What Happened to the $2.6 Trillion Social Security Trust Fund? (Madoff would be proud)

Forbes.com ^ | July13 ,2011 | Merrill Matthews

[Hojczyk]

Well, either Obama and Geithner are lying to us now, or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.

Here’s why: Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

President Obama’s budget director, Jack Lew, explained all this last February in USA Today:

“Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

Notice that Lew said nothing about raising the debt ceiling, which was already looming, and it shouldn’t matter anyway because Social Security is “entirely self-financing” and off budget. What could be clearer?

Unconvinced, syndicated columnist Charles Krauthammer wrote a subsequent column questioning Lew’s assertions. “This [Lew’s] claim is a breathtaking fraud. The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction. … In other words, the Social Security trust fund contains—nothing.”

[wtc911]

By law The SS Administration must "loan" any excess monies to the federal govt. There has been a surplus (more taken in than paid out) every year since the early eighties. All of this has been "loaned" to the feds ($2.6 trillion) in the form of 'special' instruments to be repaid with interest. That is the "trust fund". The problem is that the fed doesn't have the money to make good on the debt.

Also, Flemming v Nestor (SCOTUS 1960), ruled that SS payments are not an entitlement..iow...the feds can stop paying out any time the want.

[kabar]

Last word from me. The only way you can redeem the IOUs from the SSTF is to pay SS benefits to make up the shortfall between revenue and payouts. The General Fund must come up with the money whether thru borrowing or cutting spending. You don’t seem to understand what the CBO is saying about trust funds. Cheers and good luck.

[Norseman]

Well, your last word is actually a new point that I’d hoped to get to next.

You state that the ONLY way you can redeem the IOUs (non-public debt) from the Trust Fund is to pay benefits to make up for a shortfall of revenues.

To do what I’m discussing, they would have to have the discretion to pay ALL of the benefits by redeeming the IOUs, as you call them, while diverting the current tax receipts to to pay other expenses.

Not sure that could be done under current law, but current law can be changed...

[Norseman]

>>the feds can stop paying out any time the want.<<

Have you been following the discussion kabar and I have been having, and if so, any thoughts on it?

[wtc911]

No. I am new to these SS threads.

[P.O.E.]

wefare and food stamps started at troughly the same time

"Troughly" is the proper term in more ways than one.

[Gaffer]

This ‘law’ is a travesty. If it were researched, I’d bet a Democratic Congress and President were behind it. If if was Republicans, then we are just so f@cked. Our own do us in and we are lost.

[chris_bdba]

LOL some typos are bettter than others....

[detective]

Thanks for the info.

[SunkenCiv]

Thanks Hojczyk. G’night all!

[rdb3]

There's really an SS trust fund? I thought SS came out of FICA taxes.

If you can't appreciate the pure beauty of the violin after hearing this, something's wrong with your ears.

Or you can get raw with these strings. Either way, the violin is sweet yet lethal.

Do it!

[WOSG]

“Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers.”

If this is true, then Obama lied when he said the social security checks would stop once the debt ceiling limit was reached. He doesnt HAVE to stop the checks.

[supercat]

If this is true, then Obama lied when he said the social security checks would stop once the debt ceiling limit was reached. He doesnt HAVE to stop the checks.

Standard passive-aggressive budgeting. Assign the lowest budgeting priority to the items which will cause the loudest squawking if cut. That way, since those items can't be cut, nothing can be cut.