Saving Social Security, Again

Accuracy in Academia ^ | December 9, 2010 | Malcolm A. Kline

[Parmy]

I completely understand what you are saying. But, there was a fund with a large amount of money in it until a willing Congress and a compliant President in the 1960's moved the fund out of the 'trust' and into the general fund so that the wad of money could be accessed.

Once the access was legal, then the fund was raided. Prior to the change in the legality, the 'trust fund' was off limits and not included in the calculations that you are now using.

These T-bills that you reference are 'non-negotiable'. That means that are in essence, worthless. Regardless of the interest, if any, earned, they can't be traded on the open market. That means they have no value other than the interest they earn.

The real questions are this. What would be the shape of SS is the 2.5 trillion were actually on deposit? What kind of interest would it be earning? If the surpluses hadn't been mis-appropriated/skimmed, would there really need to be a fix?

I am a business man. All the experts' advice; people in the know recommendations; and so on mean nothing. Most of them, if not all, have never had to meet a payroll or make a profit. That is why, every time something they operate goes sideways, they opt for the easy fix of altering the rules like raising the age limit or opting for more taxes.

Finally understand this, the USG doesn't have to redeem anything. The government, i.e. these learned educated fools from the elite, ivy-league institutions are the ones making the rules and not redeeming anything. Just ask the WAMU stock holders. Case in point.

[kabar]

I completely understand what you are saying. But, there was a fund with a large amount of money in it until a willing Congress and a compliant President in the 1960's moved the fund out of the 'trust' and into the general fund so that the wad of money could be accessed. Once the access was legal, then the fund was raided. Prior to the change in the legality, the 'trust fund' was off limits and not included in the calculations that you are now using.

MYTHS AND MISINFORMATION ABOUT SOCIAL SECURITY

Myth 4: President Roosevelt promised that the money the participants paid would be put into the independent "Trust Fund," rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement program, and no other Government program

The idea here is basically correct. However, this statement is usually joined to a second statement to the effect that this principle was violated by subsequent Administrations. However, there has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government.

The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."

Most likely this myth comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.

These T-bills that you reference are 'non-negotiable'. That means that are in essence, worthless. Regardless of the interest, if any, earned, they can't be traded on the open market. That means they have no value other than the interest they earn.

They are not worthless. They represent the full faith and credit of the USG to pay them. And they are included in our national debt under Intragovernmental Holdings as are other trust funds including the Medicare Trust Fund.

The real questions are this. What would be the shape of SS is the 2.5 trillion were actually on deposit? What kind of interest would it be earning? If the surpluses hadn't been mis-appropriated/skimmed, would there really need to be a fix?

The short answer is yes, SS would still be unsustainable even if the $2.5 trillion were in real T-bills that could be bought by anyone including the Chinese. If you accept the idea that the SSTF should only invest in US securities, i.e., T-bills, the rate of return would be the same. Now if you would want to invest it elsewhere including the stock markert, other countries, etc., the rate of return would be greater. However, there are some downsides including the fact that the SSTF is so huge it could affect the markets and be used politically. Clinton was pondering such a move.