See my last post, investing in Treasuries does give a return to the gov’t, since it allows them to avoid having to pay interest on debt to a private creditor.
I honestly have no idea what you’re driving at here… what do you mean by “We can pretend that government spending is an investment”? Nobody is pretending anything of the sort. We are acknowledging that government securities held by the Social Security Trust Fund are an investment. Clearly they are, just like the T-Bills held by millions of investors around the world.
A better way to think about investing in government debt isn’t that you think the country is going to turn a profit. It’s to recognize that the government is borrowing against the collateral that is its taxing authority. As long as you believe that the US Government will continue to pay off its debt obligations by generating revenue via taxation then it’s a perfectly reasonable investment.
I understand this. I am saying that the intentions of this system do not match up to the reality. We are right now taxing less than what is necessary to maintain current costs of debt. The government does not act as if it is trying to produce a return on investment. I am not saying that in strict financial terms SS is a Ponzi scheme. I am talking about a resemblance to the nature of Ponzi and other financial schemes. If you are arguing that the US government acts in a financially responsible manner, then we will just have to disagree.
Bonds DO produce a return on investment. That’s why the Trust Fund holds bonds.
I am arguing that the Social Security system acts in a financially responsible manner, and that attacking it over the general budget deficit is misleading and counter-productive.
The rest of the federal budget obviously has lots of issues both on the spending and revenue side. But that is completely irrelevant to the question asked by this thread’s title.
I agree that the SS system itself is maintained responsibly, and I am not attacking the SS system. But it is managed by the same people who have made a mess of the rest of the budget, and the investments are based on the rest of that budget. Pointing out the problems in government finance is not the same as attacking SS, and saying such is misleading and counter-productive. If the SS system, including it’s dependency on the rest of the budget, is not addressed dispassionately, then both sides of the argument are just engaged in an ‘Are too - Am not’ argument.
Calling the SS system a Ponzi scheme, or implying that it is unfunded because the Trust Fund consists of treasury bonds, is attaching SS, IMO
Could you elaborate on the bolded part? What dependency does the Social Security system have on the rest of the budget? Are you implying that you think the US Government is actually at risk of defaulting on the securities held in the trust fund?
As to the “are not, am too” argument, sometimes one side is factually correct. And in this case those stating that the SS system is in no way a Ponzi scheme are correct. Just like they were when we did this last month, and the month before, and no doubt next month when these same attacks will resurface.
Social Security is also a boon to the economy. Giving the poorer people money allows them to purchase things and help create jobs. There are a lot of jobs in SS too. Killing it would be terrible for the economy on many levels.
It is solvent and will be for 30 years. Unless TBonds become worthless, then SS would not be our biggest worry.
Wow, this is wrong on so many levels.
Helping the economy by giving money to poor people? Where did that money come from?
Helping the economy by hiring more civil servants? Where does that money come from?
Maybe stop helping.
ETA SS is still a good idea and not a ponzi scheme. Bad arguments don’t help.
I would argue that providing elderly people with a steady pension income is a boost for the economy, compared to them being destitute, even considering that it is merely a transfer payment. I have to think that SS payments circulate more than the FICA dollars would have, and thus generate more economic activity. I could be wrong, of course.
I agree that this is a weak point. The number of SS paper-pushers certainly doesn’t justify the cost of the system. But that’s really just a side effect.
So I should get the money I was expected to get as well as a % of the money as a return on investment, right?!!
Social security is a good idea, but not because it “helps the economy.” We don’t need fallacious justifications for a program that does a good thing.
As far as I understand there is a cap to what people can contribute, so it’s not even a true redistribution of wealth. It’s a forced savings plan that happens to be guaranteed and pays out in a somewhat universal manner.
Allowing seniors a small but steady income is a good thing, and if you want you can view the program in that manner. We’re all chipping in to provide seniors with income security. Or you can view it as we’re all contributing to a small pension upon retirement.
Either way it’s pretty economically neutral in that people should have their own money to put into their own savings for their own retirement. Taking money from the economy means it’s not there to pay people salary. Eventually it’s given back to seniors who then spend it, hopefully helping pay salaries.
And adding insult to injury, to do that transfer requires taking a little extra so we can hire government workers to manage the system.
SS is a good thing, it should be there, it’s not a ponzi scheme thus lying about how it operates or the benefits it provides doesn’t help.
A better question would be “why” is s/s needed? Why aren’t people saving for retirement? What would happen if we set up a better incentive for those earning less than $30k to put money into savings? And in the process freed up everyone else’s income to move the economy forward.
A few years ago Canada set up a Tax Free Savings Account, will be interesting to see how it plays out.
That’s true at times when there’s a deficit of demand, like during the current recession. But in general, I don’t think there’s really much economic benefit to Social Security, though I support the program for other reasons. You take money in taxes from one set of people and give it to another, there isn’t really much of a boost to GDP from that.
Indeed, old people are pretty crappy for the economy, its pretty hard to think of a worse investment then old-people. They retire, consume resources without working to contribute anything to GDP, get sick, consume a bunch of health resouces and then die anyways. If we wanted to maximize economic growth, we’d make people work until they were no longer physically able and then euthanize them.
Of course, we as a society have decided we don’t really want to do that, so we set up programs like Medicare and SS and 401K’s and so on and so forth. But those aren’t really programs that are meant to maximize economic productivity, they’re programs that help us deal with the fact that the elderly are in fact a drain on the economy that we feel we need to help anyways (or at least, set things up so we ourselves will be helped when we get old).
No, it’s not a redistribution from the wealthy to the poor (well, it is moderately). It’s a generational transfer scheme from the young to the old. This is potentially stimulative, because the old will spend a good portion of the income while the young will likely spend less of it. It’s not extremely stimulative because the taxes that pay for it are flat, as you mentioned.
As for why it’s needed, well in my opinion it is needed because relying on individual investment will inevitably lead to large variation in the quality of life for different eras of retirees. A defined-benefit pension avoids this by guaranteeing a certain level of benefits to all participants. Considering most private pension plans are dead and gone (replaced by more volatile 401(k) plans) I think that the need for a safety net of defined benefits is essential.
I see Simplicio’s response on edit, and am willing to concede that SS is perhaps not stimulative except in times of recession.
I’m afraid I don’t get the question (unless you’re just being obtuse).
You will get exactly what the current Social Security law says you will get. It’s not an investment account - it’s a defined benefit pension plan with some insurance plans on top.
The Social Security Trust Fund, however, will get back all of what it loaned to the general fund plus interest. That’s the whole point. Unless the government defaults on it’s debt, which is a completely separate issue.
This is the point that needs to be driven home. It’s a good program, so there isn’t any reason to lie, obfuscate, or otherwise spew bullshit about it.
The concept came up in a previous thread of mine: The Problem With Choice in a Free Society
with the conclusion being that we recognized a need and created a program to deal with it. But the unintended consequence is that now I have less money to help my aging parents, and they have gained a bit of independence. So I take that as absolving most my responsibility. I don’t have to bother taking care of them because we’ve made then society’s problem to solve. We’re obviously not going to put them on ice drifts, but we’re also not going to force individuals to care for their own family.
Exactly, which to me suggests that during times of growth it is a hindrance to the economy.
But if YOU buy a treasury bill, then no, you don’t owe the money to yourself… not in any meaningful sense. You owe just one three-hundred-millionth of it to yourself. In any sense that matters, the money is owed to you by other people. There is no substantial difference between you holding a T-bill and a citizen from another country holding one.
In the case of Social Security, the U.S. government is buying IOUs from the U.S. government. Party A is promising to pay back Party A. Call it a trust find if you want; the inescapable fact is that the same party is promising to pay itself. Eventually the U.S. government must borrow more money, or tax more money. There is no investment anywhere outside of the U.S. government holding the money in trust.
When you talk about the Social Security “Trust fund” getting back its money with interest, what are are saying is that the U.S. Government will take X dollars, call it interest, and then pay that interest to itself. It is simply a movement of dollars from one accounting entry to another. In terms of the finances of the United States government it doesn’t make any noticeable difference whatsoever.
Understand that I am not saying a social security program is a bad idea in principle. There’s good, sound logic behind the theory. But there’s a weird unwillingness to accept that, in any sense that matters, it’s just a really big government expense and a line item on your tax bill, and the connection between the two is simply a matter of naming convention.
As has been pointed out before, SS is a terrible way to plan for retirement. Why is it a forced contribution system? It takes more than it pays out (for the majority of folks)
At the very least there should be an opt out clause for those people willing to invest in their own future.
But this isn’t unique, and the only reason your post “sounds bad” is because you’ve lumped the US Government as one giant monolith.
To put things into made up numbers, pretend the government takes 10% of your income in taxes, and 10% as social security payments. It then uses 10% of it’s revenues for roads and 10% for social security payments.
If for some reason it needs more for roads it “borrows” from the SS fund instead of borrowing from some where else, or raising the income tax.
People “borrow” from themselves in a variety of ways such as borrowing from a retirement account or life insurance policy to put a down payment on a house. And frequently individual family members will “borrow” from another even though it’s all within the same household. Corporations have ways for one business unit to borrow from another.
The point is that SS has it’s own separate revenue stream, meaning that it’s not part of the government’s general piggy bank. Imagine it as a private entity that the government is borrowing from.
If you increase net demand, it is a benefit. We also have to compare the situation with SS to that of an economy without it. Assuming we don’t let old people starve, where would the money come from then?
On the contrary, they are decreasing unemployment by not being in the working economy, and pumping savings into the economy. Even if they were working the health issues would remain.
Kids are even more of a drain on the economy, since they don’t even have savings to spend on themselves. USA Today yesterday said that the average person has retirement savings (401K) of $79 K (way up from the depths of the recession) which is pretty frightening.
SS is also a transfer from dead people to living people, since the people who really lose out on SS are the people who die at 67. And undocumented workers, who pay in and never take out, also.