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View Diary: Dem Econ Agenda: Budget Balancing = Reforming Government (236 comments)

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  •  still scratching my head (1+ / 0-)
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    I know that many kind people have tried to explain this to me -- but they just never answer my question so I understand.

    I think Social Security is way broken and it's wasting money because of the way it's set up. And I think it's set up really wrong.

    cringe I hate looking like a moron so be kind.

    Okay. I'm Taxpayer "T". I go to work and pay SS taxes/and my employer pays SS taxes. This money goes to the government which will supposedly pay me SS Benefits at some point in the future.

    But, as even George pointed out, all that money isn't kept in a vault, it's loaned to the Government. I can't find any restriction on what it might be loaned to the G for. I guess it might go to pay salaries, buy tanks, fund NASA, whatever. And everyone kindly points out that these are Treasury bonds the safest investment in the world. What they stop short of explaining is who pays back those Treasury bonds to SS. So far as I can see, it's me, Taxpayer. With interest. So why the heck do I have to pay in and then pay back. I pay back the employer's part, too. That's nutz.

    I should pay taxes to pay for government expenses. I understand that the SS money can't be kept in a vault; it has to be put back into the economy. But it's a nutty system that makes it so the federal government has to spend the money to do this. That's not a wise investment. The government likes to spend money all too well and not always wisely.

    If SSA were allowed to reinvest this money directly into the economy, then the returns would be greater and the stimulus to the economy better. But I don't think individual accounts are the way to go (as I sit here watching my pitiful 401k). This has to be professionally managed money.

    I would like to see at least a portion of SS money invested in municipal bonds. Some taxpayer somewhere still has to pay for them, but at least they get a bridge or school or something to show for their money.

    I would like to have the worker able to draw on his future SS earnings for his education, with this paid back as a deduction (with interest) from his paycheck. (And a small insurance policy--just in case.)

    And fer pete's sake, then I don't have to pay for my SS twice.

    Now I will go sit quietly in the corner and shut up.


    •  Remember Al Gore's lockbox!! (2+ / 0-)
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      NeuvoLiberal, redstar

      Well, someone has taken the lock off the box!

    •  2 good articles (0+ / 0-)

      Good SS info here and

    •  Have a '4'. You are on the right track.. (1+ / 0-)
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      New Deal democrat

      "But, as even George pointed out, all that money isn't kept in a vault, it's loaned to the Government."

      Wrong. Used to be loaned to the government now they just take it. Your payroll taxes are sent to the US Treasury and held in the General Revenue fund. Then the money is spent on everything. The GAS securities you referred to are "markers" or as King George said, "Worthless IOUs."

      In 1985 the real marketable US Treasury bonds were sold and GAS securities were used instead. GAS securities are non-marketable. They are an accounting entry method better known as "cooking" the books method.

      "What they stop short of explaining is who pays back those Treasury bonds to SS. So far as I can see, it's me, Taxpayer. With interest. So why the heck do I have to pay in and then pay back. I pay back the employer's part, too. That's nutz." Additionally, "And fer pete's sake, then I don't have to pay for my SS twice."

      Yes, you are absolutely correct. Almost. You, the taxpayer, pay a hell of a lot more than twice. It all depends upon your age but think about this: the social security surplus funds before 1985 were invested in US Treasury bonds. Key word: marketable.

      In 1985 Congress and Sec of Treas. Baker dis-invested social security by selling off the marketasble US Treasury bonds and putting GAS securities in their place. GAS securities earn interest in additional GAS securities. IOW, IOUs paying interest in IOUs.

      Pay back: the original marketable US Treasury bonds and the interest earned will have to be paid back. The GAS securities and interest earned will have to be paid back. Who pays? You the taxpayers.

      Money: the original money that "bought" the marketable US Treasury bonds was spent starting in the earkly 60s by Congress. The money generated by the "sell" of the marketable bonds was spent by Congress. The surplus funds of each year since 1985 has been spent by Congress.

      Greed: The concept worked so well with the social security surplus funds/bonds Congress has employed the conceptual usage with all the 150 trust accounts. Guess who pays that money back?

    •  Mistaken concept (0+ / 0-)

      I've seen this way too often to let it go again.  (even though this diary's scrolled off the list.)

      Social Security is NOT a pension plan or a retirement account.  It's INSURANCE, and it's run just like any other insurance company with one exception.

      Insurance companies collect premiums from their customers (that's what your payroll taxes, on both the employee and employer side).  In a well run insurance company, the revenue generated from premiums is much more than the liabilities that have to be payed out to beneficiaries.  

      Private insurance companies typically take the leftover surplus and invest it in the stock market.  When they get good returns, the premiums that have to be paid can be lowered.  If they lose their shirts, then premiums must be raised to keep up their profit performance.  It's one of the big reasons premiums go up when the market goes down.  It's also the difference between private and public insurance.

      In the SSA, the surplus from all those premiums is not invested in the market, but in the most secure investment available: Government bonds.  What does this mean?  Is the surplus gone?  Am I having to pay for my benefits twice?  NO!  You never pay for your own benefits anyway, your children and grandchildren do.  

      Those T-bills in the SSA accounts aren't worthless either: they're worth exactly what they say their worth and are no different than if you held them in your private safe.  If the SSA ever starts to run a deficit (Who knows, it could happen) then they can cash in those T-bills to pay their benefits.  The government can anticpate this and either increase revenues to pay them or issue bonds to other lenders to fund them.  What they won't do is default on them, because that would strike at the heart of the credit-worthiness of the US Govt.  

      •  hmmm (0+ / 0-)

        thanks for trying to help me out, but I'm still puzzled.

        I'm quite aware that SS isn't a pension plan or retirement account. Perhaps my sense of humor confused you.

        It's exactly like life insurance; pay your premiums and your heirs get a cookie when you die. If I pay my SS tax, then I get a benefit when I qualify. I qualify at age 67 for my benefits if I have met the minimum premium. There's no needs test. The benefit is tied to the premium you paid.

        What I don't like and think is very unsound is the current method of loaning the money to the government for operating expenses and then having the same people paying into SS, paying back the loans (or does some other country pay the principal and interest out of tax revenues on T-bills? Maybe that's the part I'm missing here. It's all Brazil's problem, right?).

        And since there is talk about the US being bankrupt, I hardly place my faith in T-bills.


        •  SSI isn't the government (0+ / 0-)

          Insurance works best if you can pool all the people at risk for something together to insure each other for that risk.  non-monopolistic private insurance works counter to that by having many different pools for essentially the same risk, increasing administrative costs and increasing the pain that paying out benefits causes to the pool.

          SSI is essentially what we would get if we decided to let insurance companies monopolize into a single, nationwide insurance provider.  Everyone would pay in, the same as everyone pays taxes.  And just like you could opt out of buying insurance from that company (by having no insurance at all) you can opt out of SS, it's just extraordinarily difficult (for good reason).  

          The only difference is that a private monopoly would be able to invest their surplus (profit) in the market, which would introduce a great deal of volitility into premiums.  In SSI, that volitility is virtually eliminated by investing the surplus in the most stable investment possible- US T-bills.  It's true that that investment won't get you the best return on that money, but you won't have to worry about premiums (payroll taxes) jumping around during a bad economy.

          I'm wondering what else SSI could do with their surplus.  The market's out for all the reasons I pointed out above, and they're not going to just let that money sit in their accounts- inflation would depreciate the value fairly quickly.  You also wouldn't be able to reorganize it so it's constantly zero-sum.  Population and economic fluctuations would require a very flexible payroll tax rate, and I'm not sure that the Baby Boomer's children would be able to handle a 50% payroll tax to pay for their parent's retirement.

          Your complaint seems to be centered on the fact that we pay into SSI and that surplus is then loaned to the Goverment proper.  That loan must be serviced, so we pay the loan fees and interest with our income (and other) taxes.  I suppose you could make an argument that the interest paid on that debt must be no more than inflation dictates so that the value of what's owed doesn't depreciate, but the fees and administrative costs of issuing the loan remain.  I'm not sure that the interest paid on those loans is much higher than inflation anyway though.

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