"Social Security's assets are invested in interest-bearing securities of the U.S. Government. In 2003 the combined trust fund assets earned interest at an effective annual rate of 6.0 percent."
http://www.ssa.gov/OACT/TR/TR04/II_cyoper.html#wp94983
I'm a retired adman who earned almost a million dollars in the ten years between 1980 and 1990. A good half of that went for taxes -- Federal, State, and FICA. Being self employed, I had to pay both halves of the FICA, amounting to what I remember as being close to 15% of my roughly $100,000 per year income. California state taxes and the IRS got the rest. And a bargain, I figured, to live in this great country.
How about the money I've put away in the Social Security Trust Fund? Some ax-grinding politicians are telling the public, with the help of a lazy press, that the money is all gone. It's been spent, they say. Not so.
I've done a little research at Social Security Online and can say, au contraire, mes amis, the excess monies collected since the Giant Reagan Tax Hike have been loaned out at very good rates of interest. During the early 80's, it was earning over ten percent per annum (See Trust Fund Data) and has earned 6.9, 6.7, 6.4 and 6.0 per cent over the past four years.
Smartly, the Trust Fund managers of Social Security requires the Federal Government to pay good interest on those funds, so the trillions they have borrowed continue to build up a heck of a lot faster than the same amount invested in the stock market. The Summary of the 2004 Annual Reports of Social Security and Medicare Boards of Trustees says that taxes collected in 2003 exceeded payouts by $68 billion. The excess payments will continue, they project, until 2018. All that time the excess money loaned to the Government by will continue to pay interest, earning enough so that Social Security and Medicare can carry on in full until 2042.
Since Republicans can't figure out how to raise the small extra income needed to pay for those safety nets after 2042, I suppose we'll have to wait until we get a realistic Congress to get going on it.
What nobody talks about is how the Federal Government is going to find the money to buy back those trillion dollars' worth of bonds. And I keep wondering why the Feds have to pay 6% on those borrowed funds when the Federal bonds I read about in the paper are yielding 2-3%.
Are we also paying China 6% on the bonds they buy?
It appears to me that we ought to get out of debt. A few little tax increases should be in order about now. I'm willing to pay FICA on up to $500-million a year income. And I'll bet you are, too.
So what's the problem?
Note to President Bush: When you borrow money, Sir, you have to find a way to pay it back.
Cheers!
Paul Pease
Retired in Oregon