I would ask what you are raiding it for. If it is something that you would be legally obligated to borrow to pay for, then I would argue it would make no difference, and in fact is probably financially better for you to raid the college fund.
Then I would tell you to get your other finances straight so that you didn’t have to borrow anymore, either from daughter’s college fund or from someone else.
What I wouldn’t do is say “Sorry, I had to borrow by law, so I borrowed from your college fund and now rather than clean up my financial situation and pay you back you’re just no longer going to college”.
We just saw an example of this with the debt crisis. The U.S. Government was about to default on payment of its existing treasury bonds unless it could go out and issue…more treasury bonds.
But no matter what the reason I raided the fund, whether for food or for cocaine, wouldn’t you still agree that the fund is depleted, my promise to pay it back notwithstanding?
So what’s the face value of that $200 Shodan Bond? Assuming it’s somewhere above $200, and the full faith and credit of Shodan is as good as the Invisible Hand seems to think that of the United States is, why wouldn’t I? I’m still coming out (nominally) ahead, for close to zero risk.
A) The Recent Unpleasantness was a completely manufactured crisis caused by a Republican desire to score political points.
B) So what? Even for quite possibly the worst week for the FF&COTUS in history, the yield on a 10 year T-note is still down by FIFTY BASIS POINTS. All the smart guys on Wall Street seem to think that government debt is still one of the safest investments around, so why shouldn’t the Social Security Administration?
I would say that the IOU is a moral obligation to raise enough money to repay it, and in the case of the US, also a legal obligation. So, no, I guess I don’t think “depleted” is the right word in this case.
In your analogy it means you need to sell your big house or whatever assets you might have, increase your personal revenue (night job?), and make your daughter whole. In the case of the US Govt it means increasing revenue, cutting spending, and addressing the Medicare time-bomb.
I’m not saying that Social Security doesn’t have issues. Even counting the Trust Fund it will no longer be able to pay full benefits around the middle of this century. Doing something to address that is a good idea. But just throwing out the Trust Fund and saying Social Security is broke right now is breaking a promise we made back in the 80s when this whole Trust-Fund raiding began.
I also find a high correlation between people making this claim (the Trust Fund is empty) and those attempting to eliminate or privatize the program, so I’m sure that colors my reading of the situation.
I would agree that the fund is depleted by the risk that you would not pay the IOU. For SS, the risk is minuscule because of the credit rating of the US Government. If your IOU was backed by a contract committing you to repay, enforceable in a court of law (and bankruptcy court), then that is an asset. It is not as secure as the government bond, but there is a level of security.
That’s an even better answer than mine, amarone. It is “depleted” by the whatever risk there is that the government will not repay. That risk is both financial (some sort of US default) and political (the law is changed to somehow “write off” these bonds).
One could go even farther, though, and say that that risk is being compensated for by the interest being payed on the bond - that’s pretty much the definition of bond interest, no?
Correct. And that is why a 10-year US Treasury pays you only about 2.7% whereas the troubled European countries are paying much more, to reflect the increased risk.
Disagree. Let’s assume that there is a 100% chance I will repay. Functionally, what is different from me: Raising my income, cutting my spending, or borrowing more money to either:
Repay the IOUs to her college fund
or
Pay to send her to college?
Nothing, correct? This is identical to social security in this country. There is no bank of assets to draw from. Any funds used to pay for social security will come from the general treasury no matter what name you decide to give to what you call the Social Security Trust Fund.
I can’t believe that you guys won’t concede this simple point. Let’s take it as a given that social security is a worthy program and should be fully funded. You still have to concede that the so-called surplus in the so-called trust fund is gone. There is no surplus or trust fund. It is an entry on an accounting ledger. A sleight of hand.
Well, my savings account isn’t it’s own pile of cash in a vault. The bank went and did other things with the money. It’s an entry in an accounting ledger. But I still think of it as my money. I don’t consider it gone.
(Well, I would if it were a non-zero amount of money.)
No, the first step towards enlightment is realizing that the Federal Debt is only part of the liability side of the federal balance sheet. The biggest part doesn’t even exist on any federal document, anywhere.
While the oft-stated value of the Federal Debt is $14 trillion and change, the true value of the liability side of the federal balance sheet is $100+ trillion or more. There is no document anywhere where the feds identify and fess up to this number. But private companies have to do it all the time, otherwise they go to jail for accounting fraud.
Your definition of the Federal Debt is the cumulative total of the obligations that are valued and backed by the goverment in the traded market. The gubmint sold a T-bill today that promises to pay an investor $100 in 2 years. Go and add $100 to the Federal Debt.
But the gubmint also made a promise today to pay Granny $15,000 per year starting right now, for as long as she is alive. There is a value to that liability that can be calculated using standard actuarial tables. Let’s say the value of that liability is $200,000. The gubmint needs to come up with that 200 large, somewhere, because it has made a promise to pay Granny back. Private companies need to record this 200 large on the liability side of their balance sheet, because somewhere along the line they will need to come up with the means to pay for it.
That 200 grand doesn’t appear anywhere on the Federal books. It doesn’t show up in the “Federal Debt” number, to which you refer to above. The government budget is a cash-in-cash-out accounting system, to which they and only they allow themselves to operate. They put CFOs in jail for reporting numbers this way.
Because you are assigning a very low risk - perhaps zero - of them paying you back. It’s your call.
That’s fine. You’ve made a choice about what to do with your money, valued the risk accordingly, and acted accordingly. That’s the wonderful thing about liberty and the freedom of choice. You get to do what you want with your money, and live with the consequences.
But we don’t really get that choice with Social Security, do we?
I don’t know if I count as one of “you guys”, but I agree that the money itself is gone. It has been borrowed through a special type of government bond and all that is left is a commitment from the government that it will be repaid. Just like with any other government bond. Just like the six-figure sum I have invested in government bonds. I don’t lose any sleep over that.
I don’t see why it is “sleight of hand” though. Looking solely at the SSA, it is fine - it is owed money by an entity which is paying for the privilege of borrowing it. The entity happens to be the government. Looking at the US government as a whole, it is not financially significantly better off through having borrowed from the SSA. It is able to borrow from the SSA rather than an external creditor, but by law has to pay a market interest rate. It uses the SSA fund to minimize the amount it has to borrow from elsewhere, but it does not reduce its future commitments to repay in any way.
You seem to be answering a different point than I was making. But you’re right, I don’t get that choice with Social Security. Which I consider a good thing. Really, that’s basically the point of Social Security. They take my money and make sure I don’t die completely destitute. Which is probably what would happen if I were left to make these choices myself. And given the decrease in old people dying in poverty since we started Social Security, I’d say that I’ve got plenty of company in that regard.
What is functionally different is where the blame lies (and hence what the solution ought to entail). Those who feel that it is social security that is the problem once it starts running a deficit are being silly. It is as if I had a rich uncle who was lending me money and then my uncle informs me that his financial situation is such that he can no longer able to lend me money indefinitely into the future and in fact several years from now I will have to start paying it back. Do you think I would be justified in blaming my uncle and saying that he should get his financial house in order so that I don’t ever have to pay him back?
So, rather than saying something like we should possibly tax, say, the wealthy more so that the rest of the government doesn’t have to keep borrowing from social security, the Grand Deceivers ™ want you to believe that the problem is with the S.S. system…and thus essentially use the regressive social security tax to fund the rest of government and make sure that the wealthy don’t suffer in ordinately, because apparently the modern Republican Party believes that inequality isn’t increasing fast enough.
What I think is funny is that conservatives assume we will pay China back what we borrowed from them and screw over our own seniors by not paying them back; I think it’s projection.
Well that is exactly what happens if we don’t honor the loans from the SS trust fund. Of course if we do assume that we have a 100% legal and moral duty to honor them then the whole idea that SS has added to the deficit makes no sense.