. You haven’t thought of anything that either the SS Trustees or CBO haven’t thought of.
Ok, now we’re off into ridiculous land. There’s no point in worrying about what happens 50-100 years from now, because we have no idea what’s going to happen in 50-100 years. All you can do is make reasonable estimates, using data, for things that will happen 10, 20 or 30 years out (and the further out you go, the less likely accurate the estimates will be), and plan accordingly. This is exactly what the SS Trustees do, so spare us the fear mongering.
This is where these threads always jump the rails. Shodan explained, factually, what occurred with the excess SS revenue. It was not a rhetorical device, is was in direct response to the OP. “Is there money in the Social Security Trust Fund?” No. There is an assurance the government will raise the dough, on account of they already spent the excess on, well, stuff. How will they do it? As I said previously, just for giggles we can point out it could be funded by a future surplus, but that’s a silliness we won’t indulge, okay?
So where then? From new taxes or new debt, and the latter just kicks the can for new taxes down the road so it amounts to the same thing.
Put whatever spin you want on it. Join the chorus of “so what, that matters not a whit.” Or join the “this is a Ponzi scheme!” tribe. Whatever rhetoric you’d prefer, the facts remain what they are. There’s no money in the SSTF. That’s what the OP asked.
They have a value that is exactly offset by the liability residing on a different page of the Feds’ financials. In the aggregate, the Feds have zero. That’s why when they pay off the bonds, they will have to raise the money. Why is this so difficult to grasp? You can say that doesn’t matter, you’re sure they’ll raise the $$$ without breaking a sweat. But they will have to. Why? Because they already spent it, and the SSTF is essentially an IOU.
Hellestal: are you referring to treis’s post where he says that Congress could legislate the SSTF out of existence and the bonds it holds would “go poof” once transferred to the general fund?
While Congress could eliminate the trust fund, the bonds could not constitutionally “go poof”. There must be some kind of repayment of the bonds - it is required by the 14th Amendment. The intragovernmental debt is on the books, and has to be resolved somehow, probably by issuing debt to the public in order to retire the intragovernmental debt. Anything short of that would be an unconstitutional law, so the idea that those bonds could “go poof” is quite simply illegal.
You asked what happens if all the bonds in the Trust Fund are redeemed and what would happen to SS payments: they will be reduced to about 77% of promised benefits, which is what FICA revenues would support. There is no ability under the law to use general revenues to pay the full benefits.
I’ll try to respond to the rest of your points later.
You mean there’s a piece of paper somewhere that says that the debt shall never be ignored?
Oh wow! Wonderful! And I thought it would be important whether or not there’s actually any money to pay the debt! What a fool I was
what needs to be remembered in this debate, that part of the complaint comes from the fact that other countries have similar wlefare systems and funds, and in fact more, however they invested the money. Any years there were surpluses, the money was INVESTED in things.
Our thingy just entirely depends on future generations being able to pay for it.
Typical, as Americans, we tried to do something good but we implemented it in the most stupid fucked up way
Huh? Who do you think owns them?
Such as government bonds. In many cases, US government bonds. In many other cases, bonds issued by their own governments.
You are too hard on your nation, EdwinAmi. If you think about it for a minute, all retirement income schemes depend on the ability (and willingness) of future generations to pay for them. You invest your retirement savings in corporate stocks? You’re dependent on future generations of workers and managers generating profits to pay dividends on those stocks, which in turn depends on future generations of consumers being willing and able to purchase the goods and services those corporations sell. You invest your retirement savings in real estate? You are dependent on future generations of tenants being willing and able to pay the rents on those properties which will be necessary to provide you with the retirement income to which you would like to be come accustomed.
There is a fixed point around which all this must resolve. The beer that you will drink in retirement has not yet been brewed; the bread you will eat has yet to be baked. However you structure it, retirement income involves people who brew beer and bake bread giving some of it to you, in return for your doing absolutely nothing at all (because that’s what being retired involves). You can buy stocks, government securities, land, insurance policies or any other investment; the future return on them always depends on future generations being able to pay it.
Social security is basically a form of insurance policy; you pay social security taxes (premiums) now, in return for which the insurer (the government) promises to pay you an income in retirement for as long as you live (the policy proceeds). The government could invest those premiums to build up a fund of assets, or it could spend those premiums on current liablities and meet its obligations to you, when they fall due, out of future tax revenues, or it could pursue some combination of the two approaches. But, either way, the money the government gets to pay your pension when it falls sue will come from future generations of workers. If they’re not able to pay it, they’re not able to pay it. You face the same risk in either case.